Hybrid commissions won’t boost advice quality
Changing the commission model in the retail life insurance industry may remove the perception that high upfront commissions influence advisers to be biased in their product recommendations, but it will not solve the advice quality issue, the Financial Planning Association (FPA) said.
General manager, policy and conduct, Dante De Gori, also said he could not understand why people continued to discuss the Trowbridge report, saying it was merely a contribution to the debate.
He said the Financial System Inquiry (FSI), and former Federal Assistant Treasurer, Josh Frydenberg's announcement in June that the Government would consider the industry's proposals in the context of the FSI were the only proposals or frameworks that were in play.
"The Government announced a proposal back in June, but that's not a Trowbridge announcement, that's the Government," De Gori said.
"All Trowbridge was, was a submission. All I'm saying is that Trowbridge is one person's opinion in terms of what should happen."
De Gori acknowledged that changing the commission model would prevent advisers making recommendations like replacing products or churning, and encouraged discussion on the issue.
But he argued that based on the Australian Securities and Investments Commission's report on the sector last year, it was evident advisers needed support through training and resources to increase competency.
"The remuneration structure is a part of the jigsaw puzzle. But if you don't address training and competency, if you don't address providing advisers with tools and resources to support them in actually delivering what quality advice is, then all the commission structure is going to do is maybe change one's motivation," De Gori said.
"But it doesn't mean that they're going to provide quality advice."
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Policy and advocacy specialist Benjamin Marshan has left the Council of Australian Life Insurers after less than a year, having joined in March from the Financial Planning Association of Australia.
The declining volume of risk advisers meant KPMG has found a rising lapse rate for insurance policies arranged by independent financial advisers, particularly in the TPD and death cover space.
The Life Insurance Code of Practice has transferred from the Financial Services Council to the Council of Australian Life Insurers.
The firm has announced it will no longer be writing new life insurance policies in the retail advised and corporate group insurance channels, citing a declining market and risk adviser numbers.
