Life advisers must prove need for commissions

Life/risk advisers are going to have to make their case for the retention of commission-based remuneration in the same way that mortgage brokers did, according to the Federal Opposition.

The Shadow Minister for Financial Services, Stephen Jones, made clear that he remains to be convinced about commissions-based remuneration in the life insurance industry but acknowledged the case that had been made by mortgage brokers on the issue.

“Conflicted remuneration is a problem but mortgage brokers have been able to make a case for commissions,” he told an AIA Australia adviser summit.

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Jones said that it would be up to life/risk advisers to make a similar case, but that before adopting a firm position he would be awaiting the outcome of the Australian Securities and Investments Commission (ASIC) review into the Life Insurance Framework (LIF).

Asked to define what he regarded as “conflicted remuneration” to be when a product manufacturer paid a fee to the adviser related to the sale of their product – something which had been similarly viewed by the Royal Commissioner, Kenneth Hayne.




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If he opened his eyes he would realise he is talking to a dead corpse. If we are demanding anything of anyone, it should be politicians and bureaucrats explaining why they have destroyed a previously healthy life insurance industry. It was a vital and valuable service. Employed thousands of people. Generated tax for the government and reduced the burden on centrelink. Complaints were low. Yet they killed it off. Or do we have to wait for Australians to drop their cover en masse due to extortionate premium increases and thousands more risk specialists to walk at the end of the year before we can have this conversation?

I don't think Stephen Jones or ASIC are doing anything other than flogging a dead horse. The life industry as we knew it is dead and not coming back. We see this in life company consolidation by their attempts to shore up diminishing returns and a shrinking pool of insured. The opt in regime for insurance in super only added to the problem. Banning commissions won't make an ounce of difference, the advisers who specialised in risk have already left the building. Risk used to make up around 30% of our work and I figure it's been 3 years since we wrote a policy. Not because of remuneration, but it's become too hard to get underwritten and too expensive for the client. Very sad to see such an important part of our world get kicked to the curb.

Can someone ask Mr Jones if he has a pecuniary interest in go fund-me pages? As that’s is the only way people will be able to obtain the right financial outcome in the event of death etc, if he removes commissions. The Lofe insurance sector will collapse, and when all insurers leave the industry, and the govt ask where did they all go? Another way of justifying insurance pooling and also trail commission pooling is the trail from others provides the income so the claimant can have full assistance to help with the claim. Just like the tax i pay, if I don’t use my car and don’t use the roads, does that mean I font have to pay all my tax?

So conflicted remuneration is still bad for mortgage brokers, but also good because they ran a really effective advertising campaign that made it politically unpopular to ban mortgage commissions. So now Stephen thinks mortgage commissions = ok. But needs to remain convinced that other commissions are bad. The flexible principles of the man!!!

In other news, the opposition health minister walked into a morgue and demanded the dead justify why a life saving medicine should be placed on the PBS?

If the fee being charged to the client is commensurate to the service being provided and demonstrates value for money for the client (i.e. meeting requirements of FASEA Standard 7), then why would Mr Jones have an interest at to the source of the payment?

Why is the burden of demonstration placed on the advice industry in advocacy for retention when there has not been a similarly made case made as to the rationale behind removal?

Another day, another article, more uncertainty, more angst. Why?

Guess I'll be heading back to my local wine merchant tonight for another bottle of red.

When did Mortgage Brokers "make a case for commissions", all they did was run a media campaign which made it politically unpopular to ban commissions. Stephen Jones is saying this without any knowledge of the underlying issues around the cost to produce the advice on a fee basis and the ability of people to pay for that advice. He's purely looking at commissions as evil. What about real estate agents, are they going to be targeted?

If Stephen Jones isn't the biggest imbecile to ever set foot in Parliament then he's awfully close.. The clown is a dead set fool and a true reflection of the mindset of legal professionals in parliament.

Ask Stephen, what is the level of no-insurance and under-insurance across Australia, across his State, across his own Electorate, in his own family? Calculating Insurable Needs is not taught in schools. Since World War 2, product manufacturers blamed advisers to protect their profits, so Conflicted Remuneration is another one-sided blame game, when pre-LIF commissions was caused by competition between product manufacturers, so those attacking Conflicted Remuneration are anti-competition politics that kills the opportunity to implement justice for covering Insurance Needs of no-insurance and under-insurance. Stephen should stand a week in front of Triage station in Emergency hospitals nearest to his Electorate and ask those being wheeled in "Do you wish you had more Life Insurance?" "Are you at fault for not seeking more advice?" "Which is more important to you, Conflicted Remuneration or advised appropriate life insurance cover?"
If politics cared about people instead of single-sided unbalanced bias issue political agenda, in Parliament House they should be arguing for funding Life Insurance Police who issue fines to no-insurance and under-insurance, because those who suffer Health Severity Events put their hands out for multiple forms of Government Assistance, which tax payers pay for and undermines financing of the National Interest, including good clients who take advice and act as responsible citizens. Politics does not have to adhere to FASEA Code of Ethics, Financial Advisers do and I passed the FASEA exam on 16 June 2020.

I am yet to meet a client who is willing or able to pay for Risk Advice and Implementation Service at a level that is commercially viable for an Adviser to deliver. The 60/20 structure that now exists is barely even marginally justifiable for a home office advisory practice. Stephen Jones, unless you are planning on ramping up Centrelink and Medicare cashflows, you've gotta be careful what you wish for.

Don't do risk any more and I don't know anyone else either. At $3,500 for an SoA it's in 90% of Australians best interest to tell them to watch TV and pick a company. In 2015 rising premiums and Compliance requirements was like a knee to the groin for risk advice. Compliance and SoA requirements finally kicked it to it's knees in 2018 for me. In 2019 FASEA gave it another kick, and it was bleeding on the ground, finally when it lay dying in 2021, the FSG definition of independence came along and stomped on it's head. If you're offering risk in 2021 you're a compliance time bomb or you're operating in a very very niche market dealing with people that don't have to worry about these issues.

Is Stephen Jones a simpleton? All Mortgage brokers do is look up the interest rates and then falsify clients financials so they can get a bigger loan. Then they get paid an ongoing commission to do NOTHING.

Risk advisers have to prepare a consider the clients needs and exisiting situation, prep an SOA, got through an application, act in the clients best interests, deal with underwriting to maybe get paid. Then do annual reviews to make sure the policy is still at the levels the client need and deal with everything else along the way. Pluys we have to do 60 hours of trainign and FASEA exam (when the Royal Commission pointed out that it was Mortgage Brokers and Banks who were the unethical ones).

We also have to know all the different ins and outs of each policy and the terms and benefits of all the insurance products so that we can act in our client's best interests.

Most importantly WE HELP OUR CLIENTS OUT WITH THEIR CLAIM for free (due to ongoing commissions from other policies). I recently saw a client with a straight forward TPD claim (she had alsready gone through the courts to get a civil payout) and she was charged $12k by a lawyer just to submit the paperwork.

How does this mouth breather think clients who cant afford between $2,000 and $5,000 in upfront fees for an insurance plan plus the insurance premiums will get insurance? Get the junk policies through industry super (which when it comes to claim time they realise they either cant claim due to no underwriting or need to give 30% of the claim amount to a lawyer to submit paperwork)? Or get the junk policies from the Real Insurance adds in TV.

What does this muppet think will happen to the cost of insurance without advisers? Does he think that it will become cheaper because there are no commissions? Who do you think will have to do all the work advisers used to do? The insurance companies will have to hire sales people who will get paid bonuses based on sales (commissions in other words) to sign new customers up. These sales people will also need extra support staff to deal with all the other things which advisers currently do. It will just leave customers with policies sold through sales people employed by the insurance companies which are more expensive and remove the independence and choice advisers give clients during the insurance sales proces.

Look at all the insurance products currently sold under this method of tied sales agents. Real Insurance. Their policies are much more expensive and inferior to pretty much all the policies offered by qualified advisers who are paid a commission.

Anon....it seems Stephen Jones is not the only simpleton amongst us. How you describe what Mortgage Brokers do is totally misguided. How do I know this? I am a Financial Adviser AND a Mortgage Broker. Falsifying financial data so clients can get a bigger loan ? Get real!!!.....clients numbers are what they are and the banks conduct rigorous verification checks and balances which would very quickly catch out and de-register any potential Scheisters.
Both roles are equally challenging, were subjected to commission reductions years ago, are riddled with heavy duty compliance, are laden with the risk of business not proceeding (i.e. no pay) plus add to this 2 year clawback risk which by law prohibits brokers seeking clawback reimbursement from clients (which Financial Adviser are not prohibited from doing). Then there are periodic reviews, restructures, fixing rates, product switches, security substitutions, etc because guess what ? most clients don't "Set & Forget" their loans for 25 years. In summary, both professions face challenges ......different, but yet similar. If Mortgage Broking was such a breeze, everyone (including you Anon) would be doing it.

This guy gives you an opening basically confirming his party wants to avoid the effectiveness of a mortgage broker style campaign against them by Life brokers going into the next election and you still whinge amongst yourselves instead of getting outside of this already converted audience. You are your own worst enemies.

I don't do mortgages but your accusations are unfair and unreasonable.

Play the ball (the issue at hand), don't pick on bystanders.

Would a conflict be when a political donation is accepted and hey presto legislation works in the favour of the donor ie big business and Industry Super.
Maybe we should abolish political donations all together.
The Government can fully fund political teams to work in the best interest of the country.

Can we have his email so I can send him the 30 plus cases of claim I have worked on, the countless calls for Certificates of currency? The Hours of discussions with clients on why to keep their existing insurance as they have just been diagnosed with an illness or recovering from an injury and the policy premium has gone up. It is really easy for someone who has a purist view of the world. Commissions are bad!!!, pay for advice!!!, are they going after Doctors for volume bonuses for medication or Real estate agents, Trave agents for their clip of the ticket on holidays.
The commission is a down payment when the thing happens. The industry is suffering is not plain to see.

Can anyone explain the difference between a mortgage commission and an insurance commission? Both are provided as remuneration for services/advice, but one is justified in Jones eyes and the other not. Why? Seems very odd. Is there some kind of deal within the Labor Party regarding this?

I'm a mortgage broker AND a financial advisor. Lately we have been turning away insurance business as its too hard (almost impossible to get past underwriting), too risky (compliance nightmare) and now earns less than 1/4 of the fees it did 5 years ago - double the work for half the fees, and that's assuming we even get paid (paid only if policies are issued, and then not cancelled in the subsequent 2 years). And in the meantime ALL my overheads have increased significantly, not just PI insurance (with higher excesses) and the salary of my specialist Risk Advisor!

I have been, and continue to be, very impressed with Peter White of FBAA who picked up the fight IMMEDIATELY the Royal Commission report recommended abolishing mortgage commissions, even though brokers were not the subject during the RC itself. In fact, like financial planners, the RC found loads of fault with the big banks, Licensees and AMP and found only isolated cases of individual financial planners doing the wrong thing. Yet financial planners and mortgage brokers were the easy target and thrown under the proverbial bus.

Earlier this week, I was asked to complete another survey for FBAA - it was clear, short and very targetted, obviously gearing up for a fight with politicians. Even today, they have sent out a newsletter, telling brokers to get on with helping their clients while FBAA handles the fight with politicians. Because they recognise it for what it is - politics! None of it makes any sense, not if the outcome is supposed to be helping real Australians!

Sadly no-one steps up for us financial planners. If I put together a similar survey, would Money Management (Mike Taylor?) run it for all financial planners across Australia? Because the story for Life Insurance is like a 10x stronger story than mortgage brokers! Then we might stand a fighting chance of getting any message across to politicians....

actually they should prove to me why I should bother with risk anymore, how it is commercial to do so

I agree. The best thing we can do now is review and make changes to existing clients' policies so they remain affordable and appropriate. They still need an SOA, but at least we don't have to go through the rigmarole of justifying a new policy recommendation.

Sadly, I also think the industry is already dead. Without new business coming into the life offices, they will eventually perish and their business will be sold/transferred to Resolution Life for servicing only. I find it hard to believe that once upon a time, AMP were the jewel in Australia's thriving life insurance industry, but now are just a shell of a company and not even providing life insurance any more....

Sold my insurance book for a paltry sum of capital and it was the most wonderful and liberating feeling to kiss that laborious, unprofitable, risky and downright impossible business goodbye. Will focus solely on wealth now. The economics of providing insurance advice as a service are completely broken and the industry has officially met the definition of terminal illness. The wealth sector on the other hand is on life support. In business there’s really nothing worse than dying slowly. My heart breaks for risk advisers, they have been asymmetrically victimised and punished by the government, who simply cannot comprehend what they do and HOW they do it. This absolute imbecile of a minister happens to be a prime example.

BT have just put up Income Protection prices for some policy holders by up to 72.5%. I have also been made aware from a BT rep. that they plan to send out letters to clients giving options as to how the client can reduce the premiums. IE. Dear policy holder, here is your nice little 72.5% increase however, if you want to assist with getting your premium down lower than the 72.5% increase, you can elect to switch from level to stepped, from agreed value to indemnity or reduce your benefit period from to age 70 to 5 or 2 years. They are actually doing this ......WTF. Tell me how this does not constitute advice?? Advisers cannot give quotes out to clients as this constitutes advice. We need to issue and advice doc with the quote.....WTF is going on with this industry...The bigger question rather than commissions is what insurers are actually going to be left in 5 years within Australia if this continues? How can we ethically write risk polices with insurers when we know they are going to be hitting clients with renewal increases like this?

One insurer unlikely to be left in 1 year, let alone 5, is BT.

They are clearly willing to trash their reputation and sever adviser & client loyalty, in exchange for a short term boost to premiums. Suggests they are preparing for a quick sale.

Its all too late for us. The mortgage broker industry bodies where great at defending their members and ultimately this benefited the consumer. Our bodies the FPA and AFA just threw us under a bus with the LIF as they had more interest in the funding provided from the FSC members. The result has been the decimation of the Life insurance industry.

Agree with all comments provided - I talk to lots of Advisers and all are or have been for some time moving away from risk advice...too hard and not profitable enough...the industry overall is totally cooked and probably has been for some time but we've all wanted to believe that at some point things would hit bottom and bounce...not sure we've seen bottom yet sadly

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