Risk commissions debate masks concerns about past failings
The debate around risk commissions is a proxy conversation that simplifies the issues around problems of trust and mis-selling but cannot be solved by simply removing risk commissions.
Financial Planning Standards Board chief executive Noel Maye said the belief that removing commissions will solve the problems was a mistaken one and had not worked in a number of countries.
"We have seen places were regulators have banned risk commissions across the board, until they had to begin making exceptions because it did not work for the consumer or the adviser."
Speaking at the Financial Planning Association professionals congress in Sydney, Maye said that people were used to contingency fees being used in the legal profession as well as in other professions.
"Commissions are baked into products in a number of risk markets around the world and the focus should be on consumers, the products in use and how planners can get back the trust of regulatory bodies," Maye said.
FPSB chair Barry Horner said that recent experience in the United Kingdom and its implementation of its FOFA-like Retail Distribution Review found that there were concerns about the transition from commissions to fees on risk insurance.
Horner said the review would have removed about 40 per cent of planners from the industry if they had been forced to fees.
"Our regulator had to water that push down but is watching with interest because it is also concerned about how the loss of planners we have suffered affects good advice," Horner said.
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