Risk-focused financial planning dealer group, Synchron has welcomed the fact that the final report of the Royal Commission did not recommend an end to vertically-integrated advice businesses, with its principal Don Trapnell claiming such structures help, rather than hinder clients.
However, Trapnell has signalled that he believes the industry should be lobbying with respect to the status of life/risk commissions when the Life Insurance Framework (LIF) is reviewed in 2022.
Responding to the Royal Commission, Trapnell said two recommendations - the review of life insurance commissions in 2022 and the removal of grandfathered commissions in January 2021 were causing advisers some concern.
“There was always going to be a review of life insurance in 2022, it was part of the Life Insurance Framework,” he said. “The only difference is that Commissioner Hayne has said we should look at life insurance commissions with a view to bringing them down to zero, unless there is a commercial reason not to. “
“There is a very obvious commercial reason not to and we will be talking to the Government to explain the Dutch experience whereby commissions on life insurance were removed with serious negative consequences for the consumer and the economy,” Trapnell said.
“Surely it must occur to the Government that the Dutch market is the only market in the world that has removed commissions on life insurance.”
Trapnell said the recommendation to ban grandfathered pre-FoFA investment commissions was likely to worry affected advisers, who would need support to deal with the change.
“One way of looking at it though, is to realise that advisers selling books of clients that were generating grandfathered commissions were receiving about two times revenue,” he said. “January 1, 2021 is two years away, so the recommendation means advisers with these books will receive two times revenue, therefore the net effect is zero.”