The major insurers are making public their support for commission-based remuneration to continue for life/risk advisers beyond the 2021 review of the Life Insurance Framework, with TAL chief executive, Brett Clark, the latest to join the fray.
In doing so, Clark warned that a user-pays full-fee model would undoubtedly lead to the supply and availability of financial advice being much smaller than it is today and only affordable by wealthier consumers.
Just days after ClearView chief executive, Simon Swanson committed his company to advocating for retention of commission-based remuneration for life/risk advice, Clark today declared: “The discussion and debate needs to be more sophisticated than which is better – a commission or fee-based remuneration model. The stakes are far higher than that.”
“We need to consider the issue holistically, from a number of different angles – consumer access to affordable financial advice, the supply of financial advice, the payment for that financial advice that ensures consumers can be confident in its quality and minimising any potential conflicts or risks,” Clark said in a public statement.
“The development of the LIF framework was an attempt to balance these interests and ensure a sustainable, high quality financial advice industry, which is good for consumers,” he said.
“The alternative of a user-pays full-fee model would undoubtedly lead to the supply and availability of financial advice being much smaller than it is today, and that financial advice would be affordable only for a much smaller population of wealthy consumers. This doesn’t feel in the best interests of consumers, particularly in the context of banks exiting financial advice services.”
“We believe the LIF commission-based model, alongside a legislated “best interest duty” for advisers, is a good model for both financial advisers and consumers which balances these perspectives. Alternative models which limit consumer access to affordable financial advice, or the supply of financial advice, would need to be carefully examined. Any further changes to the LIF framework beyond the scheduled 2021 ASIC review should also be considered carefully.”
“Financial advisers are small business operators, providing local employment opportunities, often trusted members of the community, who work hard to provide competitive insurance products and services for their clients. The parallels with the recent debate on mortgage broking remuneration are very relevant and insightful. We don’t want to depower competition while empowering large financial institutions at the expense of choice for consumer, and financial advisers play a critical role in that.”