Govt urged to treat advice commissions like franking credits

If the Government were to apply the same logic to life/risk and grandfathered commissions that it applied to refundable franking credits, then it would opt for their retention, according to financial services business broker, Paul Tynan.

Speaking to Money Management, Tynan said that the similarity between the franking credits debate and that applying to life/risk and grandfathered commissions was that they both involved retrospectivity.

Further, he said that just as retirees had factored refundable franking credits into their income, life/risk advisers had factored in commission-based remuneration and this was a factor in the valuation of their businesses.

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“Will the new Coalition Government apply the same principle and review grandfathered commissions because it is also clearly based on the retrospective nature of the changing product design,” Tynan asked.

“The commission in these products has no connection with the ongoing servicing of clients and was developed ‘in product’ because the consumer could not afford or would not pay for the advice."

Tynan’s comments followed on from his earlier assertions that Canberra policy-makers had been unduly influenced by self-interest groups with the result that the advice debate had become hijacked with no heed being paid to consumers, their needs and affordability.

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It doesn't matter what the government thinks anymore. The product manufacturers want it gone, or more accurately for themselves, and many are already doing it. Not surprisingly nothing is being handed back to the client. Just like the life insurance changes everyone will pat themselves on the back saying it is good for the industry, while the commissions will move from the advisers to the product manufacturers, while the clients will not get any service.

Why don't the regulators simply apply a Best Interest Duty(BID) obligation to Product Providers in Life Insurance (and the FSC), in the same way that they are now thrusting increased responsibilities onto Trustees of the relevant superannuation platform providers, to have to act in the clients best interests, rather than continuing to try and squeeze more profits from their books of business, and in the process screw both the Advisers and their clients. It is high time that all the Life Insurance product providers were held to account, as it is they who have over the past 3 years hijacked the debate around remuneration/commissions , to the detriment of both Advisers and their clients. It is high time that the new personel in the Governments Finance portfolios/ministry, actually put some commonsense back into this arena, before it is "too late" and the Life Insurance industry becomes decimated due to the greed of the big players and their shareholders.

If Paul Tynan really believes that “The commission in these products has no connection with the ongoing servicing of clients" he is as out of touch with reality as Politicians & Media. These commissions have everything to do with servicing clients! I have operated on the hybrid commission model since 1995. It gives us enough recurring revenue that when the claim comes in, a direct debit needs changing or a new needs analysis is completed, we can do this. That is what the commission pays for. When the time comes to sell, I won't now be selling through Paul Tynan if this is his view, as he clearly does not understand Practices that specialise in insurance. I am gob smacked!

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