The changes in commission structures under the new Life Insurance Framework (LIF) is not about price fixing as commissions are still allowed for life insurance advice unlike other products covered by the Future of Financial Advice (FOFA), according to Kelly O’Dwyer.
Addressing the Association of Financial Advisers (AFA) 2016 National Adviser Conference via video on Wednesday, the federal minister for revenue and financial services said while the Government could have heeded recommendations from the Financial System Inquiry (FSI) to ban upfront commissions altogether and move to level commissions, it instead decided to work with key industry stakeholders including the AFA to reach a compromise.
O’Dwyer also said level commissions and fee-for-service would not be affected under the reforms.
The comments came as the minister sought to clear confusion and cease the misinformation that had spread in the life/risk advice industry.
She emphasised that the LIF reforms would cover all life insurance sales involving advice regardless of whether it was personal advice or general advice.
“There is absolutely no carve out for direct sales and the government will ensure the future sale methods designed specifically to avoid the reforms will be captured including those with no advice provided to the consumer,” she said.
O’Dwyer said she would introduce the legislation this month into the Parliament, which would transition advisers to the new remuneration structure on 1 January, 2018 regardless of their employment arrangements.
“This is a departure from the approach undertaken during the FOFA reforms and a variation to the original life insurance framework legislation which originally proposed a standard approach to compliance by grandfathering employee advisers for the duration of their specific enterprise agreements,” O’Dwyer said.
She said she would ensure the reforms did not favour one part of the industry over the other, having listened to concerns of small and large businesses, and financial advisers.
