In a letter, AIOFP executive director Peter Johnston and chairman Peter Daly urged Ms O’Dwyer to consider the implications of the reforms for advisers, and especially for those who are small business owners.
“A very likely future market prognosis will be domination by the institutional vertically integrated models selling their own products through in house conflicted advisers and direct flawed internet/telemarketing sales,” the letter said.
“The Independent adviser numbers will be devastated as the proposed structure is commercially unsustainable.
“We urge you on behalf of consumers, small business and the nation’s future wellbeing not to allow the Institutions to act in the best interests of its shareholders (and bonuses to its Executives) but act in the general [community’s] best interests by adopting [a compromise],” it said.
The AIOFP also conceded that the “ideal” future risk adviser will work on a fee-for-service basis; however, the association argued that both the industry and consumers are “not ready for this environment” just yet.
“Consumers are simply not accustomed to paying for risk advice and having institutions offering flawed policies directly to consumers is perpetuating precisely the same structure and culture, but with consumers the big loser,” the letter said.
“History generously demonstrates that despite the initial political rhetoric about ‘consumer savings’ from price reductions, this will very likely not eventuate.
“Premiums are likely to increase over time, consumers will lose choice, protection and not get professional unbiased advice and assessment of their circumstances,” it said.
ifa understands that the AIOFP met with Ms O’Dwyer on Monday 26 October.
During the meeting, the AIOFP called for the commission rate to be changed to 80/20 and for a clawback period of two years instead of the proposed three.
ifa previously reported that representatives from the AFA, FPA and the FSC met with Ms O’Dwyer to work out the specific details of the Life Insurance Framework, such as a definition of the clawback policy.
Agree mostly Edward, except that an FDS is only required for ongoing service fees and arrangements, generally not insurance commissions, so would not be required for advice solely relating to insurance 😉
All other points valid however
Mr. Johnston – DERRRR what do you think they are trying to achieve!?! ASIC actually WANT to see the advice sector more centralized so they can police the field more easily and issue infringement notices galore at $50k a pop which they know the big banks and life insurers will pay without question!
The LIF has absolutely nothing to do with consumers bests interests because if they really did care about that then the big banks call centre staff would be required to provide personal advice accompanied with all the regulatory red tape truck load of disclosure documents for each sale, but they dont have to do that because theyre in a call centre so its an easy, commitment free and liability free sale for them!
(Now back to you Mr independent advisor have you provided an FSG and PDS and SOA and FDS with that $500 sale of basic life insurance to your last client? Aha! You made one typo in your FDS so were suspending you from the industry and you are required to get an independent expert to review every single SOA for the next 10 years and report back to us, and heres a penalty notice too).
Kelly O’Dwyer = Minister for Financial Institutions.
Clearly couldn’t give a stuff about Small Business advisers, with both Frydenberg and O’Dwyer being heavily influenced by their past Institutional jobs with NAB and pandering to the institutions.
Exactly. The outcome of LIF will be a move away from professional non aligned insurance advice, to inhouse product and junk insurance.
There is no surprise in any of this as LIF has been designed by the institutions for the institutions. What I don’t understand is why on earth consumer groups are supporting it when it will clearly lead to worse outcomes for the 95% of consumers unwilling to pay upfront for professional insurance advice.