In responding to questions raised at the end of the fifth round of hearings on superannuation, AFA chief executive Philip Kewin acknowledged the scrutiny grandfathered commissions have come under as a result of the royal commission and wasn’t expecting much support on the issue.
He proposed the introduction of an annual reporting obligation for licensees to report the percentage of practice income that is from grandfathered commissions.
“In our view, the transparency of this measure, along with a set of actions by government to enable clients in uncompetitive products to move to modern products, including the removal of exit fees, CGT rollover relief and Centrelink deeming relief will assist to speed up the move of clients to modern products,” Mr Kewin said.
“Where there is no need or benefit from moving, then they should not be forced to move.”
Mr Kewin said any commissions and/or fees are fully disclosed to clients in the statement of advice (SOA) and the clients need to agree to proceed and the business needs to be implemented before any commission payment is made.
He added that any questions about a conflict of interest that this creates do not take into account that, under the Life Insurance Framework, all insurers are paying initial commission at roughly the same rate and it is capped.
“As such, commission is not a driver that encourages a financial adviser to select one product over another, it is a mechanism by which many clients gain access to valuable advice who would otherwise not have this opportunity.”
Further, Mr Kewin noted that advisers are also bound by the best interests duty and related obligations, and the advice needs to place the client in a better position as a result.
“Any consideration of what this commission payment represents, needs to consider the extensive work that goes into the provision of life insurance advice, including the needs analysis, strategy design, product consideration, SOA production and presentation, underwriting and implementation,” Mr Kewin said.
“Importantly, these commissions include the servicing payments that cover a financial adviser to provide claims payment services when life insurance really demonstrates what it is for.”
[quote=Anonymous]There won’t/wouldn’t be any savings to pass to clients.. Since the amount of up front commissions on life insurance started to reduce the cost of cover across all lines of personal insurance has continued to rise, not decrease.[/quote] That is true
And why do you think that the media still thinks we’re product sales people?
each time the AFA and FPA come out, they sound stupid and make us look stupid.
just shut up, you loser turds and shut down your stupid association.
no one wants you, you have nothing worthwhile to say only losers keep paying your fees and become members
everything you say is idiotic and stupid so shut your fat face and stuff it with another hoagie so nothing else comes out of it
And you are obviously a well
educated and intelligent commentator and serve as a beacon for our industry yourself with you gutter attitude and language
Come on AFA. You are increasingly showing your irrelevance here. The industry has to change, time to realise this and get on board with thought leadership of how it can evolve for the better.
You probably had my support until you said “thought leadership” . What does that even mean, just some muppet putting thought bubbles up in social media. Just get out there and do your job
Why Grandfathered Commissions were not included in FOFA and FDS was just stupid (and Banks / AMP, etc pushing to exclude it) and allows this issue of Comms for No Service to continue.
Adviser’s, its not that hard, do your job and service your clients and if you get paid via a fee or commission it shouldn’t matter.
And guess what, for those majority of good adviser’s who do provide a good service, the ongoing reviews makes happier clients, more involved clients, more likely to do extra business clients and more likely to refer more business clients.
And you don’t need a new FASEA approved degree or ethics course to work that out !!!!!!
[i]commission is not a driver that encourages a financial adviser to select one product over another, it is a mechanism by which many clients gain access to valuable advice who would otherwise not have this opportunity.”[/i] If this statement is true then why do they have to encourage advisers to remember to provide them with a service. this is all that is wrong with this position. On one hand advisers say commissions is just a way of paying for advice. On the other hand the reality is that thousands of people are paying commissions to advisers and get nothing for it and are even oblivious to the fact they are paying commissions. This industry needs to grow up and turn this fee structure off and pass on the savings to clients.
There won’t/wouldn’t be any savings to pass to clients.. Since the amount of up front commissions on life insurance started to reduce the cost of cover across all lines of personal insurance has continued to rise, not decrease.
MV, they are talking about grandfathered commissions on superannuation when they speak of commissions for no service. Risk commissions are not for fee for service, only adviser service fees with a linked client service agreement are. Clients can go direct to insurance companies and will not get a cheaper policy than through an adviser, this is a fact. Also, if an adviser rebates some of the insurance commission clients will pay less than going direct every single time. You can prove this by asking TAL for a quote, then asking an adviser for one from TAL for the same cover for example. They are two totally different areas of advice. Please understand that and grow up a little yourself before going off half cocked with these types unfounded comments.
except reading between the lines, Risk commissions are on the radar as well
No, they’ve already been dealt with.
G’ my view. Your statement is so true for those who rape this payment. I believe- no evidence- there are an unquantified number of advisers who do the right thing and service clients in an ethical manner. Just don’t bag all commission advisers with a bad name. There are many out there who do not deserve your one bag fits all statement. Cheers mate, grow up.