AFA chief executive invites advisers to ‘get behind’ QAR

In a post to his LinkedIn profile, the chief executive of the Association of Financial Advisers (AFA), Phil Anderson, has clarified the most recent proposals made under the Quality of Advice Review (QAR), specifically those impacting risk advisers.

Namely, earlier this month, Michelle Levy published a snapshot of the data the QAR has considered on general insurance and life insurance, and a set of proposals.

Among them, Ms Levy recommended that financial advisers who provide personal advice to retail clients in relation to life risk insurance products must obtain their client’s “informed consent” before receiving a commission.

As expected Ms Levy’s proposals gave way to a flurry of concerns particularly around how disclosure would impact an ongoing commission.

In a LinkedIn post this weekend, Mr Anderson labelled this concern “misinformed”, and revealed that the AFA had met with Michelle Levy and Treasury where this concern were addressed.

Mr Anderson said that Ms Levy confirmed that the consent requirement “would be a [one-off]”, and not an annual requirement. “Where consent has previously been obtained from the client, it would not be required again,” he confirmed.

Providing an example, Mr Anderson explained that if the upfront and ongoing commissions were previously disclosed in an SOA and the client signed the Authority to Proceed, “then this is consent and nothing more would be required”.

“Disclosure of ongoing commissions could be as simple as the commission rate and the dollar amount on the basis of the first year’s premium,” Mr Anderson said. This, he noted, is consistent with current practice, and not an additional obligation.

“There is no expectation of predicting commissions payable over multiple years,” he added.

Finally, he said, while the adviser needs to keep evidence of client consent, “there would be no requirement to provide this to the life insurer”.

“The bottom line is that this is nothing like annual renewal and client consent in the super/investment space,” Mr Anderson assured.

“Clients providing informed consent is not unreasonable. This already happens. In a future world where SOAs are not mandated, we will need to have other ways to ensure disclosure of commissions and confirm consent. That is not difficult to resolve, particularly where it is principles-based, rather than prescriptive.”

Ultimately, Mr Anderson said, “advisers should not fear this QAR proposal”.

“We need to continue to support the QAR for the work that they are doing to deliver fundamental change to the advice process and to reduce the cost and complexity of advice. Let’s all get behind what they are doing”.