May 18, 2010
Financial Services Minister, Chris Bowen, has confirmed that risk insurance commissions will be one of the key issues as the Government consults with the industry on its Future of Financial Advice reforms package.
Addressing an industry function in Sydney hosted by the AFA, Mr Bowen said that full and open disclosure does not make up for fundamental conflicts of interest associated with commissions, whether those conflicts are real or perceived.
But on the question of whether commissions on risk products should be included when other commissions are banned in 2012, Mr Bowen told his audience of 430 advisers and industry stakeholders that he can see both sides of the argument.
On one side is the issue of conflict of interest, but this is balanced against what Mr Bowen sees as real concerns about the potential impact the banning of risk commissions may have on Australia’s underinsurance dilemma.
Following his speech, Mr Bowen reaffirmed to reporters that he has a “…genuinely open mind…” about the future of risk insurance commissions, and this will be a key topic in the Government’s consultation process with the industry, announced earlier this week.
Mr Bowen also remarked he has received feedback that more people will now be seriously considering a career as a financial adviser because commissions will be banned from 2012.
Other key points made by Mr Bowen in relation to financial advice issues include:
- A clear indication that the Government will not be pursuing the possibility of making financial advice tax deductible. Mr Bowen said this was a very expensive measure that needs to be justified and that it is not something the Government is considering.
- There is a place for simple, one-issue advice to be provided, particularly to superannuation fund members, rather than providing all clients with a comprehensive, ‘holistic’ advice solution. Mr Bowen is mindful of those mums and dads “… who only need simple, basic advice.”
- The Government is two thirds through its comprehensive superannuation reform package, already announcing measures it will adopt from the Henry Review and Ripoll Inquiry; the final component being the measures that will stem from the Cooper Inquiry, to be handed down on 30 June 2010.