Financial Services Minister Bill Shorten has today said the Government is reconsidering its position on banning risk commissions on individual superannuation advice.
Speaking at the Financial Services Council’s Annual Conference in Queensland, Mr Shorten reiterated his Government’s determination to proceed with opt-in regulations as part of its Future of Financial Advice (FoFA) reform package but said he was reviewing his position on the banning of risk commissions in super as a result of feedback he has received from the financial services sector.
Mr Shorten’s comments today follow earlier indications that he was re-considering the Government’s position on risk commissions in super. At an AFA function at the end of June, Mr Shorten said he was “… listening carefully to what people are saying…” and did not rule out a review of this policy.
Shadow Financial Services Minister Mathias Cormann told riskinfo today he had expected some kind of shift from Minister Shorten on this particular element of FoFA because it is “such bad policy”.
“Of course, those people who get insurance automatically through their superannuation should not be charged commissions for that. But those who access financial advice should not be disadvantaged by banning commissions. We do not see commissions as conflicted remuneration.
“Bill Shorten needs to remember that his job is to act in the public interest, not to be the agent for one segment of the financial services market,” Senator Cormann said.
AFA CEO Richard Klipin has told riskinfo he believes Mr Shorten has been taking wise counsel on a number of issues and that it appears by his comments this afternoon there may be a consumer-focussed outcome on the question of whether to allow the continuation of risk commissions in superannuation for individual advice.
FPA General Manager for Policy and Government Relations, Dante De Gori, said the association welcomed the comments.
“The FPA has been opposed to this aspect of the reforms from the first moment it was announced.”
He said the narrowing of the ban would still protect those who are not actively engaged with their superannuation and do not receive advice. “No-one agrees with a situation where commissions are paid but no service is received,” he told riskinfo.
He added that the FPA was particularly proud of its efforts in working with the Government to highlight the issues with the proposed ban. “It was great to receive that acknowledgement by Minister Shorten in a public forum for the work the FPA has done.”
While the Minister seems determined to move forward with opt-in, Mr De Gori said the FPA would not give up on this issue. “There will continue to be pressure from the FPA on opt-in because we do not think it is necessary in the context of a Best Interest Duty,” he said.
The Government is now looking to release draft FoFA legislation in September, having previously targeted August for its release.
I’d like to retweet this, or post it on facebook – suggestions please?
Is there a chance common sense has prevailed?
Good news, but why the comment from the opposition that “people who get insurance automatically through their superannuation should not be charged commissions for that”? Why not? Who does he think handles the claims that arise from these polices? Who does he think advises on increases or upgrades etc etc?. Maybe the opposition are showing a bit of ignorance on this issue also. Not all corporate super funds are industry funds. Its going to get very technical if the ‘selected’ amount of cover within a plan is exempt from commissions. This selected amount is often agreed upon following advice from the adviser and the employer. Why should the insurance companies not pay for having all that business sent their way? They would also have to handle all the claims themselves? Good luck to the members then! As for the issue of price, I have on many occassions quoted cheaper cover, commission included, than cover included in a clients industry fund – so using that as a reason for this change is a joke!
This is great news and it seems the Government is finally starting to listen to constructive advise.
There will be a negative response from the Industry Super funds, which is to be expected, as the advise model is where they fall down and can never compete with experianced advisers who truly represent their clients.
Corporate group Insurance is also an area that requires advise.
Most employee’s do not understand how insurance can benefit them if taken as a group and they need advise to guide them on their best strategy, including types of cover and levels of cover they need.
Many employee’s with Insurance held in group cover, are underinsured and unfortunately uninformed.
Great all they need to work on now is opt in. If there doing it to us why not mortgage brokers who get trail comms, or the local phone shop who signs you up on a mobile phone plan and gets trail comms. Both of who do bugger all for their trail comms.
The fact that such a proposal was put forward in the first place is clear evidence that the power of influence on the Ministers office from some industry participants, overpowered common sense and logical thinking. That is frightening! As for opt in and comment by Dongle above, financial advisers will have a very strong case under anti-discrimination laws if they are single out within the financial services industry.
Cormann you need to be better informed. A corporate super adviser provides a similar insurance service to an employer super fund as a financial adviser does for an individual client. As an adviser to both employer super funds and individual clients, there are huge benefits for individuals accessing insurance through their employers default super fund. These benefits include access to wholesale insurance premiums ( due to economies of scale), automatic insurance cover (without medicals) and a dedicated adviser to annually review the policy on their behalf. A non corporate super client would not access these benefits. Both the labor party and liberal party would disadvantage corporate super members if their adviser was not paid a commission to negotiate a better deal on their behalf. We have also achieved better premiums ( which includes an adviser fee) and greater insurance coverage through retail super funds compared to some of the industry funds. Please be fully informed before commenting on this important topic.
Cool your horses folks, the devil will be in the detail. Expect pressure from the ISFN & ” Choice ” to get the proposal changed back
BTW, ” Choice ” apparently have no problems in taking commissions to switch mortgages. After all, Choice runs a business, or does selling subscriptions somehow not qualify as a business.
A new Choice business ( swapping mortgages )also needs to make a profit. And its nice they will disclose the commission, but only on the website.
Hypocrisy and cant abounds !!!
” Forbear to judge, for we are sinners all ”
( Willie Boy, ” Henry VI ” )
Greg F – Spot on mate. Short(en) sighted still…
I am going to email my clients letting them know that from the day the FoFa legislation is passed including the Opt-In clause they would be wise to read all mail they receive from their adviser in order not to become ,by default, an orphan. My clients hate dealing with 1300…….. numbers. I am also unaware if the legeslation allows them to opt back in down the track or whethr I would want to deal with them anyway. It appears to me that the insurance companies and the fund managers may be looking forward to pocketing a lot of trails for little effort however the cost of phone and internet advice could become huge.
I see ASIC have dug themselves in ( SMH 11 Aug) on the “opt in ” issue.
I wonder if the same will apply on commission on risk in super
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