The Trowbridge Report recommendations could lead to a “generational change” in the way the life insurance industry operates, the Association of Financial Advisers has warned, encouraging advisers to familiarise themselves with the issues.
In an email to members last week, AFA CEO, Brad Fox, said that the outcomes of the recent Australian Securities and Investments Commission (ASIC) report into retail life insurance (Report 413) and Recommendation 24 from the Financial System Inquiry (FSI) may have significant impacts on how advisers are paid for providing life insurance advice.
In response to these two reports, the AFA and Financial Services Council (FSC) formed the joint Life Insurance Advice Working Group (LIAWG), chaired by John Trowbridge. Mr Trowbridge is expected to hand down his final report this week, and Mr Fox said that whilst he remained hopeful that the recommendations would be consistent with what the AFA sees as fair, equitable and practical for all stakeholders, there was no guarantee that the Association would agree with Mr Trowbridge.
We may agree, agree partially or disagree with Mr Trowbridge’s recommendations
“The various LIAWG members have the task of assisting Mr Trowbridge in understanding and addressing the many issues relating to the provision of personal life insurance advice, the broader life insurance market, and more specifically the concerns raised by ASIC in Report 413,” Mr Fox told members.
“One way to consider the role of LIAWG members is that they have been used by Mr Trowbridge as information consultants to assist him in gathering an understanding from which he will arrive at his final recommendations.
“We have exhausted every avenue to provide research and fact-based information to assist Mr Trowbridge in his deliberations. The AFA Board has met four times since the LIAWG process commenced, and as a Board where all voting members are current financial advisers, they have ensured that the AFA has continued to represent advisers and their clients honestly and clearly.
“We certainly understand the costs and obligations financial advisers have in providing quality, strategic and compliant financial advice. We know that advisers, particularly those operating in small business practices or as sole-practioners need to achieve a revenue outcome that at least meets their cost to provide quality advice. It is very clear in our minds that simply changing adviser remuneration does not resolve the issues raised by ASIC.”
However, Mr Fox reiterated that the Trowbridge Report would represent the views of Mr Trowbridge, as independent chairman.
“Once the report is released, the AFA Board will determine a response to it,” he said.
“We may agree, agree partially or disagree with Mr Trowbridge’s recommendations.”
Mr Fox added that, regardless of the recommendations, advisers should be under no illusion as to the impact the Trowbridge Report would likely have on their business, licensee and clients.
“Insurers, licensees and advisers will each need to take accountability for their part in improving the overall standard of retail life insurance advice. This is not just an adviser issue.”
Simple, ASIC to audit any adviser who replaces products every 12-18 months. Find out why and take appropriate action. If an adviser does their job properly, policies should not need replacing every 12-18 months unless there are major changes to a clients situation.
Insurers can provide these reports as they all monitor lapse rates. While they are looking at the industry as a whole they should also look at advisers or companies that have guaranteed commissions set up with insurers. These advisers or companies still get commissions paid to them even if the client has moved to another adviser, so in effect they get paid for doing nothing. AFRM
Nice thought, and anecdotely I believ that ASIC’s favoured position would be to have individual licensing, that way ALL advisers would be visible to them. However government funding means this isn’t possible, as a significant increase in manpower and resources would be required.
But in one fel swoop you would cure a lot of the ills, even bank planners Would be independently reosponsible for their own actions and the banks / insurers with vested interests unable to interfere in the advice process. But that’s not ever going to happen.
The expectation is to be beaten up again (and why is that).
I have no confidence in these reports and they are destroying our fabulous industry.
Any experienced adviser can articulate ways to improve this business and its not reinventing the wheel as I have no doubt this report will propose.
Let’s see what comes out of the report and the . React I trust the AFA and other bodies will re nounce the stupidity and support us as they say they will
If this was an attack on an industry Super fund I have no doubt the Unions would be up in arms I trust our associations will be as strong
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