Risk focused advisers have greeted Kelly O’Dwyer’s appointment as Assistant Treasurer mostly as an opportunity to commence a new conversation about the proposed Life Insurance Framework reforms, while other industry stakeholders have issued more measured but positive initial responses.
Adviser Feedback
Not lost to advisers in a number of their early comments is the fact that Ms O’Dwyer will also assume the Small Business portfolio responsibilities. Advisers have drawn the link to the argument that remuneration restrictions and proposed clawback provisions will challenge many financial advice small businesses, where many advisers hold the view that this challenge is unfair and too prescriptive:
One would hope that as Small Business Minister, it will be [Ms O’Dwyer’s] duty to support we advisers who are small business.
“One would hope that as Small Business Minister, it will be [Ms O’Dwyer’s] duty to support we advisers who are small business.”
The issues of clawbacks and improved efficiency with integrity have also been raised as significant issues the new Assistant Treasurer should address:
“Address the overlaps and paper war we are all experiencing while still ensuring integrity in the industry is not compromised. As to the professional associations, it is time they to stood up for all of us and not merely roll over.”
“There is only one real problem, three year responsibility, that has to go. Two years maybe, but three swings too far the other way.”
Dealer Group View
The initial response from Australia’s largest independent risk-focussed licensee, Synchron, continues the theme of linking Ms O’Dwyer’s ministerial responsibilities. Synchron Director, Don Trapnell, noted Synchron was delighted that the Small Business and Assistant Treasurer Ministries have been brought into one under Ms O’Dwyer:
“…the vast majority of financial advice businesses in Australia are, by definition, small businesses and together, small businesses are the biggest employers in the country,” said Mr Trapnell. “We believe Ms O’Dwyer is across the LIF reforms and we will be making representations to her at the earliest opportunity,” he added.
Before the announcement of the new-look Ministry, Synchron had already issued a call to action to its advisers and the broader industry last week, urging it to lobby for change to the LIF clawback provisions.
Mr Trapnell said that until the new Minister has had the opportunity to evaluate the LIF proposals, the clawback provision remains the most inequitable element of the reforms and advisers should be lobbying to have it changed.
To that end, Synchron provided its adviser force with a letter template for them to use to send to their local Members of Parliament, requesting the clawback provision to be reconsidered. We understand this initiative has led to significant new advocacy by advisers to their local members regarding the clawback issue.
AFA
Similar to other adviser comments, AFA President, Deborah Kent, has acknowledged the significance of Ms O’Dwyer’s combined portfolio in highlighting the link between the new Minister’s small business and financial services sector responsibilities:
“Policy in the area of financial services has the opportunity to help thousands more Australians secure their own financial future,” she said. “This, together with small business as the engine room of our country, means that Ms O’Dwyer will have significant decisions to make in the Government’s response to the Financial System Inquiry, the area of professional standards for financial advice and also in regard to the future of life insurance advice.”
Ms Kent said the AFA is looking forward to the opportunity to consult the Minister on issues that have significant implications for the future of self-employed advisers and small business financial advice practices.
FPA
In welcoming Ms O’Dwyer’s appointment, the Financial Planning Association has also welcomed the elevation of the financial services portfolio into the Coalition’s Cabinet Room.
FPA CEO Mark Rantall, note, “It is appropriate that financial services should be a policy priority for the Government, given the significant impact it has on Australians,” he said.
FSC
The initial message from the Financial Services Council differs from adviser and other statements, in that the its agenda relates more to continuing the reform agendas already in motion. Acting FSC CEO, Andrew Bragg, noted, “We expect the new Treasury team will hit the ground running during this term to complete the reform agenda established by their predecessors.”
In a clear reference to the Life Insurance Framework proposals, Mr Bragg added, “Life insurance reform is overdue. The sustainability reform proposals have taken five years to develop and must swiftly progress.”
The AFA has come part way to address the 3 year clawback fiasco, though agreeing to 2 years is not far enough and does not address the real issues.
What other small Businesses around the world, would agree to a massive reduction in income and carry losses forward, to help the Big end of town. VERY FEW.
A revenue reduction is one thing and is going to be a huge hole in many small practices profitability, which most would accept if there is a sense of fair play.
A 3 or even 2 year clawback on top of this, for lapses that are not of the advisers making, is totally unacceptable.
The solution is simple. Keep a 3 year clawback for the original adviser who wrote the Business if they move it and maintain the current 1 year clawback for everything else.
Life Companies will choke themselves of New Business and as we all know, claims will rise as people get older and without increasing revenues, it is a road to losses.
The FSC has proven it is out of touch and cannot clearly articulate it’s position, or it appears, to even bother to respond with clarity to questions as to how and why, they came up with their 3 year clawback agenda.
Stop even talking about accepting a 2 year responsibility. That just gives them room to appear flexible. Set a ridiculous standard and then give some ground to appear negotiable. You still end up with an unfair impost on small business. Just like Shorten claiming how generous he was in reducing the ridiculous opt in requirement from yearly to bi-yearly. Sounded almost like he’d done us a big favour. Don’t fall for it.
Totally agree Greg. 1 year responsibility – end of story!
Bragg is trying to push through his and his paymasters agenda as quickly as possible. Again, 3 year clawbacks & halving commission with no reduction in premium benefits only one group. Consumers and small business will suffer for greater profits of you know who.
Are you all serious? The FSC (the insurance companies) want this for profit only, they can’t get legislation (it can’t be legislated) so with all this hype, it’s about the insurance companies saying they have to bend over to government pressure, it’s not about anything else But pure corporate greed, The AFA, The FPA the CPA all need to get lost they do not represent risk advisers nor the best interest of the public. Stand up in numbers you will win put your head in the sand and have your income halved, perhaps we all join the banking industry Union? Or star our own , bring the industry to its knees just like they want to do to us, the industry has already lost 8000 advisers with another 5000 to go if this gets up, this idea has no public interest or gain, this is all profit, hat industry can reduce your income by 50% none so why let it happen? Responsibility period talk about a breach of the fair trading Act. How about the consumer competition act? Oh really an industry that has run like this for centuries, oh it’s not sustainable what is not sustainable? Craig Millers income? How about Damien MU,s income ? Or how about th FSC be formed without conflicted interests? Oh and by the way it was not Bill Shortn who started this is was Joe Hockey. I’m no fan of Shorten this as I said has nothing to do with the best interest of the public, no public opinion has been sort and the only conflict is an insurance company CEO catches a commercial plane as opposed to a private jet. The insurance company profits are through the roof google it Zurich has never posted a better profit. AMP profits up 135% , TAL still makes 80 MIllion dollar profit but disappointed it wasn’t more, ClearView profits up 50% suncorp life profit up 125% 1 Billion dollars Suncorp not 1 Million, 1 BILLION and it’s not sustainable? Oh perhaps they can’t manage investment returns, that’s more like it. This process in The UK destroyed the industry now the are too embarrassed to admit mistake. Read the Heath report google it. The AFA has come none of the way it ought to say simply no, it does not condone price fixing (so to speak)
It’s fascinating that Mr Bragg and the FSC have moved to an industry sustainability argument when it comes to ‘reforms’. I thought this was all about the quality of advice??? Is a 30% increase in profit and a reduction of lapse rates in the past 12 months not good enough for sustainability?? If it was about sustainability it would be in all stakeholders interests to work together – so why is the FSC using the blunt stick of a flawed ASIC report to blame only advisers for their ‘problem’??? The FSC position doesn’t make sense. If we can get more insurance to more Australians everybody wins – insurers, government, consumers and advisers. So what is going on? Perhaps Ms O’Dwyer and her team can get to the bottom of the FSC’s real motivations.
Never ceases to amaze me how many rules are changing without decent discussions about the “pros and cons” of all sides involved. The problem is that too many rules are being made without most people even knowing the discussion was taking place and poor communication with the “silent majority” who generally think that “if it aint broke then don’t need to fix it” idea. Lawmakers are too often trying to justify their existence by rushing through things to be doing “something” instead of accepting that there is often a good reason for they way things “evolved” on their own. Of course I am all for laws if they can produce a good “win/win” outcome (and improve the general under-insurance problem) but often the new laws involves someone needlessly losing and that means the whole system is setting itself up to “fail” because there is less “motivation” to do things than what was done before. The only solution is for a true democracy that allows more people to be heard who are actually “doing” the work rather than those being paid comfortable and predictable salaries “dictating” how they should work. Only those doing the work fully understand the full range of issues being dealt with on a daily basis but the “lawmakers” have not been patient enough to “listen” before rushing off new laws (because they were swayed by the wrong “parties” or short term vote grabbing).
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