The change of Assistant Treasurer has the potential to reset the playing field for advisers to influence the outcome of the Life Insurance Framework discussions.
In calling for the focus to move back to quality of advice issues, Bourke Financial Services owner and director, David Bourke, told riskinfo that recent discussions with his local Federal MP, Bert Van Manen, have indicated advisers have gained some traction in the LIF debate with the change in Assistant Treasurer.
Bourke, who is based south of Brisbane within Van Manen’s Federal seat of Forde, said he and a group of seven other advisers across a number of licensees had met with the MP last week to present an adviser perspective on LIF, and that he also hoped to meet with new Assistant Treasurer, Kelly O’Dwyer, in the coming weeks.
Speaking to riskinfo, Van Manen said the change of Assistant Treasurer had provided the advice sector a good opportunity to clarify where LIF was at and he had already spoken with the new Assistant Treasurer at length about adviser concerns stemming from the proposed changes.
the Assistant Treasurer “…was well aware of the concerns of advisers
Van Manen said further meetings between O’Dwyer and the Association of Financial Advisers were yet to take place but the Assistant Treasurer “…was well aware of the concerns of advisers and we can negotiate a way forward from there”.
Both Van Manen and Bourke were critical of ASIC’s Report 413: Review of Retail Life Insurance Advice, released in October 2014, stating it has been used to typecast all risk advice and advisers as being involved in churning.
“The report did not break down the sections of the industry responsible for churning or where the problems where occurring,” Van Manen said, adding “Insurers and dealer groups know where the churners are and if they were doing their job they should have reported them to ASIC or dealt with them via their own internal channels.”
Bourke said there is general agreement across the industry that churn needs to end and those who engage in it removed from the sector, but questioned why insurers and ASIC have not acted.
“When Report 413 came out it was already easy for insurers to identify those who churn and were able to weed out the bad advisers,” he said.
“ASIC also knew who they were but there has been no industry consultation around how to deal with churn. Instead the attitude has been that all advisers are churners and advisers’ incomes should be reduced across the board.
The industry has the resources to ascertain who churns
“The industry has the resources to ascertain who churns and there are maybe 50-100 churners overall, but we have never been consulted about dealing with this problem.”
Bourke said efforts to reduce advisers’ incomes are the result of life insurance companies ‘being very unaccountable for their actions’ around product pricing and design.
“Insurers claim they are bleeding money but that is because they have priced themselves out of affordability and chased new business or closed legacy books to make advisers write new policies,” Bourke said.
He pointed to figures from the Australian Prudential Regulation Authority released in June that show net profit in the life insurance sector climbed 30% over the previous calendar year.
“No life insurer complained when advisers churned policies in, but they are quick to complain when policies are churned out. Yet no insurer will admit that their products and business practices are at fault and are designed to attract advisers.”
He said advisers had been given more traction on LIF and expected a re-examination of the core issues which led to the development of the proposed reforms.
“We feel with a new minister there is a greater chance for change with a different personality in the role and with more oxygen around the issue. There is a strong case to readdress the LIF and make the sector clean by getting back to the issues addressed in Report 413 around churn and advice.”
Well done a great start let’s hope everyone else gets on board and pushes this to their own members along with a line or two to Ms O’dwyer to strengthen the request
I trust and believe AFA should be at the Fore front of this ! Show us you are our association fight for us and the long term benefits to our clients that will be gone forever if this goes through in January as is planned
Well done to David and those involved.
A task I would have thought FPA and AFA would have run with.
Yes, well done David and “team.” Isn’t it interesting that if Life Offices want to stomp out churning, many of them still offer “takeover terms” for recently underwritten competitor’s policies? It is time to bring the debate back to advice quality, instead of having been hi-jacked to insurer profitability.
Where is the AFA and FPA.? Our associations. While great at self promotion, advisers such as these along with many other of equal passion including myself are hoping our associations will represent us in the manner we expect of them. As for the looming January debacle this has created and the uncertainty to our businesses, I find this frustrating in the extreme and the leadership we need is lacking in our industry associations. Its time advisers made it quite clear that direction is needed in the form of leadership and we ought not, should not and will not tolerate self interested agenda’s be this from, our associations as much as our government. I agree, from the outset, advisers have been ambushed and our name and valued work tarnished to bring the current mess into reality. The end loser often forgotten by those in charge is of course the consumer. The associations should understand as well as government, BEST INTEREST and not agendas are not mere words and ought not only apply to us as advisers but those in charge….including government and our associations.
Guys, don’t hold your breath waiting for the AFA or the FPA to do much of anything for thier rank and file members.
It would require an anatomy transplant for that to happen, the prospect of which is unlikely.
Well done David Bourke,great to see someone representing the Planner and exposing the real villians the manufactures and dealer groups .Keep up the good work.
Well done David. It would seem obvious that no business can sustain a 3 year clawback and a 50% reduction in commission and obvious that the end losers are customers and advisers with the insto’s being the winners.
But the issue we still have is senior members of the AFA siding with the insurance companies against the wishes of their entire membership making it easier for ministers to wrongly assume that the market has reached a consensus.
Brad Fox should be shouting for a return to the negotiating table over these reforms with the new minister but is worryingly quiet.
I agree with the comments below its up to us to get our local members to understand the issues.
“Leaders” of the AFA and FPA have proven that they seem to have other agendas to their members.
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