All industry parties involved with the negotiations around the Life Insurance Framework should begin implementing them for the benefit of consumers instead of discussing other possible outcomes according to Synchron director Don Trapnell.
Trapnell said while industry groups, particularly the Association of Financial Advisers (AFA) and the Financial Planning Association (FPA), worked hard to change some provisions leading to last week’s announcements around clawback, further reshaping of the risk advice sector should be avoided.
He stated the amendments would not be satisfactory to everyone but they were “a significant improvement on the original” and should be adopted by all parties.
“Now that the Government has spoken, all parties – the AFA, the FPA and the Financial Services Council (FSC) – should embrace the changes and work towards meaningful outcomes for consumers,” he said.
At the same time Trapnell said that while the adviser associations were key players in the changes to clawback, the efforts of individual advisers were also critical.
“The pressure brought to bear on the Office of the Assistant Treasurer by the political action of individual advisers cannot be underestimated,” he said.
“Now that the Government has spoken, all parties…should embrace the changes and work towards meaningful outcomes for consumers.”
“We acknowledge the impact of the numerous advisers, both of Synchron and of other licensees, who contacted their local members and state senators, personally and via mail.”
“We believe it is through the efforts of these individuals that Ms O’Dwyer gained enough information to really understand the issues affecting advisers, their businesses and their clients.”
Trapnell views are at odds in part with a group of more than 600 hundred advisers who have rejected the recent amendments as the final outcome as well as the representation of advisers by the AFA and FPA.
However, Trapnell also rejected any further moves to a fee for service model for life insurance stating that overseas experience and current under-insurance levels both point to poorer outcomes for consumers and advisers.
Trapnell pointed to industry consultation conducted by the UK Government in 2007 around the banning of life insurance commissions which found a high impact on both life insurance sales and underinsurance, prompting it to abandon plans to ban commission on life insurance products.
“The FSC has also said it expects all advisers to move towards a fee-for-service model over time. As underinsurance is likely to be an ongoing problem, we believe a fee-for-service model could only result in poorer outcomes for consumers and for advisers,” Trapnell said.
He also stated that with the release of further details around the LIF model, including changes to maximum upfront commissions Synchron would be examining which insurers will be passing on the full commission and which would be passing on a reduced commission excluding policy fees and frequency loadings.
“Some life companies currently pay new business commissions on auto increases and we don’t see any impediment to this practice continuing. In fact, Synchron believes there should be greater pressure brought to bear on life companies to pay them.”
Don, understand what you are saying but all trust which IFA’s demonstrated towards licensees and product providers has evaporated as it appears that these changes have been thrust upon us with no real evidence of the supposed benefits or even the issues these are supposed to fix. Advisers are very concerned that this is only the beginning… 2018 will see further afforts from the FSC to drop Comms to a flat figure – their statement post the announcement basically made this quite clear. Advisers want to be supportive but have lost faith.
I agree unfortunatly I also have a large GI Business and for those that understand the paper war fare of it do not know why we do it for 10-20% Commission. Why ? We hope it leads us to be able to look after the clients complete portfolio and be paid an amount that helps justify the amount of overall work needed not just at renewal but over the 12 month period sometimes day and night This is a similar situation for Financial Planners who turned to incorporating risk products in their plans to “soften” the blows of FOFA Risk only writers cannot “hide” behind a fee as they can based only on risk advice The clients won’t pay for risk advice life insurance as it has been explained time and time again when they can go direct for free regardless of the risk they may take in under insuring or getting the wrong product
If this eventually ends up as a flat commission of 20 % how can anyone survive on it And before you quickly race to comment on additional fees Yes there are some but at $100 $200 a case ( and not in all cases and only on business insurance) try adding a few to a house and contents policy ! It has the same effect as risk only advice they will go direct for free not that we do many anyway as everyone does this from Coles to NRMA
This needs to be addressed now not in 3 years when the trial fails and the flat commission option is given the green light
Don, I fail to understand how these measures will lead to better outcomes for consumers, let alone advisers.
Tim I completely agree with your comments, It feels like it’s only the beginning of the road do the FSC, what they are doing now is paving the way for them to justify moving to flat fees in 2018.
Don, I also agree with Tim & Daniel, these reforms are a joke, they are based on falsehoods and are designed to wipe out the Independent Financial Advisers, the consumers will not benefit from the reforms, in fact they will end up paying more for good advice, [ if they can find an independent adviser that is still in business after 2018 ].
QUOTE FROM ARTICLE:-
Trapnell said while industry groups, particularly the Association of Financial Advisers (AFA) and the Financial Planning Association (FPA), worked hard to change some provisions leading to last week’s announcements around clawback, further reshaping of the risk advice sector should be avoided.
He stated the amendments would not be satisfactory to everyone but they were “a significant improvement on the original” and should be adopted by all parties.
“Now that the Government has spoken, all parties – the AFA, the FPA and the Financial Services Council (FSC) – should embrace the changes and work towards meaningful outcomes for consumers,” he said.
END QUOTE.
Please someone tell me it isn’t true – that Don Trapnell has rolled over to the insurance companies who want to pay less commission and claw it back for longer??!! Don was our strongest advocate – now he’s saying we should “embrace” this rubbish? The world really is upside down if this is true . . . please, somebody tell me I’m mis-reading this, that my eyes are playing tricks.
I’m afraid it seems true Brian. The associations had a gun to their heads from the FSC that unless they accepted 60/20 – they would be pushed towards a flat comm aka the Trowbridge style recommendations. I think strong advocates have in all honesty lacked strong support from the broader group of advisers. Feedback to associations has been a trickle when it should have been a torrent, as advisers we have been segregated by licensees – we don’t get together as much these days so good ideas are not widely aired and bad ones aren’t called out the way they used to be. This has lead to a perfect storm where we are all now at the mercy of banks and industry funds and the way they use their muscle to annihilate the competition and increase their own margins. It’s a disgrace and will lead to more expensive ‘bespoke’ advice and a field day for Slater and Gordon etc when with no advocate at claim time – clients are pushed in their direction. We all need to do what we can with our licensees, colleagues, associations (I’m a member of both but feel strongly that the AFA understands us best) and politicians to light a fire, otherwise all of us will have to completely re-engineer our businesses.
As an avid student of history and current affairs dating back to the 60’s when I first started taking notice of the world around me, it appears there is a revolving pattern of what’s old, becomes new again.
Not much has changed in the nearly 50 years I have been studying human nature,
Governments, Unions, Big Business, the Public Service and Small Business.
Humans make most of their decisions based on emotion.
Government makes most of their decisions based on little understanding of anything. Unions go from one scandal to the next.
Big Business focuses on shareholders and are run by Legal eagles and bean counters Public Servants have many meetings, form more committees and achieve very little that is efficient.
The engine room of Australia, which is small Business, gets trampled on by them all.
So lets take the above equation and put it into the context of the Life Insurance
Framework.
Australian human nature is easy going, a bit apathetic and reactive to events, which
enables the noisy minority to jump on their platforms and lecture all and sundry, that their left wing ideology, (which would bankrupt the world) is the only way forward.
The Government of the day, really has no idea on much, except what the plethora of
self-interest lobby groups tells them and of course how they are polling.
For instance, when 230 files of high risk advisers were checked and 37% failed, this has led to a witch hunt of the entire industry.
The FSC who is funded by the Big end of town, made secret recommendations based on mistruths and the Government made a decision to show how pro-active they are, which unfortunately is wrong and if tested in Court, would be thrown out.
The Unions want control of the Superannuation and Insurance area and feel
threatened by intelligent advisers who can see through their masquerade, so they throw their 2 bobs worth in.
The legal eagles, bean counters and public servants love this, as it allows valuable dollars that could be spent in productive areas, now to be sucked into their budgets to provide their salaries and to build their enclaves at the expense of small business and the rest of Australia.
One million jobs have been created over 10 years in the compliance area for all Industries. How many of these compliance jobs actually produce anything?
The Life Insurance Framework is just another groundhog day.
A small investigation and analysis of the retail life industry, finds a problem.
The media, consumer groups, unions and public servants see an opportunity and turn a mole hill into Mount Everest.
Big Business sees an opportunity to increase profits and the whole circus has come
to town.
There always has to be someone to blame for perceived failures and even though
virtually all the accusations and hype put forth has been proven to be inaccurate, rule number one is never let the truth get in the way of a good story, or in the case of all the aforementioned vested interest groups, an opportunity to destroy the credibility of a valuable contributing part of the industry, which is the advisers who do the hard work,
protecting their clients.
Going back to the 60’s, 70’s and 80’s style of negotiation which the unions perfected, you start off with a ridiculous claim, put forward an even more ridiculous solution and then negotiate from there, so when we finally go from 3 year clawbacks, nil commission, or level commission to a victory for all >
e.g. a 2 year clawback and up to a 50% reduction in income for all the upfront work, the very people who should know better, i.e. the AFA and FPA, can come back and say, look what we did for you all and be thankful as the alternative could have been so much worse.
When wise old heads are removed or get tired and are replaced with enthusiastic, highly educated though inexperienced heads with little understanding of how the real world works, then history will always continue to repeat itself.
A great read Jeremy – thank you. Summed it all up better than I thought anyone ever could have. Such a damning shame it all seems true. makes one wonder what really can be done at all for our current situation, except sell up and retire. Good risk books should be worth a motza now due to grandfathered renewals in the face of pathetic new business upfronts from next year onwards! Real food for thought.
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