The Association of Financial Advisers (AFA) has warned members that any return of the Life Insurance Framework (LIF) after the Federal Election was unlikely to be more favourable to advisers than that already proposed.
Writing to members earlier this week, AFA President Deborah Kent also stated that any revised form of LIF would need to include direct insurance arrangements, which were still the subject of discussion when the Federal Election was called in May.
Kent reminded AFA members that LIF would need to re-enter Parliament via the Lower House before being reintroduced to the Senate as it had not passed the upper house before the election was called. As a result of this process LIF was subject to change by whichever party won the election.
“Depending on which party forms power after the election, LIF may continue substantially in its current form, or it may not. From the discussions we have had with the major parties, they will proceed with some type of life insurance reform,” Kent stated.
“None of the parties have shown any indication that the outcome would become more favourable for advisers than the current form of LIF.”
“None of the parties have shown any indication that the outcome would become more favourable for advisers than the current form of LIF.”
Kent also stated that regulations providing guidance on the application of any LIF legislation were also being negotiated before the calling of the election and the inclusion of direct insurance would require new confirmation it was included under the legislation.
The AFA President stated that where direct insurance was sold with general or personal advice it would be covered by LIF legislation but concerns remained around direct insurance where no advice was given.
Kent said that despite the Assistant Treasurer and Minister for Small Business, Kelly O’Dwyer stating in November 2015 that would LIF would apply to direct sale channels without advice, pressure remained from the Financial Services Council (FSC) to include non-advised direct insurance, under a carve-out, in the final legislation.
“The Minister agreed that there would be no carve-out for direct sales channels…Disappointingly, the FSC continued to call for this after the announcement was made by the Minister through their submission to Treasury on 24 December 2015 when providing feedback on the Exposure Draft Legislation,” Kent stated.
“We see this behaviour from the FSC as unacceptable given the thoroughness of the negotiations and that the Minister had already publicly confirmed that LIF would apply to direct insurance.”
Kent said any carve-outs within LIF may see institutions target these areas with models that failed to protect consumers while also being unfair to advisers who would operate under commission caps and clawback periods.
“This is the loophole that the AFA Board needs to see closed before legislation and regulations are furthered by the next government.”
Surely by now we’re over all of this! Life offices initiated this witches brew because they’ve wanted control and even more importantly, a better bottom line. Using stealth they induced the government to act on so-called dodgy advisers when this was barely an issue. Now there’s enormous uncertainty in our industry and it will result in advisers exiting the scene because they no longer want to deal with the business distraction that it’s become. One thing is sure: it’s made us take our eye off the ball.
Finally, how will all of this benefit would-be purchasers of life insurance and how will it make our industry a better, fairer one? There’s been no evidence to suggest that it will. Yet isn’t this the whole point of this 2 years+ long issue?
As you said, this was never about better outcomes for anyone other than the insurers, least of all a consumer!
You can’t be serious Deborah. Why are you giving up so easily? Bert Van Manen, the only MP who understands our position as Risk Advisers and is fighting for us, has recently stated that after the election, LIF starts again. That means that both the AFA and FPA have a golden opportunity to fight for their adviser members. There is just too much at stake for you to give up and raise the white flag so easily. It doesn’t matter how unlikely things may change after the election, the fact is that you must FIGHT and FIGHT and FIGHT! You are supposed to be representing your members, well then do just that – represent your members! I challenge you to work with the LICG, to work with Bert van Manen. Unless you are prepared to show your adviser members that you are truly representing their best interests, then why should we support you financially? We pay your salary Deborah, never forget that!
Secondly this business about the FSC pushing for direct carriers to be exempt from LIF – is this a joke? Is there any way the FSC can be stopped presenting such nonsense? Can anyone answer that question? This body has clearly shown how out of touch they are, or do they have another agenda – the destruction of the retail specialist life adviser? Someone has got to do something about the FSC! If it is funded by the insurance companies, then I challenge the insurers – stop funding them!
I think the AFA proved where their alliances lie previously, after all, they cannot go against their paymasters, can they?
Now is the time to start a new fight, insurers have already raised premiums in “Support of advisers due to clawbacks” and this is before the LIF has come in. The additional cost to the consumer is already happening as the main players increase their profits.
Never has there been a better time to point out the misconceptions that the members of parliament have been fed.
The cattle farmers are currently suing the Federal Government for banning live exports without proper investigations into the negative financial effects of that decision, Will the Government that brings in LIF be up for the same class action??????
The ACCC need to become involved in this issue as it is anti-competitive and strongly biased against small business. Have the AFA or FPA tried to engage with the ACCC?
Or how about the Small Business Ombudsman service? Have they tried that?
Definitely more action required before accepting something so blatantly anti-consumer and anti-small business.
And why hasn’t media been notified by the Associations that the Government is being pushed to waste time on legislation that has NO consumer benefits, and will actually be to the detriment of many consumers? Not to mention the cost to the economy!
It’s a good comment, Melinda. I questioned the legality of the government’s cutting of adviser commissions a couple of months ago in this forum. Simply because the government proposes a certain course doesn’t necessarily mean that it’s legal. So yes, why hasn’t the AFA and the FPA approached the ACCC re this issue? Good question.
One thing that amazes me is the “no advice” excuse Its impossible not to !! Once you open your mouth It starts be it personal or general you cannot have NO ADVICE Yet the FSC say you can and therefore it is not encapsulated in the LIF legislation !! What a “croke” of s*^#%>
Any half smart person but not politicians apparently ?? can read between the lines on this and see that these institutionally owned direct insurers are the banks” gravy train” and dare I say it way of “cornering” the life insurance market at the demise of the very people who have spent s lifetime giving the right personal or general advice to thousands of clients
Us yes Us the advisers are the ones who have pushed for constructive change within the insurers for years sometimes getting the right reaction sometimes not Without us to stand in their way what a easy way forward
I am discusted in both the AFA and FPA all I hear is how much worse it could be !! How about having a go for your members with whom your going to have s lot less of if this legislation proceeds as it is You will never get a better opportunity than now !!
It is presumptuous for Deborah Kent to make a statement that it is unlikely the LIF will be more favourable when it is re-entered via the Lower house, before being reintroduced into the senate after the election, when she admits LIF can be subject to change by whichever party wins.
A group of advisers met on 9th June in Sydney with Bert Van Manen, who is the member for Forde and he was the only politician who stood up for advisers, including making an excellent speech in Parliament on our behalf.
He said the FSC made copious presentations to him and many other interested parties in Canberra and was surprised how the AFA and FPA seemed less vocal and did not
seem to present a conclusive argument in support of Advisers.
He said the game starts again when the LIF is re-entered and he suggested that as
advisers pay fees to the AFA and FPA to represent them, then this presents them
with a golden opportunity to simplify their approach and start attacking the mistruths perpetrated by various self-interest lobby groups.
He said NO-ONE in parliament understands what advisers do and that in order to get our message across, it must be kept simple, concise and quick.
In other words, cut to the chase and tackle head on the lies perpetrated by the FSC and other vested interest groups who have NO idea of our Industry, but who,
unfortunately have the ear of politicians.
It is clear that the AFA and FPA may have had good intentions, they are just not good
at articulating in a simple way, the issues our Industry faces with the LIF in its recommended format.
Bert said our issues are important, though we may be forgetting that politicians face a barrage of other issues that can involve things like infrastructure, education, health and hundreds of other areas that are a distraction and equally or more important in the eyes of those groups wanting the ear of their member of parliament.
Deborah Kent of the AFA states from the discussion they have had with the major
parties, they will proceed with some form of Life Insurance reform, though none of the parties have any indication of what will happen.
The reason for this, is simple. No Politicians have a clue, which means it will be the perfect time to properly educate them and in plain English, quickly point out the lies and mistruths when round 2 starts.
As to the Direct Insurance fiasco, where a telephone conversation occurs with a
Direct entity and a potential client, it is always general advice and mostly personal advice dressed up as no advice.
To their credit, the AFA have attacked the FSC for unethical, self Interest behaviour
and this is a step in the right direction, though it should be the first of many steps.
Based on the wise words of Bert Van Manen, he stated you have been given another
opportunity to present your case, though may I suggest you make it easy to
understand, clear, concise and don’t get bogged down with too much information
when talking to ministers and members of parliament, as they will not tell you they know nothing about the subject, they will just nod and do nothing if they don’t understand what we are saying.
He used the example of simplicity that has worked for the Industry Super funds lobbyists AKA the unions, “Compare the pair” Simple and straight to the point. It works.
Advisers need to lobby the AFA & FPA to relaunch the campaign when it is re-established and this time attack the FSC which will be very easy to do, then present the advisers case in simple language to show how much better off Australians are with Advisers and illustrate a compare the pair. E.g. Direct v retail advised and Vertical Bank model v retail advised, in graphs and fewer words.
Doing it this way will attract politician’s attention and smash the lies perpetrated by the FSC and show up the absurdity of lobby groups like choice advocating nil commission.
The question is this: Does the AFA agree that the proposed LIF is in the public interest?
If the AFA does not agree that the proposed LIF is in the public’s interest (which could only be determined by identifying meaningful outcomes and valuable benefits to the public and consumer) then the AFA are bound by their own constitution to oppose the proposed legislation.
The AFA Constitution under the heading “Purposes of the AFA”, Section 3(k) states:
“As a professional membership body the AFA’s objectives are:
to consider questions affecting the interests of Members and the financial services industry generally and to cooperate with and advise Government and relevant authorities in developing financial services and corporate legislation IN THE PUBLIC INTEREST AND TO OPPOSE SUCH LEGISLATION WHEN IT IS DEEMED CONTRARY TO PUBLIC INTEREST “.
If the AFA therefore believe the proposed LIF is NOT in the public’s interest or CONTRARY to the public’s interest, (NOT the AFA’s interest , NOT the FSC’s interest, NOT the political process interest), but IN THE PUBLIC’S INTEREST, then they must oppose the proposed LIF legislation based on that premise and the governance secured by their own constitution.
If the AFA agree the proposed LIF legislation in it’s current form is IN THE PUBLIC’S INTEREST, then they must disclose to their members exactly why and how they believe the public will be in a better position following the implementation of the LIF.
As the AFA first and foremost represent their membership, it would be expected by the AFA members the governing document of the association is strictly adhered to regarding the purposes of the association.
So, it is simply a yes or no answer as to whether the LIF will or will not be in the public interest and dependent upon that answer, the opportunity to commence clear and concise discussion based on facts can continue until a sensible and workable outcome is arrived at, without the conflicts of interest that have pervaded the process to date.
Craig, you have summed it up brilliantly and I think the AFA also have a fiduciary obligation to tackle this.
If the AFA cannot or will not do their job, based on the hundreds of requests put to them, then the next step is to force those responsible, to stand aside or resign so the AFA can bring in effective people who will face up to and make submissions that follow the AFA Constitution with it’s inherent responsibilities.
Well said Craig, very well said. Well Deborah Kent, we would all like you to provide a written response and place it here on riskinfo. Will you please do that? The same request goes to Brad Fox.
This is a great summary Craig and deserves a response from the AFA. Otherwise why have a constitution? In a previous Q and A I recall Brad Fox stating that he did not think this would create a better outcome for consumers. Therefore why are the AFA siding with the FSC?
It will certainly not improve if the AFA don’t start doing the job they should and start standing up for the best interests of consumers and advisers.
I agree also with the comment below that the ACCC should be getting involved here as the FSC has clearly engaged in anti competitive behaviours with what they are lobbying for. Lets not also forget that shortly after the FSC members started meeting to agree a self serving LIF that they all suddenly started to increase premiums at the same time and at similar rates.
The AFA have let their members down and clearly rely too heavily on the financial support of the FSC members who are out to destroy independent risk advisers and therefore independent risk advice for consumers who will no longer be able to afford to get it. The AFA have another shot at rectifying this but by these statements above clearly do not have an intention of using it. Hang your heads in shame.
Deb, the July 2nd election was called on the 8th May giving the AFA nearly 8 weeks to formalize a plan of attack to start fresh negotiations with MPs around the LIF. Take into account that parliament does not re sit after the election until Mid August there is another 6 weeks post the elcetion for the AFA to publicly discredit the LIF and in particular the FSC and Kelly O;Dwyer untruths about “substantial consumer benefits”.Surely, the AFA have a plan Deb on behalf of it’s members other than “it may change or it may not”!! Please let us know “What is the Plan?”..
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