The Association of Financial Advisers (AFA) will push for an exemption from clawback triggers in the event where a policy is cancelled in the best interests of a client, stating there was a need for a clearer distinction around lapses subject to clawback.
The Association has already raised the issue in submissions to Treasury and in further discussions with Government and is seeking to add the exemption to those already included in the Life Insurance Framework (LIF) draft legislation released before the last election.
The legislation states that clawbacks would not apply in cases of age-expiry, self-harm, suicide and health improvement with the AFA stating advice in the best interest of a client that leads to a policy cancellation should not be considered a lapse subject to clawback.
The Association is also seeking greater clarity between poor adviser behaviour, the actions of insurers and decisions made by clients without seeking advice.
“It is imperative that cases of inappropriate advice must be clearly differentiated from policy cancellations caused by administrative errors, operational decisions of the insurers and subsequent choices made by an insured client acting independently of their adviser,” AFA General Manager, Policy & Professionalism, Samantha Clarke stated in a recent article to AFA members.
“We will continue to seek a common start date for all channels…because the integrity of the reforms requires it.”
“We also recommend it is important to clearly define on whom a clawback obligation rests where ongoing commissions have been transferred to another adviser or licensee during the two-year clawback period,” Clarke said.
The lobbying on clawback is part of a wider push by the Association to create a level playing field between insurance channels and to head-off conditions within the legislation which would disadvantage advisers.
This has included the Association pushing for non-aligned advice, employed advice and direct insurance channels to be covered by the legislation; a situation which was recently confirmed by the Minister for Revenue and Financial Services, Kelly O’Dwyer (See: O’Dwyer Confirms LIF Will Cover Direct Channels)
The AFA said the confusion around whether employed advice and direct channels would be covered by the new framework was due to a clause in the draft legislation which would have allowed the latter to be grandfathered in at a later date.
“This was based on the grandfathering model within the Future of Financial Advice reforms, but no industry representatives actually sought that change,” an AFA spokesperson said.
“We will continue to seek a common start date for all channels and the application of a level playing field for all channels because the integrity of the reforms requires it.”
The AFA stated it was expecting the release of the final LIF legislation shortly and had been informed that Minister O’Dwyer was keen to introduce the bill to Parliament as soon as possible.
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This is certainly a breath of fresh air – well done Samantha. I warmly welcome these amendment pushes.
However, I still don’t see how any government (in this country) can put a cap on what an adviser is allowed to earn from the hard work we do (i.e. 88% to 77% to 66% over the next three years) especially when extra education and compliance requirements are also being imposed.
Added to that too is the ever increasing costs that advisers incur running their business such as professional indemnity insurance. Mine is now almost $450 a month. Then there’s comparative / CRM software costs…and it goes on an on. Could ‘some’ common sense finally be prevailing?
This is certainly a breath of fresh air – well done Samantha. I warmly welcome these amendment pushes.
However, I still don’t see how any government (in this country) can put a cap on what an adviser is allowed to earn from the enormous amount of hard work we do helping a client with their personal insurance solution (i.e. from 88% to 77% to 66% over the next 3-years). More so when you consider the extra education and compliance requirements also being imposed with this quasi-communist approach.
Added to that too is the ever increasing costs that advisers incur running their business such as professional indemnity insurance. Mine is now almost $450 a month. Then there’s comparative / CRM software costs…and it goes on an on.
Could ‘some’ common sense finally be prevailing with these AFA’s push for these additional amendments?
There are a hundred reasons a policy might lapse that has nothing to do with their Adviser. I have 40 clients in the age bracket of 58-65 who are more or less now financially independent. When they cancel their cover off over the next 2-3 years, will I be labelled a churner? Or will they have mercy on me and just send me a monthly “please explain” for each one. Its tragic how our profession has gone from a noble one to something the government has perpetuated as shameful.
The AFA is finally starting to realise that putting 100% of the responsibility onto advisers small Businesses, does not pass any test of fairness, or one that encompasses any joint responsibility for actions that lead to a person cancelling their Insurances.
There will be a flurry of lobbying from the FSC, who will beat a path to Canberra and anyone who is naïve enough to believe their bleating and forecasts of doom if “all” the Life Industry has to; “god forbid” follow the best Interest Duty that retail Life advisers live by.
They will say it will be too expensive to make system changes and as there has
already been numerous investigations, the Government should just finalise what has been recommended, so we can all move on.
The fact that the FSC have now been caught out and the past investigations have not been able to make appropriate recommendations that will improve the “stated” outcomes for all Australians, shows that this whole LIF debacle, must be thrown out, or start the process again with some honesty and integrity, that looks at the real issues, not ones based on biased, greedy money grabs by vested interest groups.
The only time a 2 year claw back should apply, is when the original adviser rewrites the
cover to benefit themselves.
Where was this attitude in 2015 when this mess was pushed through as acceptable and “it could have been worse” attitude adopted ?
This whole thing is a joke. If the current law (FOFA) was left to handle these matters there would be no need to adjust anything as it is either in the Clients best interest or it is not. Instead they (those that want to look busy) rush through a heap of other illadvised laws that are in “public interest” without even as much reviewing the recently brought in FOFA laws to see what (if any) impact they were having.
The industry representatives and the politicians should be ashamed for looking like the fools they are.
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