Life insurers may still be able to pay shelf space fees to advice licensees after 1 January 2018 as long as the payments were not considered conflicted remuneration, ASIC has told a Parliamentary Inquiry.
In a written response to a question on notice from the Parliamentary Joint Committee Inquiry into Life Insurance, ASIC noted that while volume-based shelf space fees paid to platform operators were banned under the Corporations Act, this did not apply to life insurance shelf space fees.
The regulator stated that shelf space fees paid by life insurers to advice licensees will only be banned if they:
- Satisfy the test of conflicted remuneration in section 963A of the Act
- Are not covered by an exemption in section 963B of the Act
“Currently, life insurance shelf-space fees would not be conflicted remuneration because of the exemption for monetary benefits relating to life risk insurance products,” ASIC stated.
“…we are not in a position to provide a view on whether…these fees are conflicted remuneration”
The regulator added that this exemption would be removed from 1 January 2018 and the fees would then be assessed under the test for conflicted remuneration in section 963A of the Act.
This section states that conflicted remuneration was any benefit that “…could reasonably be expected to influence the choice of financial product recommended by the licensee or representative to retail clients” or “…influence the financial product advice given to retail clients by the licensee or representative”.
ASIC wrote that circumstances were likely to determine whether shelf space fees were conflicted remuneration, with the following factors all having to be taken into account:
- The size of the fee
- How the fee is calculated
- How the licensee uses the fee
- Whether the fee was passed onto advisers and in what form
- How the insurer’s products were presented (eg: as ‘preferred products’)
In making the comment to the PJC, ASIC also stated “…we have not conducted reviews of these types of shelf-space fees. Therefore, we are not in a position to provide a view on whether, generally, these fees are conflicted remuneration”.
Of course ASIC will allow the Institutions to continue to influence advice with “shelf space fees” that are only paid if volumes justify it.
But hey better ban an adviser if they receive a promo led pencil from an institution as influencing advice.
ASIC your double standards to the institutional wrongs in the industry are criminal.
What a load of rubbish. I see the dab hand of the FSC and the bank insurers. Have their cake and eat it, and bugger the advisers. Of course its a conflict – why would the insurers pay shelf fees if they did not expect to exercise influence and gain a benefit. Once again ASIC, influenced by the propaganda from the FSC, have waived through some more top-end-of-town flammery.
Hands up those advisers whose licencee has disclosed the money they get NOW from insurer shelf fees and where they spend it!!!!
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