ASIC has moved commissions off the front page of its example Statement of Advice (SoA) for life insurance, following industry feedback which claimed the numbers were being presented without context.
Under the new version of the example SoA, ASIC recommends commissions are listed as part of an executive summary of the advice provided, which appears after a cover page detailing the name of the adviser and clients, and a table of contents for the SoA.
A detailed breakdown on all fees and commissions should also appear at the back of the SoA before pages providing an Authority to Proceed, ASIC stated in the updated Regulatory Guide related to scaled advice for life insurance clients.
In a separate report covering the feedback ASIC received on the first example SoA, the regulator stated that “prominent, upfront disclosure does not necessarily mean that commissions need to appear on the front page”.
ASIC also stated that while consumers may notice the information on page one “…it may not lead them to understand it in the context of the advice or to critically engage with the advice itself” and it considered “…there is merit in the argument that commissions should be better contextualised”.
“…there is merit in the argument that commissions should be better contextualised”
According to the report, ASIC also removed some of the repetition of information that appeared in the first version of the example SoA. That work did not go as far as adviser feedback suggested and ASIC stated that advisers read SoAs differently than consumers and repetition would ensure the latter understand the contents of the SoA.
ASIC also removed any disclaimers designed to protect advisers from liability for the advice stating that information was more appropriate in a letter of engagement or Financial Services Guide, instead of an SoA which communicated the advice provided.
The new example SoA is the result of public consultation as well as a round table with representatives from the FSC, FPA and AFA, following the release of the first version of the example SoA in May (see: ASIC Releases New Sample SoA for Life Insurance).
Acting ASIC Chair, Peter Kell said the new example SoA had been designed to balance the interests of consumers with minimising regulatory burden on advisers.
“SoAs are a fundamental and important tool for an adviser to communicate their advice to the client,” Kell said, adding “We appreciate the feedback we received on the draft example SoA and have taken it on board in finalising the guidance.”
If it is in the best interests of consumers to know what the commission paid on a policy is, why do they not have to be disclosed when they are purchased direct? As for the ‘public consultation’ that supposedly took place, does anyone out there know of any member of the public asked about this? And if they did, I like to know any previous experience these people may have had in receiving advice was ‘contextualised’ into the process! They probably grabbed some public servants from the floor below and told, sorry asked, them what they thought.
GregF – on page 4 of Report 557 (link in 4th paragraph above) ASIC stated it received 16 non-confidential and 7 confidential responses to its call for feedback. The list of non-confidential responses can be found here: http://rine.ws/2AxZLY1
A whole 23 ??? That should give us the right advice ?
ASIC does love to contain its sample sizes. In fact, why the feds didn’t put ASIC in charge of the SSM vote is beyond me…
And this includes two submissions from industry super bodies and one from the consumer law group. Gee, they’d be fair and balanced opinions wouldn’t they? They might as well ask a bird watching society to comment, they’d probably get a more intelligent response! There are 3 individual names on that list, who I would say are probably advisers, so I’m still struggling to see where the ‘public’ consultation took place.
Best Interest Duty carries a responsibility to provide advice that will improve a clients position.
Advice is a series of steps that advisers take their clients on, that leads them to a conclusion that benefits the client, their family and their Businesses in the event they cannot work due to death, illness or disability.
The real world is not a regimented step One, two, three etc, as every person has different needs, thoughts, perceptions, circumstances, time and cost limitations, that means trying to box every person into a set format of how a SOA is presented to them and in what order, is not a science, it is an art that takes into consideration all of the mitigating circumstances that have led to the SOA being presented.
Only someone who has never been an adviser, could come up with a guidance that has a main focus on what a practice earns, before the Best Interest provisions and reasons for the recommendations are discussed with the client.
What is frustrating, is that valuable and limited resources are being wasted, having to explain basic principles to a group of people with not the slightest idea and who appear to be spending Tax payers money, learning with their eyes and ears closed, at our expense.
Well said Jeremy, as usual. Thank you for the clarity you often bring to difficult and frustrating issues on behalf of advisers. I get further frustrated thinking if only these ASIC clowns would read your well-structured comments they WOULD indeed learn something – will never happen sadly. Hope all’s well with you mate.
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