AFA Slams PJC Report

The AFA has released its response to the Report of the PJC Inquiry into Life Insurance stating it was “surprised, perplexed and disappointed” by parts of the report, which it considers as having missed the terms of reference for the inquiry and having drawn conclusions without evidence.

AFA Chief Executive, Phil Kewin

In a statement released to members from AFA Chief Executive, Phil Kewin, the Association noted its initial feedback has been focused on the recommendations that directly impact financial advice and the retail advised insurance sector, including the recommendation for random audits of financial advisers (see: PJC Recommends Compliance Audits For Risk Advisers).

Compliance Audits

In regard to this suggestion, the AFA stated, “We are amazed at this recommendation given there is no new evidence or reporting referred to other than what was previously available that has led to the significant and sweeping reforms of the Life Insurance Framework and Professional Standards Legislation.”

“the suggestion that there is a vast range of hidden remuneration in the retail advised life sector is surprising…”

The Association declared its opposition to this recommendation, noting there was no basis for it and that it contradicts measures already put in place by the Government and would also duplicate audits currently performed by licensees while increasing the level of the ASIC Funding Levy each adviser will pay.

The AFA also suggested that instead of random audits, “…any such activity should focus upon those who are suspected of doing the wrong thing” and that ASIC would be able to ascertain who those people were from information that is currently available to the regulator.

Review of Remuneration

The AFA also questioned the PJC’s recommendation for a review of adviser and licensee remuneration stating the former “…has been significantly scrutinised and an unprecedented level of restrictions introduced via the Life Insurance Framework Legislation”.

The Association continued, “the suggestion that there is a vast range of hidden remuneration in the retail advised life sector is surprising and not substantiated anywhere in the report”.

It also added that advisers have been obliged to disclose remuneration for a number of years and non-monetary remuneration was banned under the Future of Financial Advice reforms from 1 July 2013.

Terms of Reference

The AFA was also critical of the failure of the Report to address Part B of its own Terms of Reference which required an assessment of the benefits and risks to consumers of the different elements of direct, group and retail advised insurance, claiming “…this report fundamentally fails to address this objective”.

“Instead, it merely rehashes reports and research in relation to retail advised insurance and advice that have previously been comprehensively addressed by the government through FoFA, the Life Insurance Framework and more recently Professional Standards Legislation,” the AFA stated.

“This scrutiny and increasing cost to provide advice is threatening the very existence of an advice profession…”

The Association added the Report made no attempt to investigate the merits of the three life insurance channels and also failed to compare the cost of insurance, quality of benefits, claims payment ratios, product features or underwriting issues across the three channels.

Continuing with its critical tone, the AFA noted “there is an abject failure and lost opportunity to highlight to the community the relative merits of appropriate types and levels of life insurance to protect individuals, their families, businesses and in doing so the broader community”.

Further Action

At the end of the note to members, the AFA stated it would complete and release a more detailed analysis of the Report, as well as a formal response, and would be speaking to the Government and politicians about the Report, noting the Government had yet to respond to the recommendations made by the PJC.

The Association also made the following closing remarks, “Financial advice and financial advisers have been subject to unprecedented scrutiny, Legislation and Regulation particularly over the last 10 years”.

“This scrutiny and increasing cost to provide advice is threatening the very existence of an advice profession and the ability for small business advice practices to continue to provide cost effective tailored financial advice,” the AFA stated, adding:

“If the costs and burden to all is prohibitive as a result of a few, the Australian public will be deprived of a profession that provides an immeasurable benefit to people and the community in which they live”.

  • Md’a

    The AFA could not be more spot on with it’s criticism of the finding of the PJC. Ignoring the differences that exist within the products offered from the three channels where life insurance can be purchased by the public is criminal. ASIC, the product manufacturers, licensees and for that matter the government all know of the cost and quality differences that exist between these products are enormous and no one is taking responsibility for informing the public of those differences. This is a disgrace and I feel it should fall to ASIC to impose on product manufacturers an obligation to inform the public of the differences in price and quality of at lease the products they sell. If the government and the regulators are hell bent on more regulation because “that what we do” then at least do something meaningful for a change.

  • C.

    Do ASIC have KPI’s and criteria required to meet performance targets as we now discover the ATO does ??
    If so, as we have discovered with the ATO who has admitted to significant overreach,
    manipulation of or deliberate omission of data, it has to be questioned whether a regulator trying to ensure performance targets are met, would assess and audit advisers seeking outcomes by which to satisfy those targets ?
    Kelly O’Dwyer must clarify if ASIC have performance targets and Kate Carnell must ask the same question of ASIC in relation to the detrimental impact on small business.

  • Warren J

    Reading this article is, in a way, refreshing and credit must go to Phil Kewin. Just on two years ago, Zurich made a submission to the government around the LIF and it was excellent. The submission highlighted the disastrous consequences if LIF becomes law. It’s a shame it was ignored. I learned from a former Zurich BDM that Phil wrote that submission. Thankfully, he is now leading the charge against the appalling LIF in his role at the AFA. Risk insurance advisers have been so unfairly targeted through this LIF process and we have needed courageous representation from our associations. Don’t give up Phil. You may have a fight on your hands but you are doing the right thing. Congratulations. Now FPA, are you going to do the right thing by your members and join the AFA?

  • Fedup

    What hope do we have that our trusted politicians actually do not understand the environment we operate in. If you think about the costs associated it makes you feel sick.
    I hope that the AFA continue the pressure and expose the political vendetta that is going on!

  • Jeremy Wright

    Thank you AFA for taking on rather than appeasing to a disgraceful bunch of reforms and regulations that will not improve or provide Best Interest advice, instead it will have the exact opposite affect.

    The AFA have realised that the only way to get justice, is to question the false data, question the tainted and targeted investigations that have failed to provide, in just one area, comprehensive proof of churn, which has been totally discredited, though still used as the excuse to screw risk advisers and has led to the fiasco we are now in.

    The AFA and FPA, if they want risk adviser Businesses to be viable going forward, now is the time to start attacking, not accepting the ridiculous assumptions and same old rubbish, lazy public servants and ill informed regulators promote as gospel.

    It has taken until a threatened mass walk out of thousands of advisers, to finally get the AFA ( we await the FPA response ) to start taking on the Government and vested interest lobbyists assumptions.

    I have said for years, if you want to defeat an opponent who has little integrity, use false or tainted data and have their own agenda, then 3 words knocks them down and keeps them down, which are;


    What is the problem? Why is this a problem? How did you come up this conclusion?

    Then repeat the questions and demand proper proof.

    Usually asking twice is enough to destroy these arguments.

    Our whole debacle around Life Insurance and especially the disgraceful attack on retail advisers, while virtually ignoring the vast issues around Direct promoters and the Governments abject failure to rein in their disgraceful actions, encouraged by the FSC who should be deregistered, or at least ignored due to their extreme bias, is just one area that needs to be made a priority.

    The most important questions the associations need to ask the Government is,

    What is your end objective?

    Do you want Australians to be able to access advice that is in their best Interest?

    What proof do you have, that your recommendations and current regulations will provide the 2 above objectives?

    The Government has failed and will continue to fail with their stated end objective.

    The job of the AFA and the FPA is to now articulate this, with Questions and a demand of proof.

  • Poh Kheng Chin

    Good on you AFA and wish FPA have the gall to do likewise. You cannot legislate cowboys and cowboys will be cowboys whatever you do.
    With all the changes I now do no bono work and also have to charge my clients more to cover cost. I also refuse to take on clients that is not able to pay sufficient fees which is a shame because small clients can be big clients with the right direction.
    Thank you AFA.

  • Ken

    One word Finally

  • Where’s The Integrity?

    Earlier today, I had the pleasure of attending a business breakfast with Federal Senator Mathias Cormann.

    During his presentation, he spoke about the COMMON SENSE understanding of businesses being profitable and that the flow on effect of them being profitable actually enables them to attract investment and employ more and more people, which in turn helps the economy grow. (Labour apparently don’t understand this basic concept!).

    Using COMMON SENSE as my point here – how is it that a specialist in one area of financial advice is forced to undergo enormous areas of education – at their own expense, from an income that’s now been capped (and reduces further over the next 2 years), which also has a 2-year responsibility period now – when that education is not even relevant to the service they provide their clients?

    How is it too that no other industry ANYWHERE in the world that I know of, can have its income capped? (Can someone PLEASE prove me wrong if there’s any other occupation out there where this has happened.)

    How is it also that a regulator can legally manipulate handpicked (NOT randomly-chosen) data to validate a predetermined result and then use that data to create legislation that specifically targets a legal and honourable profession? This is a regulator who’s very existence actually depends on finding (or creating) fault.

    I’m pleased the AFA have finally stood up and represented its members frustrations and major concerns with the PJC report and applaude Phil Kewin for his stance. Stronger words wouldn’t have hurt either though with all the crap we’ve been subjected to the last 3-4 years.

    The recommendations are outrageous, ludicrous and will do nothing but DAMAGE the industry; not improve it.

    • Squeaky_1

      True and profound words, well said. I’ve had these same thoughts for many years but I now find myself growing weary and tired of hearing myself protesting in the same way. I dare not say it out loud ‘yet’ but I’m starting to think nothing will change – these politicians, life company execs, special interest groups and generally the big end of town who want advisers OUT of the way forever may indeed win. I mean, who are ‘we’ anyway. THEY are the ones with influence and power – who are WE to battle with them. They control it all and have clandestine links behind the scenes. We can’t battle that. Don’t like to hear myself even think this way but I am approaching it.
      One thing I will never get over though is the duplicity of the life company execs who dribble about their passionate commitment to us while behind the scenes in deals in the dark do all they can to get rid of us with lower commissions and higher clawback periods. Whetehr you believe this or not matters little as it is most definitely happening. They don’t want us cramping their style any longer. They’re done with us. They know not what they do and will regret it sometime around 6 to 8 years from now when the Robo they install to replace us falls flat on its face. And fall it will. And they will all follow.

  • Phil

    When the PJC report selectively references the likes of the Trowbridge Report only where it forms a basis to support their inane approach to ostensibly single out the Retail Adviser market and it’s ‘evil’ commissions and secret payments…what hope do we really have? AFA or FPA can rant & rave as much as they like. We are pariahs to all things government. And, once Shorten & his cronies are running the country next year, what hope do we really have going forward…I should explain I’m one of those 17% of risk specialist advisers being thrown from pillar to post for no good or justifiable reason.