October 2, 2018
The AFA has claimed the Financial Services Royal Commission has not fully understood the nature of financial advice, nor the role of commissions in the remuneration of adviser, and will push to improve the latter’s view of these issues.
In a note sent to AFA members following the release of the Commission’s interim report, Association Chief Executive, Phil Kewin said the AFA had been supportive of the Commission process.
Kewin added the AFA was also impressed by abilities of the Counsel Assisting to extract information from witnesses, as well as how it highlighted issues in financial advice, including fees for no advice. saying, “Undoubtedly there will be significant implications for the financial advice sector”.
He also said, that after reviewing the report, the AFA was concerned that it “…does not suggest a good understanding of financial advice and it is also apparent that the Royal Commission does not seem to acknowledge our submissions to date”.
“They have specifically focussed attention on issues related to adviser remuneration, including such important issues as life insurance commissions, ongoing adviser service fees and grandfathered commissions,” Kewin said.
“…we cannot see any justification for a review, let alone removal of life insurance commissions”
“While we understand the myriad of complexities and issues with adviser service fees and grandfathered commissions we cannot see any justification for a review, let alone removal of life insurance commissions,” he added.
Kewin said the AFA would make a submission to the Commission and “…will be working hard to ensure that the level of understanding of these issues is improved and that any recommendations in the final report are based upon a real understanding of the issues and the implications for ensuring the best outcome for clients”.
He also addressed the Commission’s release of its Insurance Policy Questions which questioned the continuation of life insurance commissions, the ongoing sale of direct Life insurance and the use of Approved Product Lists (see: Royal Commission Questions Ongoing Use of Life Insurance Commissions).
“Members should be in no doubt that we will be strongly arguing for the retention of the existing Life Insurance Framework arrangements,” Kewin said, encouraging AFA members to provide feedback in support of its submission.
Submissions to the Commission in response to the Policy Question report close on 25 October, and for the report on 26 October.