March 26, 2019
TAL Life has stepped up to back the retention of life insurance commissions.
In a statement released to Riskinfo this week, TAL’s Group CEO and Managing Director, Brett Clark, has called for a balanced consideration of all of the issues hovering around the challenges associated with serving client best interests while maintaining a thriving advice sector:
“The sustainability of a financial advice channel that facilitates both choice and good consumer outcomes is critical,” says Clark, adding his company’s perspective that “TAL supports a model which delivers good consumer outcomes through a vibrant financial advice sector now and into the future.”
Clark emphasises the discussion and debate around adviser remuneration needs to be more sophisticated than simply whether a commission or fee-based remuneration model is better. “The stakes are far higher than that,” he says.
In his statement, Clark also details a number of factors he says need to be considered holistically when debating the future of risk commissions, including:
- Consumer access to affordable financial advice
- The supply of financial advice
- The payment for that financial advice that ensures consumers can be confident in its quality
- Minimising any potential conflicts or risks
Reflecting on each of those elements when viewed collectively, Clark said, “The development of the LIF framework was an attempt to balance these interests and ensure a sustainable, high quality financial advice industry, which is good for consumers.”
Contemplating an advice world without risk commissions, Clark observed the alternative of a user-pays ‘full-fee model’ would undoubtedly lead to the supply and availability of financial advice being much smaller than it is today, and that financial advice would be affordable only for a much smaller population of wealthy consumers: “This doesn’t feel in the best interests of consumers, particularly in the context of banks exiting financial advice services,” he cautioned.
…the LIF commission-based model, alongside a legislated ‘best interest duty’ for advisers, is a good model for both financial advisers and consumers
Addressing the sometimes perceived conflicting agendas of adviser remuneration and client best interest, Clark said, “We believe the LIF commission-based model, alongside a legislated ‘best interest duty’ for advisers, is a good model for both financial advisers and consumers which balances these perspectives. Alternative models which limit consumer access to affordable financial advice, or the supply of financial advice, would need to be carefully examined. Any further changes to the LIF framework beyond the scheduled 2021 ASIC review should also be considered carefully.”
Standing up for the continuation of the existing adviser remuneration model, Clark recognised the integral role of advisers and advice businesses:
“Financial advisers are small business operators, providing local employment opportunities, often trusted members of the community, who work hard to provide competitive insurance products and services for their clients. The parallels with the recent debate on mortgage broking remuneration are very relevant and insightful. We don’t want to depower competition while empowering large financial institutions at the expense of choice for consumer, and financial advisers play a critical role in that.”