Return of Coalition Eases Pressure on Future of Risk Commissions

The majority of advisers and other industry stakeholders appear more optimistic about the future of their business and that of the broader life insurance and financial advice sectors under a returned Coalition Government.

One of the implications of the election result is that the Coalition will be the incumbent Government when ASIC hands down its 2021 review into the impact of the Life Insurance Framework reforms.

Unlike the perspective outlined by Commissioner Hayne in his final report stemming from the Banking Royal Commission, which suggested ASIC should consider its 2021 review from the perspective of whether the Life Insurance Framework reforms have contributed to reducing underinsurance, the returned Coalition Government’s position is that ASIC should instead consider the impact of the LIF reforms from the perspective of whether they have contributed to better aligning the interests of advisers and consumers (see: Government to Consider Mandating Level Commissions for Risk).

…last weekend’s election result has delayed the exit plans of many risk-focussed advisers

While many advisers have indicated they still hold significant concerns around the future viability of risk-focussed advice practices – as a result of the LIF commission caps and FASEA requirements – they are more optimistic about the future of their business today than had the ALP been victorious on the weekend. This greater optimism stems in part from Labor’s previously-stated position that it would seek to ban risk commissions entirely if ASIC’s 2021 review delivered an adverse finding on the impact of the LIF reforms (see: Labor Reaffirms Position on Future of Risk Commissions).

One industry stakeholder has suggested to Riskinfo that last weekend’s election result has delayed the exit plans of many risk-focussed advisers from the sector and that there will now be more time for advisers and the industry in general to find ways to adapt to the new regulatory environment that is being phased in with the LIF reforms and FASEA’s minimum adviser education standards.

  • PS

    Best outcome for the industry regarding commissions. But the remaining road block is FASEA for those of us who have been risk insurance specialists [in my case for 33 years]. My AFSL emailed the first sample FASEA exam question…’Dorothy is 86 and…’ not exactly a candidate for life insurance. It’s all too late I know, but commonsense would have seen a ‘carve out’ for risk only advisers with minimum industry experience of [say] 10 years and a clean sheet on the compliance front. Their authorities limited to ‘life insurance’! But when has this ever been about real life situations and client needs?

    • Concerned

      Good points PS. Another article in this week’s RiskInfo talks about the FASEA exam. Can anyone tell me if FASEA understand that there are risk specialists who do not give advice on planning?

  • Jeremy Wright

    The election result, has not in it’s current state, caused a rethink of risk advisers exiting the Industry.

    That is still going to occur, which will decimate the Retail Life Industry, unless there is an overhaul of LIF and this ridiculous FASEA is carved out for Risk advisers.

    The solution is so simple and MUST be pushed as aggressively as the mortgage Industry did when their Industry was attacked and they quickly caused a back down from the Government.

    Risk advisers have not been properly represented by the FSC or the FPA and it is now the responsibility of the Life Companies to utilise Life Risk specialists to clearly articulate to the Government the future, which is NO future, unless change occurs that will enable us to stay in Business.

    • Just saying

      Jeremy with utmost respect, a carve out will not happen. This is fact. The pressure on all businesses in this professional is monumental. It will survive albeit different to past model. Question is mindset and whether soeone is able to or wants to be part of it. Fasea is learnable and doable with some effort.

      Disappointing some maybe many will exit but it’s an individual choice that will be respected.

      And I’ve seen people cry and breakdown on all levels .. adviser , support staff product company and licensee level.

      • Ken

        With all due respect this whole scenario was never thought through from the start
        Just saying ? I do not know how long you have been in this industry nor your qualifications nor your field of expertise but for some of us approaching retirement having given our best efforts and our souls ( a bit dramatic but) to this industry it is hard to accept the people that wield power over our profession who have no idea how it works can put us in this position.
        At 63 and having more than 40 years in the industry I doubt I will do much more than hang on until December 2023 and exit like many others
        I know many advisers older and with more experience than me that are in their 70s and have kept working because their clients are their family and they want to stay involved will quite probably exit as well causing a drain on experience and the ability to “Soft sell “ a product that is bought by understanding the benefits and the pitfalls of not having it .
        This outrageous FAESA requirement to be some sort of better person via a series of exams and issues not relevant to an advisers work is a ridiculous dream built on false and misleading information from doctored reports
        Insurance companies banks and the FSC should be ashamed of what they have created
        There purpose ( ha ha )was for the consumers benefit who after all the dust settles is the one who loses most at this ! Higher premiums less strategic advice and an ongoing and lingering question ! Am I doing this right
        Our only salvation on this is to have the insurers the AFA FPA FSC and whoever else has had a say get together and say enough is enough let’s fix this ADMITT we were wrong and move forward ITS NOW OR NEVER !
        END OF RANT

    • Free and FAIR press

      Mortgage Brokers were successful in getting the government AND opposition to disregard the Royal Commission’s recommendation to ban upfront and trail commissions because the public would have been worse off and winners would have been the big banks.

      Mortgage Brokers succeeded because their two main associations worked TOGETHER and got the support of small banks and non-bank lenders both in terms of funding and resources.

      Can the AFA and FPA PLEASE work together with the insurers to meet with the Treasurer Josh Frydenberg and the Financial services ministerial team to help them, nay get them to understand that the logic is identical when it comes to the Royal Commission’s recommendation to ban Personal Insurances commissions because in this instance the big winners will be the superannuation funds whose insurance cover is typically more expensive and provides less cover and the losers will be the consumer who is not willing or unable to pay a fee for service for good financial and risk advice.

      Various insurers individually putting up with whitepapers to state why banning commissions is bad for the public, has limited effectiveness.

      The FPA rolling over and saying “we support the Royal Commission’s recommendations” is counterproductive to the cause.

      What is needed is a united effort led by the two main associations with the financial and resource support of insurers, to help the government understand the harm that banning insurance commissions will cause and why the Royal Commission’s recommendation recommendation to ban upfront and trail commissions is NOT in the public’s best interest!

  • Squeaky_1

    That we do not have a specialist risk adviser licence should be a cause of shame and embarrassment for the life companies and the AFA. The life companies – I have no words that can convey my disgust about the way they have ABANDONED advisers in the fight for commissions, responsibility period and ridiculous unrelated exams we have to do at great cost in time and dollars, for no reason. My disgust has turned me against the industry I once supported, loved and helped build. The self-absorbed degenerates disassembling our once great industry are either clueless about what they are doing or they are criminal in what they are doing. I don’t know which is worse. I once thought I would involve my son in this industry and perhaps he’d take over from me with my clients. I wouldn’t let him touch it with a barge pole now. Life companies and the FPA should be abjectly ashamed with the way they’ve sold the advisers up the creek – especially the life companies! Duplicitous, treacherous and uncaring are three words too lenient for them after decades of support from advisers in good faith.