Bernie Ripoll on Commissions

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The issue of adviser commission and the role it plays, both now and in the future, was highlighted by Bernie Ripoll,  MP, at the opening session of the AFA 2009 Annual Conference.

Mr Ripoll, who chairs the Parliamentary Joint Committee (PJC) Inquiry into Financial Products and Services in Australia, shared with advisers his views about the role of the Inquiry and the outcomes he and his committee are seeking.

On the polarising issue of adviser commissions, Mr Ripoll said the role commissions play is a key focal point of the Inquiry and that “… it will come under a lot of scrutiny.”

Mr Ripoll said that from the point of view of the Australian consumer, there can be a perception, real or imagined, that conflicts of interest exist when a financial adviser is remunerated by way of commission.

According to Mr Ripoll, in any consideration of the future role of commissions in the financial services landscape, there must be greater clarity and the consumer must be protected, with Mr Ripoll asking what it is that the consumer is actually paying for – what is the connection between what the consumer buys and how much they pay?

…commission payments made on the sale of life insurance products was one of the areas that would definitely be considered separately…

Mr Ripoll also stressed that the topic of ‘commissions’ is not a simple area because not all commissions are the same.  He later confirmed to Riskinfo that commission payments made on the sale of life insurance products was one of the areas that would definitely be considered separately when addressing  the broader debate on the future of commissions as payment for the provision of personal financial advice.

There were other major issues highlighted by Mr Ripoll as he addressed each of the Inquiry’s key terms of reference, which include:

  • The role of financial advisers
  • The general regulatory environment for these products and services
  • The role played by commission arrangements relating to product sales and advice, including the potential for conflicts of interest, the need for appropriate disclosure, and remuneration models for financial advisers
  • The role played by marketing and advertising campaigns
  • The adequacy of licensing arrangements for those who sold the products and services
  • The appropriateness of information and advice provided to consumers considering investing in those products and services, and how the interests of consumers can best be served
  • Consumer education and understanding of these financial products and services
  • The adequacy of professional indemnity insurance arrangements for those who sold the products and services, and the impact on consumers
  • The need for any legislative or regulatory change

In distilling Mr Ripoll’s message to advisers and the industry in general about the changes his Committee will recommend when it hands down its findings on 23 November, those recommendations will be motivated by a desire to:

  1. Introduce greater simplicity into the financial services sector and to the relationship that exists between adviser and client
  2. Engender greater consumer confidence in the Australian financial services industry
  3. Introduce greater clarity into the rules and regulations that govern the financial services industry, including clarification of the term ‘financial adviser’
  4. Create a greater understanding amongst the public about the importance of financial advice and the vital role it plays in helping Australians to build, manage and protect their wealth and the future of their families and businesses
  5. See the financial services industry self-regulate on all key areas under debate, including fee for service and commissions, clarification of the term financial adviser, review of educational standards for those providing personal financial advice, ongoing review and monitoring of the personal financial advice provided to consumers
  6. Impose Government intervention as a last resort


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2 COMMENTS

  1. in the issue above there is talk about the relationship of commission to the product. What about when a client requires a medical, the follow up of details, or when a client claims and he is given assistance with the claim sometimes years later. Real estate agents, loan brokers, general insurance brokers and many more people get paid by commissions. Yes it probably does affect the way it is sold BUT better to have insurance than NOT surely. The people pushing thias barrow are not the clients! I have just done a survety of my client base and not one person feels that the way I cgharge is a concern in fact most said ‘Excellent’! So who is stating that commissions are a problem??

  2. Rippoll or ripped off. I have been in AUstralia for 21 years and the same issues and “perceived problems” have been re-gurgitated, highlighted and talked about over the decades. However there has never been a final solution. I envisage the debacles of Storm, MFS, Opes Prime, etc will continue to grace our lives in the next perhaps thirty years before anything will actually be resolved. The more technologically clever the nation becomes the less mentally competent we remain.

    nuff said

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