The most contentious outcome from last week’s Future of Financial Advice reform announcement was the Government’s decision to ban risk commissions inside superannuation.
There are so many issues and questions associated with this move, such as whether most consumers will in future be able to afford superannuation risk advice. We will monitor and report on all these questions.
But today we are asking what impact, if any, will the banning of risk commissions in super have on how advisers will deal with insurance claims against those policies. Our question is:
Will you be forced to charge a fee to service your clients’ insurance claims for superannuation risk policies written after 1 July 2013?
Responding to the banning of risk commissions in super from 2013, one adviser has commented to riskinfo:
“I have paid claims to a number of average Australians over the past few years and not one of them complained about commissions rather the great assistance my office gave them and their families.”
But will this ‘great assistance’ only be possible in future if the super insurance client pays a fee in return for the support from the adviser and his/her staff?
In previous poll comments, advisers have said they will stand by their clients in their time of need regardless of whether they will have received commissions on their policies. Is this now still the case?
Will advisers write their clients’ insurance outside super because they will simply be unable to afford to serve their clients’ needs at claim time unless they are forced to charge a direct fee? Does this represent a new conflict of interest?
Will some advisers contemplate agreeing with the client to charge a small percentage of the claim amount as one way of overcoming the client needing to pay a fee out of their own pocket for the adviser’s time and effort? But what if the claim is rejected?
So many questions!
Tell us what you think. Tell us about the answers you can envisage for your own business. We ask that your comments focus on solutions!…
This government don’t think about consequences.
They want us to chage a fee for service So if a clients situation requires life insurance in super which is good for their cash flow, i can charge a fee for service on the clients super fund, and may select a fee commensurate with what the commission would have been. The only down side being a fee debit on the super fund, and a premium debit on the super fund. Mind you there are no adviser trails.
Makes no sense to allow commission on risk outside of super and ban it within super – this simply presents another conflict.
The Govt would argue they are trying to maximise retirement savings – if this were the case they could consider banning insurance within super all together.
Another short sighted ACTU driven piece of policy from the ALP.
I wonder to what extent this will add to the significant underinsurance problem in Australia.
The fact that this was a surprise to the financial industry after all the so called consultation is a real worry. It seems that the Govt approach to business is to make a decision, then conduct a sham consultation process during which time they have no intention of changing any aspect of their original decision.
Business thrives on certainty – current Govt is delivering uncertainty to many industries in Australia – at least they are not discriminating just to the financial industry.
The great beauty about life insurance in super was that in many instances it was at wholesale rates- simple to understand, affordable and provided life cover to all who needed it. The commissions are so minor should a person die or suffer a disablement
The very people that this incompetent federal labour governmet of ours are supposed to look after are the people that will be most affected by the suspension of risk commissions in super (should it ever happen). ie people on low to middle incomes with young children, large mortgages and limited budgets- many of these people cannot afford to pay for detailed financial advice. Some of these people are members of industry based super funds whom I hasten to add receive little if any one on one personal advice on either insurance or investments from the fund.
I am sure that many financial advisers are able to provide discounted investment advice to low income earning clients because some of our costs are offset by the risk commissions received from these clients.
One supposes that industry based super funds are not paid any commissions as these are not disclosed in most of their PDS’S. Therefore, if an industry fund member seeks worthwhile financial advice he or she must pay. I wonder who will help these people pay for any worthwhile advice they receive into the future? Maybe, just maybe, I am mistaken – perhaps the IFFP are going to start providing advice to this market for free?
this is a very weird Government, how does “Increasing” insurance through super impact positivly on retirement account balances?…or is this s clever way of getting advisers to NOT recommend insurance in super?
Well there is one good solution to start with, get rid of this useless shambles of a government in Canberra. I’ve been voting and forced to vote since Gough Whitlam’s election and I have in that time never seen such an incompetent bunch of no hopers trying to run this country. They are only there because of the “independents”. Worse still, the waste of tax payers money is criminal.
What can we do? I don’t know it is very frustrating. I just hope that the majority of voters eventually wake up.
Until we get an administration that wants to know how to achieve an outcome to the benefit of both consumers and advisers alike, we are just sitting ducks.
Banning commissions on just one part of risk insurance advice shows how stupid and ignorant they are.
Do you detect that I am a bit angry, dead right I am.
The only salvation for me is that not too far down the track, I can hopefully retire and forget all the nonsense.
Can’t you all just accept that banning commissions on risk policies within super will prevent another Storm, or Opus Prime, or Trio (who I have never heard of but keep seeing it named as another failure). Wasn’t that the reason behind all these changes??
Also, why is it that it seems only to be the ‘advisers’ portion of any fees deducted from someones super/investment that affect the investors end balance? Don’t the salaries of everyone associated with the super fund come out of the members account balance? Maybe everybody from the CEO’s down to the call centre staff should take a pay cut so that a little bit more remains in each persons account. But it would be unfair to reduce someones income for that purpose, wouldn’t it?
Maybe if people could afford to actually put more money into super or investments, rather than being bled dry with high energy, petrol, food prices and more taxes etc, they would have more at retirement also.
Clients will still pay a premium inside or outside of super. The government assumes that no commission will lead to lower premiums. What a load of rubbish. The insurance companies will probably receive less premiums which in turn will push the cost of premiums up.
We need another John Kerr to put this government in its place – the opposition!
Billy, the self-employed plumber, requires life cover to protect his family. Do I write the cover as he and his wife as owners and pay the premium with “after tax Dollars” or do I write a stand alone risk policy with a Super Fund as owner and pay the same premium with “before tax Dollars” and then charge a fee for this advice?
Which will give the better outcome for Billy and put more into his retirement savings? I think the Government have lost the plot!!
Doesn’t the Government realise that a payout of Insurance under Super gives the family the funds that would have been there if the member had worked until retirement?
I think one of the recommendations of Cooper was for all SMSF trustees to have considered the provision of insurance cover.Not sure when that comes into play
Not wanting to be a cynic – this proviso might be the sacraficial lamb – to take the eyes off the opt in obligation which will do more to destroy the provision of financial advice than any other consideration.
You might recall this is not a needs based – or evidenced based requirement – this is idealogically driven to provide the industry super funds a longer run atcoralling the provision of retirement savings.
Tzu’s Art of War.
Keep the enemy distracted to achieve your real objective.
It is plainly evident that the ISN game (ably supported by the strident Fairfax press) has always been to make the role of the IFA simply impossible – by doing this – the less than interested general public will default to the indstry offering.
The real elephant in the room is of course our erstwhile investment platforms and the Insto’s and larger investment houses who are conspicous by their abscence. ( A foot in both camps perhaps)
IFA dream 101 –
make as many rules as possible to ensure the competition can’t be profitable.
Then buy a whole lot of media space to run a fear campaign with the usual emotive language
Then get the unrepresentative swill of a minority Govt to try to pust through idealogical reform from the cafe/chardonnay set.
It remains to be seen if the cross benches will support the legislation.
If the government are trying to maximise retirement savings and they are serious about it. Why don’t they start with eliminating tax on super contributions and earnings.
Financial institutions will have to find another way to distribute risk products inside super, because it sure won’t just jump off the shelf into willing waiting consumer arms. Whatever the other marketing and sales system is, it will probably cost at least the same as current commission and probably more. There will not be any reduction in premiums as a result of this misguided socialist claptrap.
Remember that this is only a policy proposal. It still has to be passed in both houses. It therefore essential that we canvas our local MP’s and Senators and explain to them what we do so they can make an informed vote.
If the legislation is passed then life companies instead of paying us the commission can rebate the normal commission to the client’s account and we charge a fee to the client’s account for the same amount or less if we charge a fixed fee. This way we still win and so will the client. Our industry has found ways to get around legislation in the past and this will be no difference. This will not kill our industry but only make it more stronger than ever before.
Just a quick question, why is an ex union rep given such an important portfolio such as Financial Services reform? It is to maintain the massive conflict of interest that this government is so good at. I don’t know how the ALP can get away with such deception, that is coralling superannuation to union based super funds. Oh I wonder who these funds line the pockets of? Unions/ALP of course, something needs to be done and done fast because these lunatics are ruining a once great country.
Take a bow Richard Campbell. What a great idea. This is the sillyness of all this. As a financial planner and risky i can charge a fee for service the equivilent of say 1% of funds invested deducted from the clients super and this is legal because its a fee, not a commission. Where is the point of difference. There is none. In fact that fee for service is not capped like commission was so i can charge as much as Cassimattis did. I think advisers should mount a class action against Cassimatis!
The issue is quite simple i.e.all advisers/planners who feel the current gov’t are good for our industry should do nothing and all those who feel they are bad should inform as many clients/friends/business associates etc.as possible.
Advisers who live in the 3 independents ( and the Independant WA national as well ) electorates have to provide examples of thier clients WONT be able to afford advice. If advisers clients live in those electorates, then ditto. Advisers should point out the treble impact of FOFA on advisory businesses in regional areas-yet another city-centric piece of policy crap. These 3 guys will decide if this rubbish gets up. Rural economies go up & down-try charging a farmer a fee to buy insurance super in in hard times, let alone a fee to the widow to handle his death claim. Insane !!!!!!
BTW. Insurers pay commission to the ISN Funds, only its called an admin rebate. No declaration to the members though.Advisers should be aware that the insurers who tender every 2-3 years for the funds business DONT UNDERWRITE the risk-they just pick up the pieces at claim time.And if claims are high at re-tender time, the insurer just puts in an outrageous bid which has a high premium cost, and is not successful.
Some 20% of risk in No 1 funds is NON-UNDERWRITEN group to these funds. Our “friends ” the insurers can play in this market because the NEW risk we give them is fully assessed-providing strength. But if commission based advisers leave the industry, cheap group rates where the risk IS NOT UNDERWRITTEN will vanish. Mr Whitely has not worked out that he needs us to stay
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