The Financial Planning Association (FPA) has called for a level playing field for all advice, saying the ban on risk commissions inside super creates a double standard.
According to a statement released by the FPA, the proposed ban, announced as part of the FoFA reforms in April, compounds the already confusing treatment of insurance purchased inside and outside of an individual’s superannuation.
It says that different rules apply to the treatment of commissions paid by life and general insurance companies, and uses the example of an SMSF investor to highlight the discrepancies raised by the proposed reforms:
‘A member of an SMSF, which has commercial property in the fund, is advised by a financial planner to take life insurance to protect the member and their assets should something happen to them – no commission is payable to the adviser. Conversely, if a general insurance broker recommends the member of the fund to take building insurance to protect the commercial property should something happen to the building – commission is payable to the broker.’
CEO Mark Rantall said that it was important to have a level playing field for all providers of advice.
He explained that while the FPA was not in favour of commissions, it would not support a ban on risk commissions until a suitable alternative remuneration for insurance advice was found.
“Until consumers are able to deduct the costs of up front fees as a tax deduction, then commission based advice remains the most cost effective manner by which the widest range of consumers can secure insurance cover,” he said.
“The FPA considered insurance commission as part of our remuneration policy well before FoFA,” said Dante De Gori, General Manager for Policy and Government Relations, “And this issue is not something we’ve taken lightly.
“There’s no evidence of inappropriate (advice) or public catastrophes in respect to commissions on insurance.
“The consultation process for insurance didn’t start officially until January. So we are a bit concerned with the speed at which that decision was made, especially considering we have other things on the table that have been in consultation for the last 18 months and a decision hasn’t been made (on them) yet,” he added.
