Financial Services Minister Bill Shorten has confirmed that group risk commissions outside superannuation will not be impacted by Future of Financial Advice (FoFA) reform measures.
In an interview for the December 2011 edition of riskinfo Magazine, Minister Shorten clarified where group risk commissions are positioned within the Government’s definition of conflicted remuneration.
Responding to a question about the FoFA tranche 2 legislation not specifically excluding commissions from being paid on group risk products outside the superannuation environment, Mr Shorten said:
“Yes, that is correct. That is consistent with my announcement in August this year that the ban on risk insurance commissions will apply to commissions on group life insurance in all superannuation products, and to commissions on any life insurance policies in a default or MySuper product from 1 July 2013.”
Insurance commissions outside of super are not affected by the FoFA reforms
Mr Shorten then added: “Insurance commissions outside of super are not affected by the FoFA reforms.”
Section 963A of the FoFA (tranche 2) legislation defines the term ‘conflicted remuneration’, while section 963B outlines what the Government considers not to be conflicted remuneration. An extract from this section reads:
… a monetary benefit given to a financial services licensee, or a representative of a financial services licensee, who provides financial product advice to persons as retail clients is not conflicted remuneration in the circumstances set out in any of the following paragraphs:
(a) the benefit is given to the licensee or representative solely in relation to a general insurance product;
(b) the benefit is given to the licensee or representative solely in relation to a life risk insurance product, other than:
(i) a group life policy for members of a superannuation entity (see subsection (2)); or
(ii) a life policy for a member of a default superannuation fund.
In other words, risk commissions are banned for all group risk policies inside super and all policies in super default funds. Mr Shorten’s comments confirm that group risk commissions outside superannuation are not considered conflicted remuneration and will remain available as a remuneration option for financial advisers.
Click here to access the full wording of the second tranche of the FoFA legislation introduced into the House of Representatives on 24 November 2011. Clauses 963A and 963B can be found on pages 19 and 20.
So no commission on products that would drive more business to the industry funds & to buy tables of 10 at labour party donation parties. Is that right Bill?
Tell me Bill , if industry funds are only their to benifit the members, why do they spend millions on advertising each year and sponser national sporting teams. What is the business relationship between unions and industry super funds. A royal commission would uncover a few things I suspect.
Mr. Shorten is confused and conflicted. Group insurance arranged by an adviser within a superannuation environment or outside it take the same amount of effort and skills to calculate and implement. Claims may be even more complicated within super as they can lead to calculations around tax, definations of types, and ant detriment. He imagines that the high levels of commission for compulsory group insurance paid to large union funds who have a million members, are typical. He is far off the mark. He has had them in his ear as in their case they arange nothing. Whether Shorten sees it or not, it will lead to no advice in super insurance and will be expected to be would back under a new government. If remuneration for group is not conflicted outside super, neither is it within. His dilema is because of bad policy which he is now twisting himself every which way to make work when it can’t
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