A recent Parliamentary Committee submission from the ANZ Bank suggests the wealth manager would support a fee-for-service life insurance advice environment.
The submission was made in response to the Senate Economics Committee’s Scrutiny of Financial Advice Inquiry, which is investigating the implications of the recent financial advice reforms.
ANZ’s submission specifically identified retail life insurance advice as an area in need of legislative reform, in order to prevent misconduct by financial advisers. It pointed to the steps that would need to be taken to arrive at ‘a staged transition to fee for service’, acknowledging that interim remuneration approaches should be implemented.
‘With respect to life insurance, product changes could be made to improve customer protection outcomes, such as through a review of remuneration arrangements, premium structures and product design,’ ANZ said in its submission.
In arriving at a staged transition to fee for service, interim remuneration approaches should be implemented
‘In arriving at a staged transition to fee for service, interim remuneration approaches should be implemented and this will require consideration of issues such as the continuation, or quantum of, upfront commissions, level and hybrid commission structures, responsibility periods.’
The submission also highlighted that care needed to be taken so that any proposed reforms did not exacerbate the current underinsurance issues, encouraged more people to take up advice, and recognised an appropriate balance between consumer protections and fair reward for advisers’ work.
The ANZ submission acknowledged the findings of the recent Australian Securities and Investments Commission (ASIC) report into retail life insurance advice, which found that current remuneration structures are impacting on the quality of advice (see: ASIC Review). It also noted that ASIC had suggested an industry-wide response would be needed to mitigate potential ‘first mover’ issues.
‘While it is not yet clear whether industry consensus can be achieved in relation to, for example, issues such as appropriate remuneration arrangements for financial planners that provide life insurance advice, ANZ believes that there may be a case for a solution to be mandated in the absence of industry agreement,’ the submission stated.
‘Separate to this ANZ is examining ASIC recommendations that we can act on unilaterally e.g. ASIC’s suggested review of the training and competency of advisers giving life insurance and increasing monitoring and supervision of advisers.’
Submissions to the Scrutiny of Financial Advice Inquiry have now closed, and the Committee is expected to issue its report by the first sitting day of July.
According to the article, ANZ’s submission “identifies retail life insurance as an area in need of legislative reform in order to prevent misconduct by financial advisers”. Don’t they realise that recent problems within the financial planning industry relate solely to investments? It is very rare that we read of major problems within life insurance.
Therefore how will restructuring life insurance commissions going to stop financial planners who focus on investments, from giving bad advice???
Having not read the report from ANZ, it would be interesting to know what research was done around the area of fee for service on Life Insurance advice.
In 27 years of talking to clients, I have not met one person who will pay a fraction of what it costs to advise, structure, write-up, underwrite, administer ( including fixing mistakes, or explaining to clients what all the information means that Life Companies requested or sent ) or represent the client at claim time.
There is a big difference between having a client willing to pay for advice on something that interests them, compared to paying for advice for Life Insurance, which does not interest them and is a main reason for the massive under insurance problem Australia faces today.
I can’t help but feel there’s bias in ANZ’s response. Consider, is there a gain for a product manufacturer (Onepath) to sacrifice their planners remuneration for product profitability gains?
Is it in the banks interest to force the smaller businesses and licensees out of the market and bring them all back in under a tied adviser force?
How does any of this improve customer protection outcomes and access to advice?
Whilst I agree that we need to remove high upfront commission, the link between the ASIC report and its outcomes around brokerage is based on a very small sample and ASIC targeted a market segment they knew that they’d find problems in. It has nothing to do with the broader adviser base.
There are many improvements to be made to the life industry, but lets make sure there’s no bias and political outcomes influencing the outcomes of these enquiries.
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