Assistant Treasurer, Josh Frydenberg, has reaffirmed his commitment to supporting the existing level commission options available for financial advisers delivering life insurance advice.
In an interview with riskinfo on issues related to the Life Insurance Framework proposals, Mr Frydenberg emphasised his concern about the importance of the ongoing viability of advice practice small businesses when taking into account the final details attaching to the proposals.
While he accepted that it was appropriate for market forces to ultimately determine the point at which level commission should be set – that is, a flat commission option for advisers from year one, without any clawback provisions, as an alternative to the proposed 60/20 hybrid commission option, Mr Frydenberg left riskinfo in no doubt about his desire for that option to continue to be offered:
…we’re not capping level commissions
“Industry will work out the right level…and I acknowledge that that’s important to the adviser community. Industry will work that out, but we’re not capping level commissions…”
The Assistant Treasurer’s affirmation of his position follows the statement from the industry that he included when announcing the details of the new Life Insurance Framework in late June, which said, “This proposal is not intended to limit the industry’s current ability to operate on a level commission or fee-for-service basis.”
Mr Frydenberg also confirmed the final details of the Life Insurance Framework proposals, which will form part of the Government’s formal response to David Murray’s Financial System Inquiry recommendations, are likely to be announced later this month.
…there will have to be an allowance for certain exemptions [to clawbacks]
The final details within the proposals to which Mr Frydenberg referred include the circumstances under which clawback provisions would be applied and, importantly, the circumstances under which they would not: “There will be some exemptions, such as where an insured event occurs, for example, when someone dies,” he said, “…and these details are being worked through at the moment.
“We need a model that is practical and workable and sustainable, and so there will have to be an allowance for certain exemptions [to clawbacks],” added Mr Frydenberg, within the broader context of the proposed changes, which the Assistant Treasurer describes as transformational for the industry.
If the proposed amendments to how clawbacks will be administered is prohibitive and becomes a restriction of trade, then the only transformational change Josh Frydenberg alludes to, will be advisers walking away and a COLLAPSE OF THE RETAIL LIFE INDUSTRY.
A 3 year clawback is appropriate and only level commission should be available if the adviser who wrote the Business, rewrites it with another Company.
For policies that fall off the books for reasons that are out of the control of the original adviser, one example being the Life Company increasing the premium by 10 to 20% on renewal, then that is not the advisers fault and the one year clawback will still apply.
I would ask the Retail Life Companies to take this very seriously and remind them that if the advisers get to the point where it has become unfair, unworkable and just too hard, they will walk away and the Retail Life Industry will be crippled with rising claims, reduced new Business and no-one to defend the existing profitable premiums that have been on the books for years.
Clients will cancel and the advisers will not be there to remind them of why they needed the cover then and now.
Life Company executives and the Government need to understand that Advisers are not employees, they are self employed and will focus their attention on more profitable, less onerous areas in the Financial world that do not have clawback issues, or the weeks and months that can be spent trying to get Life policies through that is not part of doing Business in any other field and is a reason why many advisers find it difficult now, let alone if this new regime comes into effect.
In 2004 I was asked to address a group of bank advisers in the hunter Valley area of NSW Why because their retention rate was 50% and their lapse rate was 30% of all business written in the previous 12 months ( if that makes sense?) I was astounded at how little these people knew of their products their client needs and objectives and in brief what the hell they where actually suppose to do
It did not appear to worry them too much as they were paid a wage with a bonus for sales that was cream on the cake only as they were ok on their weekly income
I have Been told )not confirmed ) from a very good source that over 50% of complaints in front of FOS at the moment involve on line TV related sales we all obviously have opinions on I am further advised that most of the remaining 50 % is made up of client complaints about the banks ( that I can understand) and the products sold by their advisers Independent ( there’s that word we are not suppose to use again! A) is very small and less than 5% Once again let me re iterate this is rumour only But surely these figures would be available ?? I would truley like to know the actual figures and confirm or deny these rumours Wouldn’t that be a ” Kicker” to this whole debate
How can we find out does anyone know ? Will FOS release these figures
I am amazed that we have an assistant treasurer so out of touch with the industry he trying to “sustain”.
Over 30% of advisers are are either leaving or about to leave the industry as a direct result of his policy. Small business people who employ and drive the economy.
If you call this sustainability then Josh you are a magnificent success!
LONG LIVE THE BANKS AND INDUSTRY FUNDS… the rest of you can get stuffed!!
Well they are making these changes because of the dodgy advisers that have given the financial planning industry a bad name. Some of these advisers have been already banned by multiple Insurance providers. Surprisingly now they’re crying poor !!!
So what about every other industry with “dodgy” people in it? Do we see the gov’t intervene and slash property spruikers income? how about all the Doctors charged with malpractice? shall we slash their income too?
Who cares about the other industries, we are talking about this industry, it’s not the end of the world and this will get rid of some of the bad eggs giving this whole industry a bad name. You can’t tell me we should be able to get a massive up front because the annual premium was $20k or $30k. Yes 3 years is possibly a little over the top but I’m more than happy with the proposed Level and Hybrids.
Mr Concerned Adviser, Have you ever done a 20-30k Deal? Do you know the work time and effort into a 20-30k Deal? Do you fully understand the personal liability we take on a risk advisers advising on a 20-30K Deal? Or even the time to find a 20-30k prospect………..?
Obviously not……………
We don’t get paid $20,000 commission on the big cases for nothing mate, plus how would said Life Co get that client otherwise?.
Go get a life. I bet you are employed by AMP and charge 3k plan fee for risk only……………
And how often do you offer to review that client when they get a standard stepped increase with indexation but they don’t know the premium structure? Given how strong you feel about not seeing a $20-30k deal come along very often it staggers belief that you wouldn’t upgrade their cover at the earliest chance
EMCA yes I do think 3 years is over the top I also think this industry as whole should be writing a lot more level premium policies than it does. If appropriate advice was given in the majority of cases over the years the industry wouldn’t be where it is at.
Risk Adviser yes I have done plenty of deals like this and your kidding yourself about the personal liability you take on, do your job properly and give holistic advice and you shouldn’t have any issues. Maybe you need to review your business structure.
Are doctors charged with malpractice sued and if its found to be criminal struck off the register? Pretty sure this would result in a slash in income.
I think you have missed the point…. The are so many parties here with vested interests all commenting on our industry, under the basic assumption that the majority of advisers do not provide adequate Risk advice, which I believe is an incorrect judgement. The media has got hold of this and run with it to sell papers, not to mention consumer groups, and even “experts” who have never been involved with the industry, or lack understanding, commenting or even advising what our industry needs to do.
Its unfair that the gov’t see fit to slash Advisers income or impose 3 yr clawbacks under this presumption there are all these cowboys operating in the industry…. My point is that if we apply this basic logic to all industries, then all industries would be strangled (like ours) because they also have cowboys operating in them… you just dont really hear about it.
ASIC and alike should be made to do their job better – rather then yet another disclosure for an soa, another piece of tedious legislation & more admin for advisers. If ASIC really believe we are all shonks, then they should do their job better – find ways to monitor risk policies for so called “churn,” rather then letting the Insurers latch onto this (churn) as the problem for their archaic business structure and lack of profits!
”This proposal is not intended to limit the industry’s current ability to operate on a level commission or fee-for-service basis.” Josh, the current level of true ‘fee for service’ life insurance would be that small it should not even be considered as part of these proposals. Have you actually seen any proof? Such info couldn’t come from the insurers as it would have nothing to do with them. It couldn’t come from dealer groups either as ‘fees’ they receive on behalf of advisers could be for any purpose. Who has given you this data? You are willing to make this comment however. Sounds like you are just peddling someone elses agenda to me!
Risk Info can you update the photo of Josh frysenberger? this one must be from the 90’s.
The truth is the Government should not be even thinking of capping anything on behalf of these banks, let the banks do it themselves and reap the rewards themselves. This is only making this government even more incompetent at a time when they needed not to.
It is going to be terrible when Labor get in at the next election because of self serving bank loving LNP politicians! just reflect on Cambell Newmans short reign……….
Risk Only… like the photo on your website (if you have one) looks like the current version of yourself.
My oh My Mr Frydenberg ought to make sure he has plenty of body bags at the next election because his government will be slaughtered, this is a very sad Government interference that is not a benefit to consumers.
Josh – here are some very simply things to think about:
1. You only have to turn on the TV during the day and every 3rd ad will be a direct insurer trying to sell risk insurance.
2. The highest levels of lapse rates are with the direct insurers
3. The lowest levels of lapse rates are from advisers.
4. The highest levels of declined claims are from the direct insurers.
3. The lowest levels of declined claims are from advisers.
4. The highest levels of upheld FOS complaints are from the direct insurers.
5. The lowest levels of upheld FOS complaints are from advisers.
So your answers to tackling under insurance is to be duped by the banks into decimating the independent adviser market???
Under these “reforms” there will be a mass exodus of independent advisers. Thousands of staff will lose their jobs and under insurance will get worse and clients will be worse off.
Why? Because nobody in their right mind will write business that they don’t get fairly paid for and most clients won’t pay fees (nor should they!)
Either you know all of this and you are happy to side with the banks against the best interests of customers or you have been duped because the above is pretty simple to understand.
If it isn’t I give up and for the first time in my life will be voting labour.
The AFA executive and Josh Freydenberg need to recognize that the overwhelming majority of Life Advisers do not want or accept:
60/20 commission structure.
3 year write back of commission
Fixing prices and terms by a government is not acceptable in a democratic competitive capitalist system and it won’t work producing only negative unintended consequences.
There is an Adviser survey going around at the moment please complete and submit it.
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