Further calls have been made to move commissions off the front page of ASIC’s example Life Insurance Statement of Advice (SoA) with the FPA stating the document should highlight the advice process first.
In its submission to ASIC in response to the example SoA provided in Consultation Paper CP 284, the FPA said it was not appropriate for the SoA to begin with fees and remuneration disclosures, according to FPA Head of Policy and Government Relations, Ben Marshan.
“While a SoA is a disclosure document and not the client’s financial plan, it should still be aspirational. It should help demonstrate the professional diagnosis process a professional financial planner undertakes, and how it will help the client achieve a better financial position through an implemented financial plan,” Marshan said.
“While a SoA is a disclosure document…it should help demonstrate the professional diagnosis process a professional financial planner undertakes…”
He added the FPA supported the development of a new example SoA template through consultation with the financial advice sector and the current version was an improvement on previous SoAs produced by ASIC.
The comments from the FPA follow news that the AFA has called for the removal of commissions from page one of the example SoA stating it presented the numbers out of context and was inconsistent with other type of SoAs (see: Leave SoA Commission Details Alone – AFA).
The view of both associations have also found support with financial services technology provider YTML which stated the example SoA downplays the importance of advice.
In its submission to ASIC, YTML General Manager Advice Delivery, Terri Ho said the advice consumers would be looking for in an SoA was not being prioritised and any commission numbers should be pushed back into the document.
“We believe the disclosure of commissions is over played in its current position in the SoA. This represents too much focus on remuneration,” Ho said.
Ho also said that YTML suggested to ASIC that focus groups that contained advisers would have shown the regulator the importance of explaining the role of advice before detailing the remuneration, which should appear on page three under the Summary of Recommendations.
“This would still ensure disclosure is sufficiently prominent but is also provided with context to the value this cost brings to the customer,” Ho said.
AND still no mention of whether or not there is a requirement to also inform the public of the 2 year claw back period…if anything, this should be prominent and detail the fact that our (the Adviser’s) work and billable hours remunerated by product commission may not actually be what we receive if the client changes their mind or has changes to their circumstances outside of our control within 2 years…how ridiculous…what is also ridiculous is the statement that resides in most if not ALL SOA templates in the market that commissions DON’T affect what the client pays…of course it does but somehow the licensee’s legal eagles seem to have missed this fact…maybe because they also have no idea how our industry works just like the monkeys in Canberra who are making legislative changes before gathering ALL the facts…what the??? God Bless the risk Industry…
What is this “overkill” with disclosure of Commissions ?? They are part of services provided world wide even my pharmacist gets trips if he sells the generic brand of Panadeine ? It only goes to confirm my thoughts on this legislation in the first place.
It has never been about what’s good for the client its how much can we “claw” back out of those greedy overpaid advisers. Eventually we will just “strangle” them out of the business and us banks and insurance companies can RULE SUPREME”
Ben Marshan, you have highlighted the reason why risk advisers find the FPA to be out of touch.
By making a statement that the SOA is a ”disclosure document and not the clients Financial plan”, has validated what risk advisers have been saying for years, in that Investment advice and risk advice are different Industries and should be treated differently with regards to compliance / regulatory / ongoing education and qualification requirements.
The FPA has never properly understood the Life Insurance advice area and the Government, including all regulators, also know very little, which makes their attempts to regulate and dictate how the Life Industry should be run, even to the point of how a SOA should be formatted, is always going to fail in it’s attempt to fix perceived problems.
The FPA and the regulators need to understand that a Risk SOA, is in effect, a protection plan for a clients life, not just a disclosure document full of legal jargon and wording that no one understands, with what appears to be a focus on what commission will be earned, rather on the most important area, which is advice and how the implementation of the advice and products will protect and improve the clients lives.
The FPA have started on the road to beginning to understand how Life Insurance fits into a persons risk needs, though they have insufficient knowledge to be making policy statements to the Regulator and other Government bodies on the future direction, as they clearly are out of their depth.
Ben, you need to start listening to risk specialists who can guide you on the real world of Risk Advice and once you have attained sufficient knowledge, then you and the FPA may be in a position to structure real world policy.
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