AFA Questions Royal Commission Adherence to Terms of Reference

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The Association of Financial Advisers has voiced its concerns that a number of the recommendations stemming from the Banking Royal Commission paid little or no heed to one of its key terms of reference.

The AFA’s Phil Anderson …there was no discussion on the number of clients impacted or the impact on the adviser population

Outlining the Association’s position, AFA GM Policy and Professionalism, Phil Anderson, has zeroed in on Paragraph K of the Banking Royal Commission’s Terms of Reference set by the Government, which it notes instructs the Royal Commission as follows:

“We direct you to have regard to the implications of any changes to laws, that you propose to recommend, for the economy generally, for access to and the cost of financial services for consumers, for competition in the financial sector and for financial system stability.”

In a paper posted within the Advocacy section of the AFA’s website, Anderson argues this directive was not taken into account by Commissioner Hayne in a number of his recommendations:

There was no reference to the impact on accessibility or the cost of financial advice

“There was little discussion about the implications of the financial advice recommendations. There was no discussion on the number of clients impacted, or the impact on the adviser population. There was no reference to the impact on accessibility or the cost of financial advice.

Anderson referenced a statement he took from MLC Advice in making his point about the impact of the Royal Commission recommendations on the affordability of financial advice:

“The implementation of these recommendations will put access to affordable advice at increasing risk for everyday Australians. This was demonstrated by a recent statement from the MLC advice business, that they …will focus on affluent clients, not mass clients.”

Anderson also called out the issue of the ending of grandfathered commissions as another example of the disconnect between Paragraph K and the impact of the recommendation:

There were no examples presented at the Royal Commission of poor advice as a result of grandfathered commissions

“While even advisers have mixed views on the debate about the removal of grandfathered commissions, it is an issue that stands out as a demonstration of the lack of good policy process. There were no examples presented at the Royal Commission of poor advice as a result of grandfathered commissions,” said Anderson, adding that this issue and its history were misrepresented and that there exists a lack of information on the number of impacted clients and the consequences.

In asking whether it is too late to have a sensible informed policy debate, Anderson reflected that advisers have every reason to feel unfairly treated: “There are many who feel sidelined and stereotyped by the Royal Commission, sacrificed and bullied by the Government, tormented by over-zealous regulators, deserted and slammed by institutional licensees and abandoned by product providers.”

Click here to access Phil Anderson’s full statement on ‘The Hayne Recommendations: Why is there no debate?’



19 COMMENTS

  1. This article will most likely generate debate and anger among advisers – simply becauise Phil Anderson is right! I remember hearing Bert van Manen, the only voice of reason within the Coalition, state that advisers have been unfairly treated through this process – and that was a year or so before LIF became law. Thank you also Phil, for putting things into perspective – advisers have been unfairly treated, sidelined, stereotyped (and this one goes back to ASIC’s flawed audit of October 2014), sacrificed, bullied and tormented…
    Can someone please answer this question – is the AFA going to raise the concerns Phil has highlighted on behalf of the AFA, with the govt?

    • I have spoken to Phil Anderson and he tells me the government isn’t listening. The AFA have been trying to raise this issue with the government for months. I sent an email to Bert Van Manen last month on grandfathered commissions and have yet to receive an answer. I said in the email, he is in Scott Morrison’s faction within the Liberal Party, can’t he have a word to the Prime Minister about this issue?

      • Thanks Daryl. If the govt isn’t listening to the AFA, then as I have suggested many a time before – the AFA and senior reps from all retail life companies need to go to the govt collectively about all of these issues that sre destroying the retail life industry.

      • If the Government isn’t listening ?{ and we have known that for some time } then we need a “bigger stick” I have great faith in Phil’s ability to dissect the Commission’s paperwork and tell them where they are wrong but we have been doing that for 2 years or more and they do not recognise the issues or simply don’t want to.
        Its time to take a page out of the Mortgage Brokers” handbook to survival”
        and one out of both AFA and the FPA’S cheque book and start some serious lobbying we need and need NOW.!
        I have serious doubts that the insurance companies will come on board with us just yet as they seem to still have their heads stuck in the sand waiting to see what they can save when commissions drop to 60% next year. That is simply not the answer.
        I hate to tell you but ! less new business will be written! claims will grow along with the lack of funds to service these claims and it goes on and on.
        Surely they can see the writing on the wall and need to along with the associations start a process of change now. Every day its left it gets harder.
        16 suicides 4000 advisers and a lifetime of experience gone! Thousand of support staff gone or soon will be. For what ? How is the consumer better off. Come on guys we need a real challenge here and now.

        • I have said in many public forums and directly to the FPA and AFA of which I am a member, they/we need to advocate like the AMA (doctors), The Pharmacy Guild (chemists) and the Accounting bodies. These other professions seem to have more success than the advice profession. The AFA/FPA need to go and liaise with these other professional bodies and learn why they have been more successful in recent decades than the AFA/FPA.

          • I think unfortunately it comes down to so called status we receive little or no positive air play via all mediums and as soon as someone has a “winge” because they have had a bad experience maybe with the bank an on line insurer claim denied !foreclosure of a mortgage etc regardless of who’s fault it was ( there is always two sides bit we only ever get one !!)
            Out comes the media with a big tar brush and we all cop it and the government thinking we are salesman not professional carers says wear that?? We don’t want to know !
            When was the last time the medical society accountant associations solicitors etc ever got the “air time” we get when they stuff up
            Rarely if ever? Seems all to hard or threats of litagation if you speak up” fly in” real quick

            We do everything we can but get no positive exposure

            Very sad

          • How about a naked protest through all capital cities like the climate changes alarmists are conducting these days? Some advisers have really been in a good paddock so that would certainly get some attention. And what do they say – any publicity is good publicity?

  2. I agree with the previous comment. While Hayne is a respected jurist, he completely missed the point in relation to how Advisers earn their income and the value of their businesses (for those that are self employed)
    Grandfathered investment commissions are not good, nor are they always bad. Especially for those who have grandfathered account based pensions. To outlaw them, as proposed will have two effects on the client, one the adviser will move their recommendation to lower cost products, but simply charge a ongoing and rather high fee (as I have personally seen in a case of a family member) for a relative simple piece of advice to replace what they are losing.
    Secondly, in relation to those who are in grandfathered Account Based Pension that pay commissions, if they are in receipt of an income support payment from Centrelink, they will suddenly find their account based pension is now deemed under the Income Test, which will result in loss of part of the Age Pension (I guess the LNP has thought of this as a win).
    As for commission payments on insurances policies, LIF has worked to a degree, but cutting commissions has not led to lower premiums at all. Cutting them out all together will not drop premiums, but will result in my needing to charge more for my initial advice, which means mum and dad, mass market clients will need to either pay more (which they won’t), rely on product pushing robo advice, or worse yet, rely on their Group Cover provider with expensive cover and dubious terms.
    I only see more Crowd Funding campaigns from this which will be a result of cronic under-insurance.

  3. It would be nice for the AFA (& FPA) to also make a statement supporting its members on the disgraceful way that AMPFP is treating its aligned businesses, the FSU seem to be the only body standing up to them!

  4. The Royal Commission was a witch hunt that was always going to end badly for the bigger Institutions.

    They meekly played into the hands of the Royal Commission proceedings, as they knew there were numerous infractions and that meant a weakened defense.

    It was never going to happen where a large Institution defended advisers.

    Their defense has historically been to blame advisers.

    The FPA and AFA were incumbent to attack any unfair or incorrect statement or reference made by the Government, Regulators and the Royal Commission, as they should not have any legacy issues that could hinder their ability to properly represent advisers and bring to task any entity that pushes too far, or misrepresents the truth.

    Once the horse has bolted, is too late to shut the gate.

    If the AFA or FPA or any one for that matter, wants to win a fight, they need to interrogate the opposing player and rip apart their arguments before they gain traction.

    What we see time and again, is a reluctance to aggressively shoot down and question erroneous statements and the longer they are allowed to breathe, these erroneous statements, become facts.

    • The mortgage brokers went to work as soon as the interim report from the Royal Commission was released in September 2018. So when the final report was issued in February this year they launched their opposition to it successfully. The FPA was never going to stand up for grandfathered revenue as the Board is comprised mainly of advisers who have moved on from this remuneration structure so our profession was split and on the back foot. In my humble opinion that is why we have ended up in this position.

  5. Hayne’s royal commission was never about the consumer. Its intent was always to direct even greater profits towards banks, industry super, unions and lawyers. The other outcome of hayne’s recommendations has been the alarming number of suicides, which our politicians and legislators deliberately ignore.
    It should be called the “royal corruption.”

    • “The other outcome of hayne’s recommendations has been the alarming number of suicides, which our politicians and legislators deliberately ignore.”

      And how terrible is this action, Alex? Just plain ignorance of the highest order.

        • I hear you Alex…it’s such a dire situation that’s unfolding here yet those those ‘should’ be concerned, aren’t.

  6. Really pleased to see Phil Anderson putting the gloves on and having a real crack now. Without trying to be overly critical, it really is about time.

  7. Yep, Advisers have been treated like dodgy low life scum that don’t deserve to earn any money for what they do. Even to the point of telling advisers what they can charge and what for, and when, and how much… I cant see any other industry copping this. Try and do this to solicitors or Dr’s, or mechanics…… you can charge for that, cant charge for this, cant get anything from the manufacturer for that, this is how much you can charge for those things, you cant make money off of that…… and the AFA, FPA and all the institutions just laid down and professed unending guilt for the sake of trial by media which happened anyway. Anyone who stood up for themselves or their staff was tarred as part of the problem…… a witch hunt is exactly what it is and what it continues to be. Now clients are paying through the nose for really simple things. If a client comes to me to request some personal insurance, I need to try and scope in and out so much to meet made up obligations, which prices them out. As it turns out, this legislation has meant that a client either pays thousands for advice, or is left to their own devices because a client has no idea what they need help with apparently. Doesn’t seem like best interest to me. I see any client interaction as a compliance risk nowadays, scares the heck out of me.

    • Many of us are too scared to provide advise. future laws will be be applied retrospectively. Ungrandfathering previous grandfathered laws that were bipartisan and also tested by labor for legality back then. Spoke to a CBA adviser and they can now do “No Advice” transactions now. Thats possibly the best way to stay in business. None of this helps me as I lose my sanity with the unethical way the industry is moving. Fees will skyrocket and advise will be hard to get. I dont see how this is in the best interest of consumers. Insurance companies just wont get the new business and will lose a lot on lapses. The result will be a falling book value of unhealthy potential likely to claim customers.
      I doubt many advisers are seeing new clients now. My 30 years service is done and Im now dusted out

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