Treasury’s Quality of Advice Review will now also consider the Life Insurance Framework as part of its wider mandate, removing the need for a separate LIF review, Senator Jane Hume, Minister for Superannuation, Financial Services and the Digital Economy, told the FSC Life Insurance Summit 2021.
She says the Quality of Advice Review, a post-implementation review recommended by the Hayne Royal Commission (Recommendation 2.3), will be conducted under the one roof by Treasury, which “…can appropriately consider the full breadth of issues impacting on both quality and affordability of all forms of financial advice.”
“In practice, this will mean that once ASIC finishes its data collection phase under the LIF review, this information will be provided to Treasury for further analysis in the context of the Quality of Financial Advice Review.”
….issues like the degree of under-insurance and maintaining access to affordable, quality advice will be at the forefront of our minds…
Hume said that as Government undertakes the Quality of Advice Review, “…important issues like the degree of under-insurance and maintaining access to affordable, quality advice will be at the forefront of our minds”.
She continued, “These elements will enable us to achieve the objective of a thriving life insurance sector that provides access to quality insurance products tailored to meet the needs of Australians…”
With regard to commissions, Senator Hume also told the summit that in order to continue the transition of the advice industry to a true profession, it is important that remuneration structures move closer toward alignment with other professions.
“That does not mean that there is no future whatsoever for commissions. Parliament has continued to allow commissions in life insurance. FASEA itself has acknowledged that commissions are an acceptable form of remuneration.”
She recognised that a flat fee charged for advice can be a challenging business proposition. “And advisers need to be paid for their work, work that is fundamental to the proper functioning of the life insurance market.
“The issue with commissions is not their existence per se. The issue is when they influence the advice provided. In short, the problem is when an adviser receives conflicted remuneration,” she told the summit.
The FSC welcomed the Government’s announcement the Review of the Quality of Financial Advice will include the planned review of the LIF.
FSC CEO Sally Loane says in a statement that the FSC has always believed the quality, affordability and accessibility of financial advice should be looked at holistically and efficiently.
“The design of the Life Insurance Framework is one part of that discussion, as are the challenges of under-insurance and supporting access to affordable advice. We welcome this announcement from the Government which will mean less duplication of process for the industry.”