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…”
On Commissions
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.
Announcement Welcomed
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.”
We are finally starting to see light at the end of a very long and dark tunnel.
It appears the years of us continually stating what would happen, which has happened and will continue to happen if the current unworkble LIF and FASEA regime continues, is filtering through and Politicians are starting to take notice, though not so much from our sage advice and warnings over the last 10 years, that would have prevented the fiasco all Australians now face, rather, they are seeing the devastation that has come about from misguided and mismanaged reviews and policy direction.
Hopefully what we will see is a reversal of policy and Treasury taking over the LIF review may bring some commercial reality back into the conversation.
However, NO-ONE has taken on board that the current FASEA regime of irrelevent studies for experienced risk specialists, is the catalyst for the next exodus of Advisers.
The AFA, FPA, the Life Companies and every entity that actually understands what advisers are thinking and doing, need to forcefully and very loudly tell Treasury and the Government the real truth, which is;
Most Financial Planners have scoped out risk advice as it is way too hard and unprofitable.
Most specialist risk advisers have scaled back any plans to expand and are in maintenance mode, similar to the Airline Industry, where they are providing only necessary service to keep their Business alive.
This model is unsustainable and will lead to eventual collapse unless changes are made to make it attractive enough for advisers like myself to stay on and the the FIRST step is to extend the time frame NOW to do the FASEA exam, as quite frankly, Advisers have NO TIME with everything else going on and they need time to catch up after a horror 2020.
If adviser are given this breathing space, then the thousands of advisers who are going to leave, will stay on.
This then will allow the Government sufficient time to take on and learn from the past mistakes and bring in viable education requirements that are consistent with the type of work advisers will specialise in, such as risk advice.
There are other improvements that will need to be looked at, which if Advisers feel that they are starting to be listened to, will provide sufficient incentive for them to stay on and continue to provide great service that has been the hallmark of thousands of advisers, including many who have already exited, which was totally preventable and can easily be reversed.
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