- Agree (85%)
- Disagree (9%)
- Not sure (5%)
The question stems from a CEO panel discussion at this week’s AFA 2021 Evolve Hybrid Conference, during which CEOs were asked whether the significant reduction in year one remuneration under the LIF reforms to a cap of 60% was, in retrospect, a mistake.
The two CEOs on the panel who were also in charge during the debate leading to the LIF reforms, TAL’s Brett Clark and AIA Australia’s Damien Mu, indicated that the industry was very close to having either fee-for-service or level commission as the only remuneration outcomes acceptable to the policy makers at the time, and that arriving at a 60/20 hybrid commission cap – although 80/20 had been supported and advocated by the insurers – avoided the sector from being forced to operate under either a fee or level commission remuneration structure for life insurance advice.
Since the implementation of the LIF reforms, however, calls have grown louder for a review of the LIF commission caps, as evidence mounts to support the contention that the 60/20 commission model simply does not support a viable risk advice business.
…the recommendation …was for industry advocates to call for an increase in commission caps only as part of a broader change agenda
In asking the CEOs whether there was an appetite among insurers to now push for an increase in year one commission to, say, 70%, the recommendation made by both CEOs was for industry advocates to call for an increase in commission caps only as part of a broader change agenda that would also include an equal focus on reducing costs.
A more fruitful and productive discussion with policy makers, according to Clark, would be based around how the industry can remove costs from the advice process, such as red tape and other regulations that are making advisers’ jobs so difficult.
This argument sounds balanced and reasonable, within a potentially fraught future debate the CEOs caution must be undertaken thoughtfully and with great care. But do you agree?
While most advice business operators would agree that revenue growth and cost control are both vital components in their bottom line, are they equally critical?
Even for those who contend that increasing revenue in a small business is more important than reducing costs, the CEOs’ comments remind us that the debate isn’t straight forward – and that any future approach to policy makers needs to be made through the lens of how a thriving and sustainable risk advice sector will better serve the community, rather than through the lens of how increasing commission caps will enable risk advice businesses to remain financially viable.
As always, there’s more to say – and we’ve already said too much – but we hope you’ve got the idea! Tell us what you think and we’ll report back next week…