Our report that the Shadow Minister for Financial Services has confirmed a future Coalition Government would actively review the current 60/20 commission caps attracted strong reader interest this week…
Shadow Assistant Treasurer and Shadow Minister for Financial Services, Luke Howarth, has confirmed a Coalition Government would actively review the current 60/20 commission caps mandated under the Life Insurance Framework reforms.
The Shadow Minister re-affirmed his position to Riskinfo last week, following his last-minute inability to address advisers at the 2024 FAAA Congress the previous week.
In responding to a question put to him around comments made by Financial Services Minister, Stephen Jones, at the 2023 FAAA Congress in Adelaide, at which the Minister said a review of the LIF commission caps wasn’t even in his ‘in-tray’, Shadow Minister Howarth was much more forthcoming.
While far from definitive in his language, the Shadow Minister nonetheless notes in the statement provided to Riskinfo that it’s time to look at the Life Insurance Framework commission caps:
“Clearly the 60% upfront commission cap has made it unviable for advisers to sell life insurance to some people,” says Shadow Minister Howarth, adding that feedback provided to him is that the current 60% upfront commission cap means it often isn’t worth doing the work involved:
“We have a situation where many Australians are now underinsured, can’t get advice on their life insurance and the only clients worthwhile are wealthier and older,” says Howarth, who makes the point that younger people people starting a family also need access to advice on their insurance.
Future premium increases?
…the current 20% cap on ongoing commissions is probably about right
Interestingly, the Shadow Minister observes the current 20% cap on ongoing commissions “…is probably about right,” which indicates a future Coalition Government review of the LIF commission caps would more likely centre on the upfront commission element.
This may be an important consideration which addresses concerns raised by Quality of Advice Review architect, Michelle Levy, who has previously expressed concerns that any increase to upfront commission caps would place upward pressure on life insurance premiums, and would therefore be detrimental to the consumer.
Following discussions with insurers, however, Riskinfo understands that from a pricing perspective, life companies are much better positioned to accommodate an increase in upfront commission caps (a one-off additional cost) than they would if the 20% ongoing commission cap level was increased.
DBFO Tranche 2
The Shadow Minister also took aim at the recent release from the Government outlining the nature of the reforms which will be included in Tranche 2 of the legislation that will implement the Delivering Better Financial Outcomes reform package recommended in the final report of Levy’s Quality of Advice review (see: New Class of Adviser Confirmed):
“After 720 days of waiting, we now have a third government response to the Levy Review but still no draft legislation,” says Howarth, adding “The Albanese Government promised draft legislation before Christmas but has instead provided another placeholder announcement lacking in detail.”
Shadow Minister Howarth confirmed the Coalition will examine the detail of the DBFO Tranche 2 legislation when it is available and work constructively to progress any sensible proposals, but that it is important these reforms rebuild the advice industry and serve consumers.
Aaaah yes, the infamous carrot dangle. "Vote for the coalition because we'll look after financial advisers." Sadly, they have ALSO proven time and time again they won't and don't.
Jane Hume has repeatedly stabbed this industry in the neck so I wouldn't trust this happening as far as I could spit while she's anywhere near a vote for this – as much as the increase in upfront is desperately needed. Sorry….but I'll believe it when I see it!
Yes, sadly so true JADN. BTW, I thought you'd be fully done by this late stage?! 🙂 The article speaks of the adequacy of the 20% renewals, I agree, no argument there. However IF advisers get the respect of a review and IF pollies deem it worth an increase then get ready for an absolute MAX of 805 to be discussed.
I've said here so, so many times that anything less than 100% won't allow advisers their reward for effort OR allow them to foster new advisers into the industry (profession?!). If I was a betting man I'd wager only a 1-2% chance at best commissions ever touch 100% again – it would take an Act Of God, methinks. besides, the life companies would never reverse the 2 year clawback period so it is all a bit set in stone anyway, nothing much will change for the better. Unless they do then the risk industry is over.
Thinking of it further, bit probably is too late to save it – most of the experience has left in abject disgust of govt and life group behaviour and the life companies have completely forgotten how to foster adviser relationships properly to engender loyalty. I won't even start about the forced and pathetic sub-standard terms, conditions and definitions in the current crop of IP policies since 2021 – just unbelievable. The kicker is that anyone naive enough to become or stay a risk specialist can't even get qualifications at Uni to reflect that – unless they spend $10K+ and waste untold time away from client-facing having to studying things irrelevant to risk insurance.
Hey Sqeaky…when I first put that 'Just About Done Now' profile name together, I was definitely in the final stages of my time in this industry but I managed to salvage my business by transferring from the toxic personal advice base (thanks to all the legislation and compliance obligations) into the General Advice space. Even if ASIC wrote to me now and conceded they'd made a mistake with my FASEA Exam Results and that I still qualified to be a Personal Advice adviser, I wouldn't go back.
I agree with a lot of your comments above though regarding the industry and life insurance companies.
There are still a few old BDM's who still observe the value of relationships but many of the young folks coming in today are happier to delegate to someone else rather than take ownership of the help you ask them help on.
There used to be a long-term view to protect this industry but now the view seems to be looking after one's own **** and the annual bonus, then move on to the next company when the destruction unfolds (ie BT Life's demise through ridiculous 1st year discounting and what Clearview have become).
The upfront definitely needs to be at least 80% moving forward though.
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