{"id":12074,"date":"2011-08-29T11:56:57","date_gmt":"2011-08-29T01:56:57","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=12074"},"modified":"2021-04-15T10:18:17","modified_gmt":"2021-04-15T00:18:17","slug":"draft-fofa-legislation-concessions-on-risk-commissions-in-super","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2011\/08\/29\/draft-fofa-legislation-concessions-on-risk-commissions-in-super\/","title":{"rendered":"Draft FoFA Legislation – Concessions on Risk Commissions in Super"},"content":{"rendered":"

Concessions on risk commissions in superannuation have been balanced by extending a ban on soft dollar benefits to include life insurance outside super.<\/p>\n

These changes and other details have been announced today\u00a0at the release by Financial Services Minister, Bill Shorten<\/strong>, of the first tranche of the Government’s Future of Financial Advice (FoFA) reform legislation package.<\/p>\n

Key elements impacting the life insurance sector include:<\/p>\n

<\/p>\n

Risk Commissions in Super<\/strong><\/p>\n

Risk commissions under FoFA will now be allowable on individual life insurance policies written via superannuation choice products<\/h6>\n

An easing of the\u00a0Government’s position on banning all risk commissions in superannuation.\u00a0 Risk commissions under FoFA will now be allowable on individual life insurance policies written via superannuation choice products and self managed superannuation funds.<\/p>\n

(The Government defines superannuation choice products as where a member has made a choice that their superannuation would not be in MySuper or their own SMSF<\/em>.)<\/p>\n

Churning<\/strong><\/p>\n

In its reference to treatment of insurance commissions, Mr Shorten said the Government will work with industry and consumer groups to introduce uniform “claw-back” provisions to remove the incentive for some advisers to shop around for the most generous claw-back arrangements.<\/p>\n

Mr Shorten added that imposing level commissions on replacement polices was an effective way of addressing the issue of churning and that the Government will work with industry and consumer groups on the most effective way of implementing this reform.<\/p>\n

Ban on Soft Dollar Benefits<\/strong><\/p>\n

An extension of the ban on soft dollar benefits to include life insurance outside superannuation (following\u00a0further consultation with the industry).<\/p>\n

Opt-in<\/strong><\/p>\n

Confirmation that opt-in regulations will be implemented as previously outlined, but which are intended to include significant flexibility.\u00a0 This flexibility includes:<\/p>\n

    \n
  1. Raise the matter in\u00a0face to face meetings<\/li>\n
  2. Electronic channels such as phone or internet<\/li>\n
  3. Potential use of an electronic record of advice to record the renewal. For example, the client could fill a short form online and click a “send” button (that sends the email)<\/li>\n<\/ol>\n

    The Government has noted a report from Rice Warner Actuaries, which it says estimates the cost of opt-in will be approximately $11 per client: “Opt-in won’t create a significant new impost for advisers who are in regular contact with their clients,” Mr Shorten said.<\/p>\n

    Best Interest<\/strong><\/p>\n

    Best Interest regulations will\u00a0apply.\u00a0 The maximum penalty for breaches of Best Interest obligations will be $250,000 for individuals and $1 million for corporate entities.<\/p>\n

    Grandfathering<\/strong><\/p>\n

    Following legal advice, Mr Shorten says the Government has determined that the ban on conflicted remuneration (including the ban on commissions) will not apply to existing contractual rights of an adviser to receive ongoing product commissions.<\/p>\n

    The first tranche of the draft Bill covers a number of key components of the FOFA reforms, including:<\/p>\n