{"id":27630,"date":"2014-10-07T17:49:47","date_gmt":"2014-10-07T07:49:47","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=27630"},"modified":"2014-10-15T06:55:06","modified_gmt":"2014-10-14T19:55:06","slug":"risk-commissions-contribute-to-lack-of-professionalism-asic","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2014\/10\/07\/risk-commissions-contribute-to-lack-of-professionalism-asic\/","title":{"rendered":"ASIC Questions Future of Risk Commissions"},"content":{"rendered":"

The financial advice industry will not be considered a profession while it continues to receive commissions for life insurance, the Australian Securities and Investments Commission has warned.<\/span><\/p>\n

Ahead of the public release of its highly anticipated report into life insurance advice, ASIC has criticised the financial advice sector for continuing to receive commissions, saying that a profession must avoid conflicts of interest.<\/p>\n

In its submission to the Parliamentary Joint Committee (PJC) inquiry into raising the professional, ethical and education standards in financial services, the regulator said while there are \u2018pockets of professionalism\u2019 in the financial advice sector, it cannot be considered a profession.<\/p>\n

\u2018We consider that significant changes are required to shift the culture of the industry from a transaction-based sales force to an advice profession, offering trusted advice that has the confidence of society,\u2019 ASIC said in its submission.<\/p>\n

While these remuneration structures are legal, they are not consistent with the characteristics of a profession<\/h6>\n

Among the areas cited by ASIC as key indicators of a profession was \u2018acting ethically and in the public interest\u2019. ASIC said that although the Future of Financial Advice (FoFA) reforms removed a number of forms of conflicted remuneration, \u2018\u2026there remain a number of conflicts in the remuneration structures and in industry structures more generally\u2019.<\/p>\n

\u2018For example, many industry participants continue to receive conflicted remuneration despite the introduction of the FoFA reforms because there was extensive grandfathering of conflicted payments. While these remuneration structures are legal, they are not consistent with the characteristics of a profession\u2026 REP 407 (see: FDS Identified as Biggest FoFA Challenge<\/a>) found that a substantial proportion of income received by Australian financial services (AFS) licensees and authorised representatives continues to flow from commissions. This includes commissions from product issuers – for example, life insurance commissions that are still permitted,\u2019 the regulator said.<\/p>\n

ASIC was also critical of the role played by advice associations and industry bodies, arguing that \u2018\u2026the proliferation of industry associations is an impediment to the professionalisation of the advice industry, as fragmented representation is inconsistent with a common identity\u2019.<\/p>\n

In its submission, the regulator indicated that the financial advice industry, through its multitude of associations, was not capable of effective self-regulation that would lift the professional standards of financial advisers. Among the reasons for this view were:<\/p>\n