{"id":29316,"date":"2015-04-05T23:57:38","date_gmt":"2015-04-05T12:57:38","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=29316"},"modified":"2025-04-01T11:51:45","modified_gmt":"2025-04-01T00:51:45","slug":"fpa-rejects-fsi-recommendation-24-on-commissions","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2015\/04\/05\/fpa-rejects-fsi-recommendation-24-on-commissions\/","title":{"rendered":"FPA Rejects FSI Recommendation 24 on Commissions"},"content":{"rendered":"

The Financial Planning Association has rejected the Financial System Inquiry recommendation to ban upfront commissions.<\/p>\n

Contained within its 31 March submission to Treasury in response to the FSI Final Report (see: Ban Upfront Commissions – FSI<\/a>), the FPA has delivered a set of arguments in arriving at a five-point set of principles it says should be adopted when developing reform in the life insurance industry.<\/p>\n

While supporting the majority of the policy recommendations outlined in the FSI Final Report, including the principles underpinning Recommendation 24, the FPA’s support does not extend to that part of Recommendation 24 which calls for ‘…a level commission structure implemented through legislation requiring that an upfront commission is not greater than the ongoing commission.’<\/p>\n

And while not directly making reference to the Trowbridge Final Report, which was released prior to the publication of its FSI submission, there are some parallels in the nature of some of the FPA’s recommendations. It’s five-point set of principles are:<\/p>\n

    \n
  1. Ban other forms of Conflicted Remuneration: Volume-based payments, rebates, profit sharing and shelf space fees should be banned. This was not addressed in FoFA and should be rectified.<\/li>\n
  2. Open Approved Product Lists (APL): Remove heavily restricted approved products list. Life risk products should be competitive on the basis of their suitability to the client and financial planners should be supported in meeting their best interest duty.<\/li>\n
  3. Consumer benefit: Life insurance companies should be required to pass on savings in the form of premium reductions and sustainable premium pricing structures across all channels including retail, group and direct.<\/li>\n
  4. Funding models: Notwithstanding the form that remuneration may take, professional life risk advice should be provided using remuneration models that are affordable, transparent, and sustainable. Financial planners should be supported through better product design that caters for different funding models that can be offered to clients.<\/li>\n
  5. Stronger and smarter enforcement: The regulator should work better with industry to monitor and enforce poor life insurance advice practices and do not meet the best interest duty. A system should be established where life insurance companies are required to provide a list of financial advisers that have replaced insurance policies to the regulator for review.<\/li>\n<\/ol>\n

    Without directly advocating retention of upfront commissions, the FPA’s statement in support of appropriate remuneration for life insurance advice specifically rejects a flat commission model. Its submission states:<\/p>\n

    …remuneration for insurance work should be compensated commensurate to when the work is undertaken…<\/p><\/blockquote>\n

    The FPA believes that remuneration for insurance work should be compensated commensurate to when the work is undertaken in an open and transparent manner. Given that most of the work involved in putting insurance policies in place through a SoA and underwriting is in the establishment phase this would preclude support for a flat or level commission structure.<\/em><\/p>\n

     <\/p>\n","protected":false},"excerpt":{"rendered":"

    The Financial Planning Association has rejected the Financial System Inquiry recommendation to ban upfront commissions.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[282,8,270],"tags":[],"class_list":{"0":"post-29316","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-associations","7":"category-compliance-regulation","8":"category-remuneration","9":"headers-new"},"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/29316","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/comments?post=29316"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/29316\/revisions"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=29316"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=29316"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=29316"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}