{"id":42325,"date":"2018-09-24T10:30:17","date_gmt":"2018-09-24T00:30:17","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=42325"},"modified":"2018-09-26T08:13:17","modified_gmt":"2018-09-25T22:13:17","slug":"fsc-head-uncertain-on-role-of-adviser-commissions","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2018\/09\/24\/fsc-head-uncertain-on-role-of-adviser-commissions\/","title":{"rendered":"FSC Head Unclear on Breakdown of Adviser Commissions"},"content":{"rendered":"

The head of the Financial Services Council has struggled to clearly articulate the relationship between financial advisers and life insurers as well as the role of commissions in the purchase of life insurance products.<\/p>\n

\"\"<\/a>
FSC CEO, Sally Loane<\/figcaption><\/figure>\n

Appearing before the Banking Royal Commission on Friday last week, FSC Chief Executive, Sally Loane<\/strong> was questioned by Counsel Assisting the Commission, Rowena Orr<\/strong> QC about the purpose of $6 billion of life insurance commissions paid to advisers by 10 major insurers over the past five years.<\/p>\n

Orr asked Loane, \u201cWhat is the approximately $6 billion paid by the life insurance industry in commissions to financial advisers for?\u201d, to which Loane replied, \u201cI really couldn\u2019t say with certainty. These are to do with commissions that are paid to advisers for essentially selling their products,\u201d.<\/p>\n

Orr continued, saying, \u201cWell, the whole point of paying commissions to financial advisers is to influence the advice that they give, isn\u2019t it?\u201d, with Loane responding, \u201cIt would certainly mean that they are paying commissions for their products to be sold, yes\u201d.<\/p>\n

Loane was unable to provide an answer to the question of whether the cost of commissions was borne by consumers in the form of increased premiums but agreed with Orr that life insurers created a conflict of interest for advisers by providing benefits that influenced the advice they provided.<\/p>\n

Loane was also questioned on whether the reduction in life insurance commissions initiated by the Life Insurance Framework should continue, and commissions phased out entirely.<\/p>\n

“… life insurance is something that people have to be persuaded to buy. Therefore, people needed to be incentivised to sell it…”<\/h6>\n

\u201cI think the reason that life insurance was carved out initially from FOFA went to that tenet that life insurance is something that people have to be persuaded to buy. Therefore, people needed to be incentivised to sell it. But certainly, we would like to see the effect of the legislation and the APRA review and make decisions then,\u201d Loane said in response.<\/p>\n

When asked about earlier testimony related to possible mis-selling of direct insurance over the phone, Loane said the tactics used were \u2018incorrect\u2019 and being addressed in the second iteration of the FSC\u2019s Life Insurance Code of Practice.<\/p>\n

She maintained, however, that direct life insurance was a \u2018legitimate product\u2019 and could be sold by outbound calls provided it was done without pressure tactics and cold-calls.<\/p>\n

\u201cI think our view is that it\u2019s a legitimate product when done correctly.\u00a0 Life insurance, I think, as others have observed, is often a grudge sale and people have to be encouraged to take out life insurance,\u201d Loane said.<\/p>\n

\u201cI think anything that helps people understand life insurance is a reasonable product and it\u2019s sold directly to people, particularly online to consumers that may not sit down with an underwriter and go through that process, it can be beneficial,\u201d she added.<\/p>\n

\u201cBut clearly, where there are pressure selling tactics involved and inadequate cooling-off periods, then it\u2019s not a good product.\u00a0 I think given some of the things that have been found and given the things that we\u2019re now putting into our code, it \u2013 it still can be a reasonable and legitimate product,\u201d Loane said.<\/p>\n","protected":false},"excerpt":{"rendered":"

The head of the Financial Services Council has struggled to clearly articulate the relationship between financial advisers and life insurers as well as the role of commissions in the purchase of life insurance products.<\/p>\n","protected":false},"author":3,"featured_media":42373,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[282,4,270,5],"tags":[4247],"class_list":{"0":"post-42325","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-associations","8":"category-products","9":"category-remuneration","10":"category-services","11":"tag-feature"},"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/42325","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=42325"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/42325\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media\/42373"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=42325"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=42325"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=42325"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}