Synchron responds to LIAWG Interim Report

Synchron Director, Don Trapnell says the findings of the interim report for the Life Insurance and Advice Working Group (LIAWG) established by the Association of Financial Advisers (AFA) and the Financial Services Council (FSC) (the Interim Report) while not surprising are disappointing.

“Regrettably, I believe the Interim Report fails to adequately take into consideration the honest hard work and effort risk advisers around Australia undertake,” he says.

On first read, Mr Trapnell says one of the things the Interim Report appears to recommend is bringing back a three to five year responsibility period for advisers, cloaked in the guise of a loan from insurers to advisers.  “In reality this is a three to five year commission responsibility period that was removed from our industry due to competitive pressures in the 1980s,” he says. “In my opinion, for insurance companies to now attempt to reintroduce a long responsibility period, without the market leveling effect of competition, is in its nature price-fixing. It is completely inappropriate to attempt to move responsibility away from product manufacturers and on to advisers in this way.”

However, Mr Trapnell says this is only an interim report and he calls on all interested parties to put forward submissions by the due date, 30 January 2015.

“Synchron will be responding to the Interim Report and I call upon all affected advisers to do likewise. I believe all affected advisers and advice businesses should make it a priority to read the Interim Report and respond to it, with clear evidence of how they operate their businesses and how the recommendations will affect their businesses.”

Submissions may be made to submissions@trowbridge.com.au 

On the subject of commissions, Mr Trapnell argues that trailing commissions are a completely acceptable form of revenue for life advisers. “The trailing commissions a life adviser receives are actually renewal commissions, paid to keep polices on the books. The renewal commissions advisers receive on a whole number of policies compensate them for the time and effort they put into helping an individual client when they genuinely need it most – at claims time. The renewal commission an adviser might receive on a single policy would go nowhere near covering this cost.”

Mr Trapnell says the recently-announced Financial System Inquiry (FSI) recommendations, which talk about having upfront commissions and servicing commissions that are no greater or lesser than each other, do not bear any relationship to the true cost of putting a policy in place nor the true costs of running a life insurance business, where most expense is incurred at the beginning and the end of the life insurance process.

Mr Trapnell also argues that if Australia is to have a vibrant industry which appropriately protects the Australian community and lessens the strain on the social security system, new entrants must be encouraged to join. “The average age of life advisers is still in the high 50s and the only way we can tackle that is to get younger people into the industry who are happy to specialize in life insurance,” he says. “We will not get those coming through if they are collared in a remuneration system that does not reflect the work involved.”