Today marks the final business day before submissions to the Life Insurance Advice Working Group (LIAWG) close. In the absence of any new information from the working group, it is worth considering its structure.
No insight has yet been provided by the LIAWG into how many submissions have been received, nor which organisations or individuals have contributed. There have been suggestions from within the industry that the deadline was too short, though no official extension has been granted. However, as late as 28 January, Association of Financial Advice (AFA) chief operating officer Phil Anderson was quoted in the finance press calling for members to lodge submissions.
There are also suggestions the working group’s expert panel – albeit overseen by the highly credentialed ex-APRA executive John Trowbridge – may not be truly representative of financial advisers.
Six members
According to Anderson, the six members include three representatives each from the AFA and the Financial Services Council (FSC).
From the FSC, they are Andrew Hagger, group executive of NAB wealth and CEO of MLC; Geoffrey Summerhayes, CEO of Suncorp Life; and Sally Loane, chief executive of the FSC.
The AFA contingent comprises Brad Fox, CEO of the AFA; Jeff Thurecht, NSW and ACT state director, AFA; and John De Zwart, CEO of Centrepoint. Of these, only Thurecht is a practicing financial adviser, in his role as a director of Centrepoint-owned PIS practice, Evalesco.
“My understanding is that the AFA is an organisation created out of life agents, the FSC is for people who produce the products that the life agents sell,” says Ian Bailey, CEO of financial planning practice Bailey Roberts Group.
“The reality of [these parties] stepping up and saying something is: whose interests are you really looking after?”
For whose benefit?
He questions who the LIAWG report is meant to benefit. “You’ve got the product manufacturers, and an organisation that is basically representing life agents – not only them, but predominantly.
“It’s not subject to proper due diligence, probably because everyone’s trying to protect their own positions at the moment. There’s no two ways about it – the Australian life insurance industry is so small, and the first person that’s going to move here is probably going to affect all the others,” Bailey says.
Bailey, who heads up a fee-for-service, independently-owned financial advice practice, is a strong advocate for change in the life insurance space. He believes clients should be given a clear choice between fee-for-service and commission-based life insurance policies.
“I would never ban commissions. If I had my choice, I’d have two things there, the consumer can choose,” Bailey says.
He also believes the initial Australian Securities and Investment Commission (ASIC) report into life insurance advice, which spurred the formation of the working group, was flawed.
“I don’t think ASIC did a very good job of reviewing life insurance…one of the things mentioned at the end of the report was the recommendations against high upfront commissions. It’s talking only about durations –which gets back to the cost to life companies, or deprivation of profit,” Bailey says.
Disappointed
He is disappointed the report didn’t look at other nil-commission low-cost insurance policies, how they lasted in comparison to other commission-based policies.
“I just think this whole argument can be solved by the right products coming onto the market. And they’re there – when you can buy life and trauma cover for 60 per cent less via an industry super or super fund policy,” Bailey says.
“I think yes, have the two products out there if you want…but unless we get down to this sort of discussion, then all we’re going to do is rearrange the deckchairs on the Titanic. I think it’s a bit of a farce, this whole review.”
