The Financial Services Council has publicly released its controversial submission to the Trowbridge inquiry into retail life insurance advice, by including it as an appendix to its full submission to the Financial System Inquiry (FSI).
The FSC’s submission to the Life Insurance and advice Working Group (LIAWG) was initially confidential, but pressure had been mounting for the council to make the submission public following concerns that the final recommendations of the Trowbridge report essentially mirrored the recommendations put forward by the FSC, to the detriment of life insurance advisers, who were represented in the process by the Association of Financial Advisers (AFA).
Concerns have been raised, including in an article written by the managing director of Infocus Wealth Management, Rod Bristow – published today by Professional Planner – that the Trowbridge report’s recommendations focus too much and unfairly penalise advisers, while allowing the manufacturers of life insurance products to escape relatively unscathed.
The AFA and the FSC jointly convened the LIAWG to address concerns raised by the Australian Securities and Investments Commission (ASIC) in a report conducted into life insurance advice. However, since the release of the final Trowbridge report, the AFA has been seeking to distance itself from the report’s findings.
The release of the FSC’s submission gives the advice community an opportunity to assess the FSC’s recommendations to the LIAWG, and to determine how closely the final version of the Trowbridge report satisfies the desires of the FSC – representing life insurance product manufacturers.
The Financial Services Council’s (FSC) submission faced criticism from some segments of the industry, who saw it as having an undue influence on the final report produced by John Trowbridge.
However, Trowbridge himself and the FSC have hosed down such implications.
“The advisers had a very big voice and an equal voice at the table. Trowbridge spent hundreds of hours talking with advisers. So I think he got a very clear picture of their views,” said the FSC’s chief executive officer, Sally Loane, at a briefing in Sydney today.
“The goal is the best outcome for everybody. We’ve got to get inefficiencies and misaligned incentives out of the industry.”
Risk advisers in particular have voiced strong concerns over the impact Trowbridge’s recommended upfront Initial Advice Payment capped at $1,200 would have on their businesses. Many argue this plus the 20 per cent ongoing commission would not be sufficient to cover their cost of providing insurance advice.
Some have suggested insurers will not pass on their reduced commission expenditures to financial planners. Insurance manufacturers comprise a majority of the FSC’s membership base.
Loane declined to elaborate on whether insurers would be reducing their costs in line with any reduction of commissions.
Pressed on whether she believes insurers have a broader role to play in making Trowbridge’s recommendations more palatable to financial planners, Loane answered in the affirmative
“We have a role of taking the views of all of our members…and all of their valid views. Yes, I want something that’s going to work for the community.”
