The absence of a unified voice from the financial planning sector may be hindering its arguments against the recommendations of the Life Insurance and Advice Working Group (LIAWG).
“The insurers are all represented by the Financial Services Council…[with] a means of offering a single voice. It’s not so obvious how the licensees could speak with a single voice,” says John Trowbridge.
“Advisers don’t have a single voice either. The AFA on its own can’t represent all advisers, and neither can the FPA.”
Trowbridge fronted an online forum yesterday, alongside Deborah Kent, AFA national president and Sally Loane, chief executive officer, FSC and other risk industry representatives including Wayne Handley, managing director, Bombora Advice.
Reiterating the AFA’s rejection of the core Trowbridge remuneration recommendations, Kent says: “We were looking for a unified response [from the report], and we haven’t got that, we know that.”
“In saying that, we respect the process that we went through…but we just don’t agree with parts of the Trowbridge report. What we need to do is get on and find…an industry solution that we can take to government.”
Industry deadline looms
Kent recognises the fraught situation the AFA faces in developing a viable alternative and mobilising a cohesive response within a tight timeframe. Assistant Treasurer Josh Frydenberg suggested last week the industry has a matter of weeks, not months, to reach a consensus view before government takes matters into its own hands.
“It is a difficult position for us, but we are determined to come up with the right answers,” she says.
Kent suggests the regulator, the Australian Securities and Investments Commission (ASIC) “actually believes in a hybrid model.”
“Advisers can accept a hybrid model [of remuneration]. We need to have a workable model and I think we can get to one if we can get industry to the table and come up with a common answer,” she says. Kent believes consumers need to again be placed at the centre of the discussion, arguing that the debate over commissions has overshadowed the question of what best benefits them.
She is also critical about aspects of the Trowbridge process; particularly the fact submissions have been kept private by the LIAWG. “There’s a lack of clarity around the submissions. You‘ve got some stakeholders out there…who are supporting a different remuneration model, but they haven’t actually said why. These are the things that advisers are not understanding, and I think this is why there has been so much emotion in the debate.”
The road ahead
Trowbridge gives some insight into the path ahead, outlining in broad strokes the various stakeholders of insurance companies, advisers and adviser groups and consumer groups.
“All of those parties need to consider the position of the authorities…they are ASIC, the government, the parliament and the treasury.
“In terms of authorities, ASIC is the key player. If the industry solution goes beyond ASIC’s powers, the only workable solution beyond that would be legislation,” he says.
If the industry fails to satisfy government by presenting ASIC with a solution, legislation would be the logical next step. Trowbridge predicts an ominous scenario that could mirror that of the Future of Financial Advice regulations, which saw the government’s amendments ultimately disallowed after a drawn out process.
“The government will have in the back of its mind that to get any legislation through it’s either got to get the support of the Labor Party or of the independents in the senate,” he says, predicting the Opposition would be unlikely to support a hybrid model if one was proposed by the government.
“You can be pretty sure that any legislation that comes out is going to be less attractive than my recommendations…it often ends up with things in it that nobody likes,” Trowbridge said.
“The best way forward is for ASIC and the industry to come to terms… While [my recommendations] may not be seen as adequate for everybody, there are opportunities…to do it through the transition process. And down the track there has to be some move toward fee-for-service.”
