Some parts of the financial planning community are hoping the appointment of Prime Minister Malcolm Turnbull will mean a reprieve from the Life Insurance Framework (LIF).
With former Prime Minister Tony Abbott deposed after a Liberal Party poll was held late on Monday night, the new Prime Minister was sworn in just after midday yesterday.
“Policy is rarely about what’s right and wrong…it’s about what’s politically acceptable and politically expedient.
“Now with a potential change of ministry, some of this, I imagine, will be put on pause, for people to digest, if ministers change,” says Brad Fox, chief executive officer, Association of Financial Advisers (AFA).
Though it is too early to predict what changes Prime Minister Malcolm Turnbull will make to cabinet, if any, there is strong speculation Treasurer Joe Hockey will be replaced. The portfolios of Assistant Treasurer Josh Frydenberg and Minister for Finance, Mathias Cormann – vocal supporters of the former prime minister – could also be under threat.
In June this year, Assistant Treasurer Frydenberg endorsed the Life Insurance Framework (LIF), the life insurance industry’s latest attempt at a self-regulatory response. A formal government response before the end of 2015 had been anticipated, and it is also yet to respond to both the Financial System Inquiry and the Parliamentary Joint Committee report into professional, ethical and education standards.
Fox says there are a range of members of parliament in the Coalition Government with an interest in risk advice reform, “some because of their own life experience, some because it affects their constituents…[and] they’re not all supporters of the [Life Insurance Framework] in its current format.”
The AFA president, Deborah Kent, and chief operating officer, Phil Anderson, were both in Canberra on Monday and Tuesday this week. “They’re talking to both sides of politics and crossbenchers around what the framework means, and also talking about the FSI and PJC,” Fox says.
Though wide sections of the financial planning sector seem to have already accepted the LIF as a fait accompli, a number of risk advisers have continued to rally for further amendments.
One such group, Australian Risk Advisers, has congregated via social media platform Linked In. In particular, it seeks changes to the controversial three-year policy retention period or ‘clawback’.
Non-aligned financial planning business Sentry Group has also indicated it is continuing to pursue amendments to the reforms, particularly in light of the new prime ministerial appointment.
Fox says the AFA continues to push for clarification and possible amendments. “We haven’t stopped advocating for appropriate outcomes, even in regard to the three-year clawback, which is probably the most contentious part.
“If insurers can’t put in place processes to handle different sorts of policy lapses appropriately, then three years is too long…it was only ever put on the table to stop inappropriate incentives [for advisers to switch policies],” he says.
The Financial Planning Association (FPA) is also closely watching for any changes to the Federal Government’s ministerial portfolios.
“The events overnight leading to the installation of Malcolm Turnbull as Prime Minister may have an affect on some very important reform announcements from the Government.
“Specifically in relation to FSI, the PJC Recommendations for financial adviser education, professional standards and ethics and the Life Insurance Framework that were imminent. The FPA will be watching with interest any changes announced within the Ministry and take appropriate action to engage on these issues,” says Mark Rantall, chief executive officer, FPA.
