The Association of Financial Advisers (AFA) has welcomed improvements to the life insurance draft regulations released today.
“The AFA has been leading discussions with Government on these amendments and we are pleased to see them being incorporated into the updated regulations supporting the Bill,” says AFA CEO Brad Fox. “The Government has listened to our concerns, especially for self-employed advisers, and we are pleased to see greater fairness in both the timing and application of the regulations supporting the Bill on Life Insurance.”
In an address to the AFA National Adviser Conference recently, Minister Kelly O’Dwyer thanked the AFA for its effective and constructive advocacy on behalf of adviser members on the life insurance reforms, particularly these amendments.
“The amendments include a later single implementation date of 1 January 2018, as well as application to the direct sale of life risk insurance products, and nil advice arrangements,” Mr Fox says. “Negotiations with Government and industry have been robust, and the AFA has achieved significant improvements relative to an otherwise level commission outcome.”
Minister O’Dwyer’s recent address to the AFA’s National Adviser Conference acknowledged the AFA’s strong engagement and effective advocacy for advisers.
Following the AFA’s negotiations, the resulting amendments include:
• Expansion of the legislation to nil advice sales. This will ensure no loop-holes and a level playing field for all advisers with absolutely no carve out for direct sales and that any future sales methods designed to avoid the reforms will be captured.
• A later-dated implementation date of 1 January 2018, being a single date applying to all types of advisers regardless of employment arrangements i.e. not a later start date for those under enterprise agreements versus self-employed advisers. The key dates for when maximum hybrid remuneration and ongoing commissions will lift to 20% are:
– 80% from 1 January 2018
– 70% from 1 January 2019
– 60% from 1 January 2020
Level commission or fee-for-service arrangements are not subject to caps or clawback.
• A later dated – to 2021 – ASIC review of lapses and the effectiveness of the reforms.
The AFA also secured, in consensus with the Financial Planning Association (FPA), a reduction in the three-year clawback to two years and for clawback to not apply at all in a range of situations.
The Government introduced the amended Life Insurance Remuneration Bill into Parliament on 12 Oct 2016. The Bill is supported by the amended regulations which is open to further consultation until 4 November 2016.
“In line with the majority vote of support we received from our members at the recent AFA National Adviser Conference, the AFA supports the passage of the amended Life Insurance Remuneration Bill through the House of Representatives and the Senate,” Mr Fox says.
The AFA will be reviewing the detail of the amended draft regulations with members and making a submission by the 4 November deadline.
