Shadow minister for finance, Stephen Jones, has signalled that Labor’s preference is to abolish insurance advice commissions if elected to federal parliament in 2022 due to a fundamental belief that the service can’t be provided without the influence of conflicts.
Speaking at the Association of Financial Advisers’ national conference on Thursday, Jones said while Labor’s position would be subject to the findings of the government’s 2021 review into life insurance, his current belief is that all forms of commissions should be excised from the industry.
“There’ll be a review of the life insurance sector but I’ve got to say I start with a bias against it,” Jones admitted.
“The burden lies upon the industry at large to prove that a commission-based sales model that’s attached to an advising sector is able to provide a service to consumers that is not conflicted,” the MP continued. “I think that’s an enormous challenge.”
The Morrison government has indicated that it remains undecided on the issue of risk advice commissions, with minister for finance Matthias Cormann saying last year that while there have been “systemic failures” in the current system, giving consumers the choice of paying upfront or via commissions was a “completely reasonable position”.
Jones made it clear that while Labor is willing to hear the review’s findings and discuss the issue with industry, the ALP will approach the debate with a far less open mind.
“[We are] always open to having a dialogue with industry but I also want to be very frank, I don’t want to leave any doubt where I come into that conversation and what my views are,” Jones told Kewin. “We come with a view of the world and the evidence will have to displace that view.”
Labor has maintained a sceptical view of insurance advice commissions. At the same event Cormann spoke at last year, the shadow assistant minister for finance, Matt Thistlethwaite, said the industry needs to justify why commissions should be retained.
AFA chief Kewin refrained from debating policy with Jones on Thursday despite being a fierce advocate for the retention of commissions on behalf of the AFA member cohort, which is heavily laden with insurance advisers. In response to Thistlethwaite’s comments in 2019, Kewin said that the industry having to justify commissions “bemuses me”.
“What other industry has to justify something that the general public isn’t complaining about?” he added at the time.
Kewin was supported by Financial Planning Association CEO Dante De Gori, who plumped for the current model to be retained. “If you remove that choice you restrict affordability and accessibility,” De Gori said.
Both association heads again provided a united front in July this year, saying that the impending 2021 review should focus on more pressing issues like lapse rates and the sustainability of income protection insurance, rather than remuneration models.
Regardless, commissions will take centre stage at the 2021 review. And while Jones tried to reassure Kewin that Labor would be guided by the review’s findings the MP made it clear he wasn’t particularly keen on having his mind changed.
“I start with a prima facie view on this and might as well make it very plain for everyone so that you’re not left in any doubt what my starting position is,” he said. “But I’ve also said with equal force that we’ll look at the empirical evidence.”
Botched FASEA attack
Jones also reiterated Labor’s belief that Financial Adviser Standards and Ethics Authority’s handling of the rollout of ethics and education reform has been mishandled, saying the first 12 months has been “far from stellar”.
“We believe that the FASEA process needs to get back on the right track,” he said. “There needs to be greater consultation with all sections of the industry to ensure that the professional standards and the recognition and training arrangements are right.”
The shadow minister left some scratching their heads, however, when he chastised FASEA for going through “three CEO’s in less than two years” (the current CEO, Stephen Glenfield, is the second) and called the authority a regulator, which it is not.
Great – let’s legislate based on ideology. The less said, the better on this one.
It’s incredibly disheartening to read of yet another politician with a fixed view on life insurance commissions. I personally feel I have no amo left for this fight.
I have been an adviser on the ground providing risk advice. I have tried fee for service advice for insurance, and it does not work. Commission is the way to go. There is no conflict if you make all insurance companies pay the same commission. The issue is the people who need insurance most are the accumulators with mortgage and dependants/children. Most often they do not have extra cash lying around to pay for financial advice’s fee for service model, but are happy for advisers to be paid, IF their insurance were put in place, which is sometimes still an unknown given their health & work circumstances. I’m not sure whether Mr Jones have been an adviser in the past, but his comment is obviously out of touch with what advisers are experiencing on the ground. I will happily debate for insurance to come back to its previous level, even 120% +GST commission at any time.
Stephen Jones is an idiot, just watch where this industry will be in 10 years as only the wealthy will be able to afford advice and personal insurance will be like private health insurance, there will be more people bailing out because of massive price hikes and know one selling (yes selling) it to clients as no (normal mass consumers) will want to pay $3k plus for SoA that could be loaded or declined. Thanks god I’m turning 60 and riding into the sunset.
Fundamental belief that the service can’t be provided without the influence of conflicts… Hmm Stephen Financial advisers are bound by best interest duty to our clients, advisers also get paid the same amount no matter which insurance company is recommended.
Clients can already choose to pay via invoice or by commission. What you are talking about doing is not removing commissions, what you are talking about is removing choice and access to clients that cannot afford to pay for insurance advice via an invoice. The very people that need it the cover the most to cover their families. If commissions are removed this would be like taking away GP visits away from medicare system only leading to terrible outcomes.
What you want to do Stephen is to making it harder to access insurance advice leading to terrible outcomes for clients and the overall tax payer and you don’t have to look very far back at countries that did go through with a total ban on commissions eg NZ & UK and had to put back in place because it did lead to terrible outcomes….
What you have said about financial advisers conflict issues is like saying a doctor has a conflict of issue because they make money from treating sick patient and collect a medicare fee… that is crazy view point that is idiotically driven and the suggestion that all advisers cannot give advice without a conflict shame on you.
Luke warm regards,
Advisers
Ok, so serving the greater public good, assuring that the public are not a drain on the health system putting more disposable income into the economy in the event of a major health event, the public do not need to pay for that impartial advice (without bias) and an adviser is remunerated on a flat percentage basis irrespective of which insurer is recommended…..Is that not the role of a politician? does a politician need to justify their income? Does a politician need to justify their guaranteed retirement income stream on exiting parliament? What material evidence to the change of personal lives ( in the event of a major health event) does a politician hope to achieve? yet not be remunerated – The Government can pick up the public Health recovery tab of course OR delegate at a much lower cost to private re-insurers that already deliver results at a grass roots level by remunerating via a flat commission model. Europe and UK have returned to or maintained a commission model after a failed experiment proved a drain on the public purse.
That is pretty clear. If there is no successful lobbying effort similar to the way mortgage brokers managed, then the life insurance industry in Australia will be destroyed.
If we look at how much damage to business and entire industries is tolerated and condoned by the public at the moment, then I may have to accept that this destruction of the life insurance industry, this large additional burden on the disability pension system and this large increase in sudden poverty when a parent is disabled or dead will also be tolerated and perhaps condoned, as it is “doing the right thing”.
Hmm, pretty crazy that a Politician can carry a bias to make an integral decision regarding a profession that is bound by a code of ethics with its main purpose to not have bias.