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.