Shadow financial services minister Stephen Jones has walked back his stance on insurance advice commissions, telling an audience at a Financial Services Council’s political breakfast he’s had a change of heart after “deep engagement” with the industry.
After three years of maintaining his “default position” that insurance advice commissions should be pulled back to zero, in line with the Hayne royal commission view that evidence needed to be shown that there is a compelling reason to retain them, Jones revealed Tuesday morning those reasons are coming to light.
“In the last four years I’ve addressed a problem from a point of view of principle or theory, and by deep engagement with the sector I can see that, actually, there’s more sides to this story than I originally thought,” Jones said.
“I addressed a meeting like this three years ago in the immediate aftermath of the Hayne royal commission, and we addressed the issue of commissions,” he continued. “I was starting from a position that espoused their banning and I can honestly say after deep engagement with the industry I can see it’s not as simple as that.”
Up until recently, Jones has been clear on his view that commissions should go, remarking in 2020 the industry would have a hard time convincing him otherwise.
“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 said. “I think that’s an enormous challenge.”
The Morrison government, via sitting financial services minister Jane Hume, has taken a much more open approach to the commissions debate, saying it was prepared to wait on the findings of the Quality of Advice Review, which has an assessment of the Life Insurance Framework laws under its purview.
Prominent liberal MP and ex-financial adviser Bert van Manen has publicly gone into bat for insurance advice commissions, saying he doesn’t have a problem with them “at all”.
“I think they’re a perfectly valid form of remuneration,” van Manen said last year.
With the election looming – early voting begins in two weeks – and an industry on tenterhooks, the ALP has now chosen to change tack on an issue that has the potential to make a difference in the voting preference of the financial services community.
Notably, Jones sat at a table during the event with Clearview chief executive Simon Swanson, who told Professional Planner in April that further pullback on insurance advice commissions – which were already capped at 60 per cent upfront and 20 per cent ongoing under a phased approach that started in 2018 – would only lead to worse consumer outcomes.
“Just leave commissions as they are for the time being,” Swanson said. “We don’t believe the industry is ready for the removal of commissions and I don’t see them being reduced either.”
Evidently, lobbying from advisers and product providers had a hand in swaying Jones. That, or the shadow minister could just be reading the electoral tea leaves. At any rate, Jones said he’ll wait for the Quality of Advice Review to take a detailed look at the commissions dynamic and, if elected, make a call from there.
“My starting premise has been to let the review do its work, but I don’t think its as sort of simple as saying if you knock off commissions you’re going to solve all of the problems that Ken Hayne was trying to solve,” he said. “I think a more sophisticated view is needed on that issue.”