Shadow financial services minister Stephen Jones’ change of heart on commissions has been welcomed by the industry as a big step forward in the quest to keep the insurance advice sector alive.
At a Financial Services Council breakfast on Tuesday morning Jones said he no longer intends to ban commissions after “deep engagement” with the industry. The issue is “more complicated” than he first thought, Jones revealed.
Synchron director Don Trapnell welcomed the move, saying both political parties need to “get off the fence and say what they really mean”.
“Both Jones and Hume are saying they’ll wait for the advice review before we make a decision on risk insurance commissions,” Trapnell tells Professional Planner. “They need to have the balls to get up and say what they really mean because we will continue to lose advisers in the risk area if they don’t.”
Jones was a guest in the Synchron office last year, Trapnell says, and seemed to have a strong grasp on the industry.
“He did listen and give his views. Certainly the advice we gave and that he received from others has impacted his stance.”
Jones, Hume and shadow treasurer Jim Chalmers all delivered promises of “stability and certainty” in separate speeches at the SMSF National Conference in Adelaide last week, but sharp policy u-turns such as the education carve-out have left many in the industry confused or angry with sudden changes.
Life insurance commission rates in Australia are capped at 60 per cent upfront and 20 per cent ongoing, which Trapnell says doesn’t cover the cost of giving advice.
Provider ClearView supported the current status quo for commission levels which it deemed “appropriate”, but said to Professional Planner previously it is an issue of choice for consumers.
Clearview chief executive Simon Swanson says Jones’ announcement will have no impact on the group’s potential submission to the advice review.
“It will certainly be encouraging for all participants and segments of the industry to put forward well thought out, congruent arguments and if that happens we should end up with a good review,” Swanson says.
“Then the government – whoever it may be – will take it seriously. The bias is to ensure customers have access to affordable quality advice; that’s the objective of all of this and we all need to keep that in mind.”
Swanson says it’s important to have an “unemotional conversation” around the issue.
“We have to be careful not to get too emotional but to keep it fact-based [so it] resonates with both sides of politics.”
MLC Life Insurance general manager of retail distribution partnerships Michael Downey welcomed the change of heart. “Maintaining the [current commission level] at a minimum we’re right behind,” Downey says.“Let’s work through the advice review. If there are opportunities over time to then review those levels, as an industry we can work together with government and regulators to look at that.”
Revenue is one aspect, Downey says, but cost is another and the key driver of the advice review is to reduce the cost of the service.
“If we can reduce the expenses to provide insurance advice that’s a significant win for our industry.”
Bombora Advice managing director Wayne Handley says he believes choice for consumers is important and commissions are the predominant means for remunerating the provision of advice.
“That doesn’t mean fees can’t work, but we know there is a great deal of reluctance to pay fees for life insurance advice.”
Handley says Bombora is working closely with the Association of Financial Advisers and Financial Planning Association on a submission for the advice review.