Lauren Ryan from Thinktank speaks to Laurence Parker-Brown for our IN60 series. The Inside Adviser
That consumers are influenced heavily by well known, trusted brands comes as no great surprise. What does, though, is that they rate life insurance as the least most important tool in ensuring financial security.
Life insurance commissions consent concerns ‘misinformed’: AFA
Industry concern about the proposed consent conditions for life insurance advice commissions is understandable, Association of Financial Advisers chief executive Phil Anderson says, but ultimately off the mark and shouldn’t detract from what is a positive batch of reforms.
Anderson released a statement on social media this week harking to a recent conversation the AFA had with Quality of Advice Review leader Michelle Levy, who clarified some areas of ambiguity advisers identified in the conflicted remuneration proposal paper.
While Levy’s agreeance to retain insurance commissions sent a wave of relief through the industry, and the proposal to gain client consent was largely accepted as reasonable concession, the ‘key findings’ document didn’t say whether the consent should become an annual requirement similar to those adopted in recent wealth management advice reforms.
According to Anderson, that concern is allayed.
“The consent requirement would be a once off. This is not an annual requirement,” the CEO stated in a LinkedIn post after meeting with the review leader.
“Where consent has previously been obtained from the client, it would not be required again,” he continued. “For example, if the upfront and ongoing commissions were previously disclosed in an SoA and the client signed the Authority to Proceed, then this is consent and nothing more would be required.”
Anderson also cleaned up confusion around the specific information required for consent, as well as the information product providers would need.
“Disclosure of ongoing commissions could be as simple as the commission rate and the dollar amount on the basis of the first year’s premium. This is consistent with current practice, and not an additional obligation. There is no expectation of predicting commissions payable over multiple years,” he stated.
“The adviser needs to keep evidence of client consent. There would be no requirement to provide this to the life insurer.”
Focus on the intent
Speaking to The Inside Adviser about the clarifications, Anderson says the Levy proposal paper on conflicted remuneration had the right content, but a few areas needed to be clarified.
“The proposal had been carefully considered but the wording probably wasn’t as clear as some in the advice profession wanted it to be,” he says.
The CEO, whose association is penciled in to merge with the Financial Planning Association next year, says he wanted to make it clear the consent proposal was “not the worst outcome”.
“Let’s focus on the intent of the proposal, which is that Michelle Levy wants commissions to continue. This is what 99.9 per cent of advisers and all the life insurers want, and their clients prefer.”
Levy’s consent proposals aren’t the same as the recent “nightmare” of advice annual renewal and client consent reforms, Anderson believes. Most insurance advice already comes with the required level of consent disclosure.
“We don’t think this is an unreasonable requirement,” he says.
