The AFA has continued it criticism of the processes around the formulation of government policy regarding the removal of grandfathered remuneration saying there is a “serious dearth of information available to the industry”.
In their analysis published to members, AFA general manager, policy and professionalism, Phil Anderson said “The consultation process has been limited to consideration of the draft legislation and, to the best of my understanding, there has been no formal consultation event.”. The AFA claims other than a recommendation from the Royal Commission and a few supporting statements, none of the submissions presented as part of the Government’s consultation process have been published.
“It is now seven and a half months since the release of the Royal Commission final report and we still have nothing. There is no guidance and no consensus on what needs to be done.”
“In the current information vacuum, product providers, licensees, fund managers and financial advisers are looking for guidance. The time has come for the Government, the Australian Securities and Investments Commission (ASIC) and product provider organisations to deliver” Anderson said.
The AFA have been outspoken in their criticism of the new legislation that will see an end to the grandfathering of conflicted remuneration paid to financial advisers by 1 January 2021. The organisation says implementation of the legislation should be put on hold until the implications are fully known. The criticism followed AFA CEO, Phil Kewin, saying that the risk advice community has no choice but to impress upon regulators and government the importance of commissions-based models leading up to ASIC’s scheduled review into life insurance remuneration.
Looking ahead to ASIC Life insurance review in 2021, the industry is cognisant of Royal Commissioner Kenneth Hayne’s comments regarding Life insurance commissions and whether ASIC should consider amending the existing Life Insurance Framework cap on commissions. Hayne stated “Unless there is a clear justification for retaining those commissions, the cap should ultimately be reduced to zero”
Speaking at Professional Planners Risk Advice Summit, Kewin said he believed there was a “predetermined view” that they should be removed. “On what basis I’m not sure, because we didn’t see too many examples through the royal commission where commissions were actually detrimental to the client.”
Kewin was responding to comments from the Shadow Assistant Minister for Financial Services, Matt Thistlethwaite, who said advisers should actively make the case to retain commissions in the lead up to ASIC’s 2021 life insurance review. Kewin responded to the comments, saying that that shouldn’t be the case saying, “What other industry has to justify something that the general public isn’t complaining about?”
At the same event, Finance Minister Mathius Cormann indicated the government was prepared to see the LIF reforms implemented and then let ASIC check that those reforms have been “bedded down” in its government-mandated 2021 review.