The CEO of the AIOFP, Peter Johnston reports

Unfortunately, some bad news for RISK writers in the last DBFO Legislation passed on JULY 4TH – the proposed FEE CONSENT FORMS were passed by both Houses under a new section s963BB……they snuck this one through.

Another example of Politicians not understanding their brief and blindly voting on legislation that negatively affects Consumers with the cost of advice.

This is also another example of the Ministers Treasury Bureaucrat Advisers having no idea about our industry, and more importantly, not listening to those at the ‘coal face’ with keeping down the cost of advice and operating a profitable business.

It seems the Minister and the Canberra Bureaucrats have forgotten about who they are meant to be serving . With exception of the Education Pathways legislation, the Minister has only increased the cost of advice during his tenure by creating more red tape – a very disappointing ‘hot mess’ outcome.

We have been critical of the Levy QAR Report from the beginning, the below analysis by AIOFP LEGAL/ADVICE Expert Lionel Rodrigues and the contradictions around QAR Risk Insurance recommendations are quite clear.

It is now critically important for the future of the RISK INDUSTRY to keep all sides of politics aware leading into the next Election of why the policy settings over the past 10 years have been disastrous for all stakeholders and what must be done to revive it.

This will be a major objective at the Canberra conference.

On a more positive note, there has been a development with the CSLR/DIXON issue that will be announced shortly.

Regards and hang in there!

AIOFP TECHNICAL CHAIR LIONEL RODRIGUES’ VIEWS.

In many respects, the recommendations on life insurance by the Reviewer are contradictory.

Below you will find a screenshot of Table 9.4 (page 164 QAR); “Number of lives insured and the average premiums”. The decline in the number of lives insured and a corresponding substantial increase in premiums all evidences a failure of policy.

At 9.5.7 (page 164 QAR) the Reviewer refers to independent work undertaken by NMG Consulting and states; “I accept that insurance is important”.

Despite this at 9.5.8 (page 165 QAR) the Reviewer informs; “I accept that the cost of providing advice has increased and the number of risk advisers has declined”. The Reviewer then proceeds to state; “This alone is not reason to recommend that commissions continue”.

Furthermore at 9.5.9 Advice Fees (page 165 QAR), the Reviewer advises ; “[I accept] that, given a choice between a commission and an advice fee, many consumers would choose a commission.

On the same page, at 9.5.10 Commissions are justified in all of the circumstances for life insurance, the Reviewer state There is a real risk that fewer people would get that advice if commissions were banned.

Despite the above observations, at 9.5.12 (page 166 QAR), the recommendation is to retain the LIF legislated commissions at the present levels. This is formalized as Recommendation 13.7 Life Insurance (page 168 QAR) where not only is the recommendation made to retain the current levels of commissions, but a Fee Consent Form for life insurance is also recommended, which has subsequently been ratified by the DBFO legislation.

The contradiction I alluded to in my opening paragraph centres around the fact that there is sufficient evidence demonstrating a direct link between underinsurance, the increasing cost of insurance, the increasing cost of advice and insufficient compensation for the risk adviser. This is acknowledged by the Reviewer. Nevertheless, the recommendation is to maintain the status quo for remunerating the professional risk adviser, whilst simultaneously increasing the compliance burden, and cost, by the introduction of a Fee Consent requirement.