A major mortgage franchise has denounced recommendations calling for an overhaul of “conflicted” commissions in the life insurance sector.
The Trowbridge Report, produced in response to ASIC’s review of retail life insurance advice, has recommended that the industry introduces a $1,200 cap on upfront commissions for life insurance advice and limits remuneration to a 20% level commission.
However, Mortgage Choice Financial Planning’s general manager Tania Milnes said the proposed recommendation could potentially harm consumers.
“While Mortgage Choice is extremely supportive of the need for change, highlighted by the fact that we have already mandated a hybrid commission model, if Mr Trowbridge’s specific recommendations relating to adviser remuneration are ratified it would make life insurance more expensive for Australian consumers. And as a result, fewer Australians would be able to access affordable insurance-related financial advice.”
Further, Milnes says these recommendations contravene some of the ideologies behind the FoFA legislation.
“The FoFA legislation was first introduced in order to improve the quality and trustworthiness of financial advice and make financial advice easily accessible to all Australians, regardless of their wealth status,” she said.
“If Trowbridge’s remuneration recommendation is ratified it may stop certain Australians, particularly the wealth accumulators, from accessing quality financial advice – thereby directly contravening one of the ideologies behind FoFA.”
According to Milnes, the recommendations could also encourage practising advisers to reconsider their future within the profession, and discourage new professionals from entering it.
“The proposed remuneration structures are likely to drive advisers to vertically aligned channels with new licensees shut out of the industry. It would be very difficult for a new licensee that is not vertically integrated to generate a sufficient return on the start-up investment required to build a robust model.”