Committee slated to rule against disclosure
THE Joint Parliamentary Committee on Corporations and Financial Services is expected to rule against disclosure of commissions on risk products when it tables its final report on the issue as early as May this year.
Committee chair and Federal Liberal Senator Grant Chapman says the committee has taken this same view on three previous occasions and recent enquiries, which have gleaned more detail on the issue, have only served to strengthen the case against disclosure.
While Chapman says it is too early to properly judge the final decision of the committee, he senses this is the direction the committee will take.
Chapman says the committee is concerned that disclosure will put too much financial pressure on insurance brokers’ businesses, reducing the capacity of agents to run their back offices and maintain services.
Association of Financial Advisers(AFA) national president Robin Yates says the committee is conscious that if the profits of advisers, particularly in rural and regional Australia are reduced they could “destroy the industry completely”.
Chapman also says enquiries have failed to uncover consumer demand for disclosure on risk products and the record of complaints on insurance commission disclosure have been “infinitesimal”.
ButFinancial Planning Association(FPA) policy and government relations manager Con Hristodoulidis says basic disclosure within the investment industry occurred over 10 years ago and had not affected the growth of the planning industry.
Hristodoulidis says the FPA has maintained a consistent position on disclosure, that commissions had the potential to create bias and should be disclosed as part of the duty advisers had of putting clients first.
“The commission paid to an adviser for the first year can range from 30 to 140 per cent and there is the potential that there could be a bias,” Hristodoulidis says.
Chapman says that the committee is not ignoring the arguments of the pro-disclosure case “but in this instance the potential cost for small business in their relationship with big business outweighs that principle”.
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