Drop the word 'commissions' says ClearView
The Life Insurance and Advice Working Group should seeking to avoid changes that would have the effect of reducing aggregate remuneration for financial advisers, according to publicly-listed life/risk company, Clearview.
In a submission filed with the working group and made public today, ClearView is also urging that shelf space fees be banned, along with scaled volume bonuses and that the working group itself dispense with using the term "commission" and instead use "adviser service fee".
The submission argues that a significant reduction in the overall remuneration of financial advisers will severely impact the profitability and sustainability of independently-owned advice practices, forcing many advisers into institutionally-aligned dealer groups with narrow Approved Product Lists (APLs) as the only means to survive.
Releasing the content of the submission, ClearView managing director, Simon Swanson warned that poorly thought out, experimental changes to adviser remuneration could severely impact and strangle the independent financial planning community which was "essential for the industry's vibrant long-term future".
He said the working group needed to focus on driving competition, innovation and improved customer outcomes by addressing blatant conflicts of interest which were not in the customers' best interests, including narrow APLS and shelf space fees designed to influence advice, restrict competition and channel adviser flows disproportionately into related-party products.
"We believe there is an irrefutable case that the default position should be for an open architecture for Approved Product Lists (APLs) so that advisers are not unduly restricted and customers can have confidence that their adviser is genuinely meeting their best interest obligations," Swanson said.
"Shelf space fees are inequitable in the financial services industry and we believe they should be banned. A number of dealer groups require upfront payments, which start from around $100,000 and rise to over $300,000 per annum for life insurance products, to be placed on their APL. This means that customers are often recommended a product not because it's the most suitable and appropriate, but because of an insurance company's willingness and ability to pay shelf space fees."
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