Risk Committee’s non-disclosure stance slammed
The Joint Parliamentary Committee’s recommendations against disclosure of commissions by risk advisers have been branded a “disgrace” and condemned by virtually all sides of the financial services sector.
The Australian Consumers Association (ACA) has urged the Government to reject - for the third time - the committee’s call for an exemption and “stick to its guns”, while theFinancial Planning Association(FPA) has also vetoed the findings and argued that a universal commitment to disclosure of commissions is imperative.
The ACA’s finance policy officer, Catherine Wolthuizen, says the recommendation to exempt life insurance agents and other vendors of risk insurance from the commission disclosure requirements of the Financial Services Reform Act (FSRA) “flies in the face of the basic transparency and accountability principles which underpin the Government’s new regulatory framework for financial services”.
“If the Government is serious about consumer protection in financial services, it cannot justify allowing parts of that industry to withhold from consumers vital information about the commissions they receive,” she says.
“Sadly, this is also an area where those commissions have resulted in cases of mis-selling and product ‘flogging’ to vulnerable consumers to generate commissions,” Wolthuizen says.
She says that in recent years theAustralian Securities and Investments Commissionhas undertaken enforcement action in response to such practices, underscoring the need for more, not less, disclosure.
The FPA’s chief executive, Ken Breakspear, says exempting risk products from the full disclosure requirements undermines the level playing field for other financial products which require disclosure of the value of commissions paid to licensees and their representatives.
“This is especially pertinent when both risk and investment products are delivered under the one-stop financial advice provider,” he says.
The Committee’s majority report argues that the imposition of mandatory disclosure provisions on risk advisers may force many small businesses to close down or down-size because of the impact of consolidation and the concentration of manufacturing and distribution.
In a dissenting report, welcomed by both the FPA and the ACA, the Australian Labor Party members of the Parliamentary Committee argued that risk advisers should be subject to the full mandatory disclosure regime.
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