AFA gains additional info on life insurance commission
The Association of Financial Advisers (AFA) chief executive, Phil Anderson, has clarified proposals under the Quality of Advice (QOA) Review for risk clients.
Recent proposals regarding a client consent requirement for risk clients had been “misinformed” he said.
The proposals had indicated life insurance commissions should be retained and be subject to an obligation for advisers to obtain client consent.
The AFA met with Treasury and QOA reviewer, Michelle Levy, last week following concerns from its members to seek further information on the matter and how it would play out in practice and alongside other QOA recommendations.
This included the form of disclosure of ongoing commission, the implication for the sale of a book of clients and what an adviser needed to do with a consent form.
Writing on LinkedIn, Anderson said:
- “The consent requirement would be a once off. This is not an annual requirement;
- Where consent has previously been obtained from the client, it would not be required again. For example, if the upfront and ongoing commissions were previously disclosed in an SoA and the client signed the Authority to Proceed, then this is consent and nothing more would be required;
- Disclosure of ongoing commissions could be as simple as the commission rate and the dollar amount on the basis of the first year’s premium. This is consistent with current practice, and not an additional obligation. There is no expectation of predicting commissions payable over multiple years; and
- The adviser needs to keep evidence of client consent. There would be no requirement to provide this to the life insurer.
“The bottom line is that this is nothing like annual renewal and client consent in the super/investment space.
“Clients providing informed consent is not unreasonable. This already happens. In a future world where SoAs are not mandated, we will need to have other ways to ensure disclosure of commissions and confirm consent. That is not difficult to resolve, particularly where it is principles based, rather than prescriptive.”
AUTHOR
Laura Dew
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People in our own industry do not even understand the valuable benefit of the commission structure or the required quantum. How in hell will clients be able to understand and confirm. We already give them the amount of commission to be received.