Clarify claw-back, says AFA
The claw-back provisions applying to life/risk policies should only be applied to replacement product advice and not to situations beyond the control of financial advisers, according to Association of Financial Advisers (AFA) chief executive, Brad Fox.
Fox has made it clear that the AFA will continue to push for key outcomes with respect to the fine detail of the post-Trowbridge arrangement, and specifically referred to the three-year clawback arrangements.
"Three-year claw-back for life insurance business which the adviser replaces themselves appears to be acceptable to most advisers, but shifting the burden of responsibility to the adviser where policies lapse outside of their control is unfair," he said.
"Over the coming weeks we will continue to apply pressure for clawback to apply only with replacement product advice and not situations that sit outside the advisers' control, like a client-directed lapse because of unaffordability."
Fox said the AFA was also seeking confirmation from insurers that they won't apply clawback where the policy lapses due to a successful claim, for example on life, TPD or trauma policies saying the organisation was concerned that the three-year clawback not be used to shift an unreasonable burden from the institutions onto small business financial advisers that do the right thing.
"It was on the public record that the government applied a tight deadline for the industry to reach a compromise on an agreed framework," he said. "The consequence is that the initial framework lacked detail and that is what we are seeking to influence now. Advisers, especially business owners, deserve clarity and reasonable lead times to adjust to a change in the rules, especially of this magnitude."
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