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More insurers defend commissions system

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NEOS Life has joined the chorus of industry calls for adviser commissions to be retained.

“As an industry, it’s incredibly important that we come together to engage and educate government, regulators, the media and consumers on the important role risk commissions play in ensuring Australians…have access to quality financial advice and appropriate life insurance products,” MD Brett Yardley said.

Changes to the Life Insurance Framework (LIF) are sufficient to address regulators’ concerns, he says.

Insurer TAL has also backed life insurance commissions for advisers.

TAL Group CEO Brett Clark says the alternative – a user-pays full-fee model – would lead to a more limited supply and availability of financial advice, affordable for only a small population of wealthy consumers.

“We need to consider the issue holistically, from a number of different angles – consumer access to affordable financial advice, the supply of financial advice, the payment for financial advice that ensures consumers can be confident in its quality, and minimising any potential conflicts or risks.”

The LIF commission-based model, with its best-interests duty for advisers, balances these perspectives, Mr Clark says.

The Federal Government proposes requiring product manufacturers to rebate grandfathered risk commissions to clients for any products still in use after January 2021.

Draft legislation to ban grandfathering from 2021 has been released following a Hayne royal commission recommendation.

The Association of Financial Advisers has attacked the proposal, arguing it creates huge complexity.

“If the outcome was the rebating of a grandfathered commission and the introduction of an adviser service fee, there will be a lot of additional transactions on their account for no benefit,” the AFA says.

“In fact, the fees are likely to increase due to the additional complexity.”

Financial advice analyst Investment Trends says grandfathered commissions have declined to just 9% of total practice income.