The AFA says that it has “succeeded”, with the help of the FPA, in having the three-year clawback period outlined within the Life Insurance Framework reduced to two years.
Following Assistant Treasurer and Minister for Small Business Kelly O’Dwyer’s announcement last week that “significant improvements” had been made to the LIF, AFA national president Deborah Kent said the combined efforts of the AFA and FPA have resulted in a reduction of the three-year clawback policy.
“To succeed in having this reduced to two years is a great relief for our members, particularly those that own and operate small businesses,” Ms Kent said.
“In an electronic poll held at our recent National Adviser Conference in Cairns, our Members indicated almost unanimously that three-year clawback was the greatest issue in the reforms. That was consistent with the view of our board.
“What we look forward to now is insurers delivering vital efficiencies into the advice, underwriting and claims processes to support advice business facing significantly reduced upfront income,” she said.
The AFA extended its thanks to the FPA, which shares a common position in negotiating for change with Ms O’Dwyer.
FPA chief executive Mark Rantall said the package represents a “sensible outcome that will help ensure the sustainability of the industry”.
Mr Rantall also commended Ms O’Dwyer for consulting and listening to the concerns the industry had regarding the original framework proposed by then Assistant Treasurer Josh Frydenberg.
“The FPA supports the need for a model that enables financial planners an appropriate amount of time to transition,” he said.
“We are deeply committed to supporting members through these changes and encourage members to make use of The FPA Life Insurance Advice Guide.”
Also commenting on the revised framework, The Financial Services Council said it welcomed the reforms, and a proposed review by ASIC.
However, the FSC also emphasised that in the long term, more refinement will be needed to improve consumer outcomes.
“If consumer outcomes do not improve, the Government has given a clear commitment to implement the Financial System Inquiry’s recommendation of a level commission model in 2018," FSC director of policy Andrew Bragg said.
“As the financial advice profession matures, we expect all financial advisers to move to a fee-for-service model," he said.
The FSC added that many advisers have already moved to this model, and that these reforms "must be implemented in a way which encourages the transition".
The final reform package is scheduled to start on 1 July 2016, leaving just over six months for the industry to transition to the new framework.