Member slams AFA for LIF lobbying effort

01-Jul-2016

By Sarah Kendell

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The Association of Financial Advisers (AFA) may become irrelevant if it continues to shy away from lobbying in the interests of its members in the political sphere, according to a veteran South Australian risk adviser.

In an open letter to AFA chief executive Brad Fox and national president Deborah Kent this week, Jeff Trimmer, director and principal of MBT Management, expressed disappointment with how the association had handled negotiations on the life insurance framework (LIF) legislation.

Trimmer said he was unlikely to renew his AFA membership, accusing the association of “going quiet on its disagreement with important provisions [in the legislation] to make sure [they] would be allowed in the room on discussions post the Trowbridge Report”, and not “seeking out the sensible politicians” to plead the industry’s case before draft laws were put to parliament.

Speaking to financialobserver, Trimmer said that he believed the AFA had “walked away from truly venting the members’ views, because it’s obvious from the fallout that has happened since that a lot of advisers were very much against what had been negotiated”.

His letter singled out the LIF implications on Australian Financial Services Licence holders’ obligation to hold adequate financial provisions to cover potential liabilities. He said this provision “effectively gives [banks and life insurers] a windfall advantage that others cannot match”, and could put out of business many independent advisers who were doing the right thing.

“If you received an up-front commission that under the LIF is going to have a two-year responsibility period, you would have to put that full commission away rather than paying it out as a salary, because there is a chance it could be taken back if the client cancels their policy,” he said.

“In a bank-owned operation all they would have to do is show that the parent company would provide a line of credit to cover their expenses.”

Trimmer said he believed the legislation was a done deal, despite adviser dissatisfaction and that it was still in limbo owing to the election.

But he said it was still essential the AFA recognised it had failed members, and that the association should improve its lobbying efforts to avoid becoming redundant.

“If they started as a membership association, it would be nice to see them return completely to that,” Trimmer said.

“Otherwise, what’s happening is they are losing relevance –we have too many industry associations expressing views as it is, so if one association becomes irrelevant it will just disappear.”

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