Vote means AFA avoids LIF backtrack

The AFA will continue to lobby in favour of the government’s proposed life insurance framework reforms after the LICG's resolution was not passed.

07-Oct-2016

By Daniel Paperny and Jerome Doraisamy

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The life insurance framework legislation is back on track after a special resolution by the Life Insurance Customer Group (LICG) was rejected at an extraordinary general meeting of the Association of Financial Advisers (AFA) in Canberra.

The association confirmed the vote by 842 AFA members was carried 620:222 against LICG member Mark Dunsford’s proposal – 138 voting members attended the EGM and the rest voted by proxy.

The result means the AFA will continue to lobby in favour of the government’s proposed life insurance framework (LIF) reforms, with the aim of lifting the overall quality of advice provision as well as of expanding Approved Product Lists and increasing total retail life insurance cover.

Speaking at a press conference at the AFA 2016 National Adviser Conference in Canberra yesterday, AFA chief executive Brad Fox said he recognised this was a difficult time for members given that any LIF regulation changes would affect existing business models.

“We don't think there is a better outcome than what we have negotiated for LIF, [and] our role is to support people to get through this change,” Fox said.

”Whether this was a big win or a small win is irrelevant. This is about whether the AFA was going to retain its position at the negotiating table and have that position of relevance we fought so hard to gain.”

The LIF framework emerged from the 2015 Trowbridge report into the life industry, which advocated scrapping upfront commissions on risk advice given the persistence of churning practices and a lack of transparency on adviser remuneration arrangements.

The LICG has contended that any reforms should result from an evidence-based review of the whole industry “across all channels, especially industry super funds” and vertically aligned distribution models to ensure that planners were not being unfairly targeted in the new legislation.

Outgoing AFA president Deborah Kent said the outcome of the vote represented a “clear mandate” for the AFA and a “resounding voice” of support from members in negotiating the LIF legislation.

“[The outcome] today meant that the majority of our members [were] absolutely behind the board in representing them and their interests,” she said.

“We made it clear that there were people who had supported [Mark] Dunsford in this endeavour, and we need to listen to those concerns.”

Earlier this week, Revenue and Financial Services Minister Kelly O’Dwyer revealed the draft legislation would not have an exemption for direct sales carve-outs in life insurance.

Advisers now have until 1 January 2018 to make the transition to the new life insurance remuneration structure as part of the reforms that are set to be reintroduced to parliament later this month.

The Financial Services Council is also expected to launch a code of practice for life insurers in the next few weeks.

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