ClearView defends risk advice commissions

ClearView is countering Commissioner Kenneth Hayne's recommendation to reduce or eliminate commissions financial advisers earn from life insurance products.

It is "way too early," ClearView wrote in an email to advisers, to consider tinkering with commission caps again given the Life Insurance Framework (LIF) reforms are partly implemented and will not be fully implemented until 2021.

ClearView believes the LIF - once it fully removes grandfathered rebates and bans restricted Approved Product Lists - will sufficiently address the industry's conflicts.

ClearView wants the APLs of life insurance products to be banned and for financial advisers to access 10 or so APRA-regulated retail life insurers.

"APLs are not recognised by law. They are an artificial construct developed by vertically-integrated institutions to influence advice and channel clients into in-house product," it said.

"The majority of financial advisers can only choose from a narrow menu of products dictated by their Australian Financial Services Licensee (AFSL)."

Under the LIF, which was introduced on 1 January 2018, the first year's premium is capped at 80% with a 20% trailing commission thereafter.

From 1 January 2019, the first year's premium was capped at 70%, with a 20% trailing commission thereafter.

From 1 January 2020, the cap reduces to 60%, with a 20% trailing commission thereafter.

In releasing the Royal Commission final report in February, Hayne proposed to shrink caps of 20-60% further when it reviews the impact of the reforms in 2021.

ClearView argued the unintended consequences of reducing or banning life insurance commissions will likely put professional advice out of reach for the average person and shut down hundreds of advice businesses.

It wants financial advice, together with life insurance advice fees, to be tax deductible.

Currently, investment advice fees are tax deductible against income-producing assets. This tax incentive should be expanded to fees such as ongoing personal advice and preparing a financial plan or Statement of Advice, it proposed.

ClearView shares last traded at 85.5 cents at publication time.

Read more: ClearViewLife insuranceKenneth HayneLife Insurance FrameworkRoyal Commission
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