Insurance
Growing advice group in commissions fight

A relatively new advice association has picked up members at a rapid pace as it takes up the fight to retain life insurance commissions.

The United Financial Advisers Association (UFAA) now has over 4000 members after launching just a few months ago.

Alex Vagliviello, principal of Charles Alexander Financial Services and committee member for the UFAA, told Financial Standard that a politician indicated to the UFAA that the group needs to get its numbers above 5000 to receive attention and be heard by parliament.

"As practising advisers, we took the view that the two most recognised bodies representing advisers, the Australian Financial Advisers Association (AFA) and the Financial Planning Association (FPA) did not truly represent the views of advisers to Government," Vagliviello explained.

"The AFA and the FPA did little more than give lip-service to the negative impacts of the reforms and basically walked in lock-step with the Financial Services Council who only works in the best interests of the banks and large institutions like the disgraced AMP."

Vagliviello said the main cause of discontent for advisers is the debate surrounding commissions in the life insurance industry and the removal of grandfathered revenue.

The UFAA maintains that removing commissions will have negative consequences for consumers.

"The experience in other countries is that properly managed and reasonably set commissions creates a sustainable industry, that will provide accessible advice to consumers," Vagliviello explained.

"Some countries that reduce or abolished commissions have brought them back in order to rebuild decimated industries that has taken away consumer choice and caused bad consumer outcomes."

When it comes to the AFA and FPA, the UFAA is clear on its point of view.

"It has become clear that both the AFA and FPA were conflicted in their role representing advisers. Both organisations receive substantial revenue inflow from institutional sponsorship," Vagliviello said.

"It is the institutions such as banks and aligned life companies that have pushed the agenda to remove trail commission and lower life insurance commissions paid to advisers, while at the same time increasing fees and costs to consumers, despite the huge windfall in revenue they retained when paying lower remuneration to advisers."

He added that most of the industry reforms have arisen from poor institutional behaviour.

"Having caused the problems, these same institutions showed (insincere) contrition by supporting more draconian operating regulations from the government; firstly, because they had the size and strength to absorb higher regulatory burdens and secondly, they knew more onerous regulations would force the non-bank aligned small business advisers out of business, thus crushing competition to the banks for both financial planning and mortgage broking," Vagliviello said.

"You can clearly see that every other "reform" has no other purpose other than to destroy the non-aligned advisers and brokers, who ironically are the ones providing the most valuable and personalised advice to consumers."

He pointed to recent movements in bank-aligned financial advisers as evidence of how some of Australia's big banks stand to benefit from the raft of reforms facing the advice industry.

"If the banks have not been cynical enough, they now have the opportunity to divest themselves of all their bank financial planners, which they are doing (and in AMPs case doing heartlessly and unconscionably) leaving perhaps millions of orphaned clients, with no-where else to go because the non-bank competition are either being squeezed out of business, or struggling under the weight of legislative requirements, where they can't afford to take on any more clients," Vagliviello said.

"What the banks may do is then employ lowly paid FASEA fresh university graduates to provide the advice and therefore take over the industry with the blessing of the Government that ostensibly set out to wipe-out institutional product pushing and vertical integration."

Read more: UFAAAFAFPAAlex VaglivielloCharles Alexander Financial ServicesFASEAFinancial Planning AssociationFinancial Services CouncilFinancial StandardUnited Financial Advisers Association
Link to something sBFrmqe8