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ALP calls for ‘prohibition of commissions’

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The Australian Labor Party has reiterated its stance against the commission model – indicating that major changes could be on the cards for advisers if the party wins the next federal election, which may be held as early as August next year.

Shadow Minister for Financial Services Stephen Jones says the ALP wants to see a “better advice industry”.

“We want to engage with industry and with regulators on how we can address the current advice gap,” Mr Jones said in a speech last week at the Association of Financial Advisers (AFA) virtual conference.

“We want to see all Australians able to access high-quality financial advice about their retirements, about their investment needs, about their insurance.

“The provision of advice must be decoupled from the sales process, which means the prohibition of commissions, however so described, from product manufacturers to advisers.”

Mr Jones says the ALP’s position will hinge on the findings of a government review next year into the life insurance sector.

However, he says he starts “with a bias against” the remuneration model. “The burden lies on the industry at large to prove that a commission-based sales model that’s attached to an advising sector is able to provide a service to consumers that is not conflicted.”

At last year’s AFA conference the ALP’s then-shadow assistant minister for finance, Matt Thistlethwaite, said the industry must justify why commissions should not be axed.

AFA GM Policy and Professionalism Phil Anderson says life advisers must work to convince the ALP on the merits of the current remuneration arrangement.

“It is critical that we retain commissions for life insurance, because Australians are not prepared to pay what it costs to provide life insurance advice,” Mr Anderson told insuranceNEWS.com.au.

“The job is in front of us to convince the ALP of the importance of retaining commissions…to understand the importance of the implications of removal of commissions.”