Choice urges ASIC to stop commissions
Choice wants the Australian Securities and Investments Commission (ASIC) to phase out life insurance commissions.
“A notable gap in current protections is the exception that allows advisers to receive commissions on life insurance,” the consumer advocate says in a submission to a Senate inquiry into consumer protection in the financial services industry.
“A 2014 review of retail life insurance advice found 37% of advice failed to prioritise the needs of the client and comply with the law.
“As a result, consumers are frequently sold life insurance products that don’t meet their needs.”
Choice says although legislation has reduced commissions, it wants a ban, which would also cover “soft-dollar payments” and adviser incentives.
It also wants greater transparency on advisers’ connections to financial institutions.
Consumers are frequently confused about multi-branding of financial advice, the submission says. It cites a Roy Morgan survey showing 55% of respondents think Financial Wisdom is independent, when in fact Commonwealth Bank owns it.
“Major institutions state they offer the best and most effective advice, implying the full range of products across the market and strategies beyond product recommendations are considered, when this may not be the case,” the submission says.
“Because of the greater likelihood of being steered into an aligned product, there must be greater clarity for consumers regarding the differences between independent and aligned advisers.”
Choice wants independent consumer testing to see if advice is labelled.
“The Federal Government should legislate to require advisers to prominently disclose whether they are truly independent or aligned with a financial organisation. The exact terms for disclosure should be based on consumer testing.”