Quality of Advice Reviewer Michelle Levy’s proposal that advisers will need written consent for commissions has emerged as a source of concern for the industry.

Even consumer advocates who have pushed for a ban on commissions and all other remaining forms of conflicted remuneration are not convinced the proposed measure is an “effective form” of consumer protection.

As reported last week, the Quality of Advice Review recommended keeping commissions – for both life and general insurance – exempt from the ban on conflicted remuneration despite acknowledging the current arrangement can lead to a “conflict”.

The Review says in its Conflicted Remuneration Paper there is a real risk that the quality of the advice provided by the adviser is not as good as it would be if they were paid a fee by the client for their advice.

To help consumers make “informed” decisions, the Review proposes that advisers giving personal advice to retail clients in relation to their life insurance needs must have written consent from them to be paid commissions.

The Association of Financial Advisers (AFA) and the Financial Planning Association (FPA) welcome the proposal to keep commissions but have flagged the written consent recommendation as an area they will be focusing on in their responses to the Paper.

“The proposal to retain commission as a payment option for clients is welcomed, and we are currently working through the implications of the recommendations around this point,” FPA CEO Sarah Abood said.

“It’s important that we don’t repeat past problems, with duplicated requirements adding unnecessary paperwork and process steps.

“We’re looking for practical and workable solutions, ones that will help our members ensure more Australians have insurance in place to protect them and their families in the event of injury, illness or premature death.”

AFA CEO Phil Anderson says the peak body hopes the client consent obligation, if taken up by the Government, “will be consistent with the existing requirement to disclose life insurance commissions and the practice of getting clients to approve the implementation of the advice through an authority to proceed”.

“We will be seeking feedback from our relevant policy working groups and more broadly from members in framing our response to this consultation paper,” Mr Anderson said.

Consumer advocacy group Choice insists adviser commissions must be banned.

“It’s clear from the latest evidence that commissions contribute to poor quality advice, with over 40% of life insurance advice in breach of the law,” Choice Head of Policy and Government Relations Patrick Veyret told insuranceNEWS.com.au.

“Disclosure is an ineffective form of consumer protection. Conflicts need to be removed, not simply disclosed.”