The Association of Financial Advisers (AFA) has pushed back against calls for life commissions to be banned, dismissing arguments as “flawed logic” as the Treasury-led Quality of Advice Review prepares to provide its report to the Government by December 16.

AFA issued a strongly worded defence of the commission model for advised-products, taking aim in particular at the submissions made by consumer advocate Choice and Industry Super Australia (ISA) to the review. Submissions to the review closed last month.

The peak body questions Choice’s claim that life insurance commissions “create a perverse incentive for advisers to sell life insurance to people that [is] not suitable for their needs”.

Choice and the ISA have in their submissions recommended a ban on life commissions.

“The call for the banning of life insurance commissions is… based upon flawed logic,” the AFA says.

“It is seemingly once again founded on the protection of the life insurance offers of the industry funds. However, more than in any other sense, there is a complete lack of comparability of the default life insurance in industry funds, compared to what is available in the individual advised retail context.”

AFA says retail advised products offer better terms, including the option for own occupation cover, level premiums, portability of cover and super linking to avoid restrictions around conditions of release.

The peak body says the level of default cover in group super funds is vastly inadequate for most Australians, citing the findings from a recent Deloitte/Association of Superannuation Funds of Australia report.

“We welcome the Quality of Advice Review consultation process and the open debate on how to fix the problems in the current financial advice regulatory regime and operating model,” the AFA says.

“However, the debate needs to be based on the facts and submissions should be subject to challenge. We look forward to further constructive debate as the review progresses.”

Click here for more from the AFA response.