The Australian Financial Services Royal Commission recommendation 2.5 reads:
Recommendation 2.5 — Life risk insurance commissions When ASIC conducts its review of conflicted remuneration relating to life risk insurance products and the operation of the ASIC Corporations (Life Insurance Commissions) Instrument 2017/510, ASIC should consider further reducing the cap on commissions in respect of life risk insurance products. Unless there is a clear justification for retaining those commissions, the cap should ultimately be reduced to zero.
The Australian Government's response was:
In 2017, the Government enacted reforms to life insurance remuneration that capped the commissions a financial adviser would receive for providing advice in relation to the purchase of a life insurance product. As part of these reforms, the Government announced that ASIC would conduct a review in 2021 to consider whether the reforms have better aligned the interests of advisers and consumers. If the review does not identify significant improvement in the quality of advice, the Government stated it would move to mandate level commissions, as was recommended by the Financial System Inquiry. The Government supports ASIC conducting this review and considering the factors identified by the Royal Commission when undertaking this
ASIC update states:
ASIC will implement this recommendation. ASIC will consider this recommendation and factors identified by the Royal Commission in undertaking its post implementation review of the impact of the ASIC Corporations Life Insurance Commissions Instrument 2017/510, which set commission caps and clawback amounts, and which commenced on 1 January 2018 (ASIC media release 17-168 MR refers). As noted by the Royal Commission, and consistent with the Government’s timetable, ASIC’s review will take
place in 2021.
The Australian environment is different to the New Zealand one.
With decades of compulsory super under their belts the opportunity for fee-based revenue for financial advisers is much greater there, than it is here. I would argue strongly that the impact of such a change here would adversely affect the availability of advice, and materially reduce access to advice, in particular, from channels that offer a choice of providers.But readers must acknowledge both the gap between the Australian and New Zealand environments, and also the gap between current and potential commission levels.
For more details, read this report: Download Asic-update-on-implementation-of-royal-commission-recommendations