Small businesses within the financial planning industry were not given an appropriate chance to defend themselves in the Royal Commission, according to the Association of Financial Advisers (AFA).
In a full response to the Royal Commission recommendations, AFA chief executive, Phil Kewin argued that while the commission may have been aiming at the banks and big business it was small business financial advisers and mortgage brokers who had been hit.
“Business valuations for financial advice and mortgage broking small businesses, many of which are family owned and run, will be significantly impacted,” he said. “As a result of recent ongoing reforms and further recommendations from the Royal Commission, many small businesses are now under threat. This also further threatens the accessibility of affordable advice.”
“If the financial advice profession was on trial at the Royal Commission, then financial advisers should have been given the chance to defend themselves. Regrettably the Royal Commission took evidence from large institutions and not the small business sector,” Mr Kewin said.
On the question of the Royal Commission’s view on life insurance commissions, the AFA chief executive said while his organisation welcomed the recommendation that they should remain unchanged in the lead up to the review of the Life Insurance Framework (LIF), “it rejects the Royal Commission’s clearly expressed preference that they should be further reduced and in fact removed, following this ASIC review, particularly given there was no informed debate on this issue”.
“Commissions are the internationally accepted method of remuneration for the provision of financial advice on life insurance, and this model works in the interests of consumers by reducing the cost of obtaining quality life insurance and advice,” Kewin said. “They are a form of remuneration, not an incentive, that pays for far more than just product placement, something we pointed out in several submissions to the Royal Commission.”
The AFA chief executive also complained that the Royal Commission’s final report had not corrected key errors the AFA had pointed to in its interim report.