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Hayne Royal Commission findings on conflicted remuneration forgotten by Federal Government in long-awaited review

Consumer Advocates are calling for an urgent rewrite of the Federal Government’s Draft Terms of Reference (Draft TOR) for the Quality of Financial Advice Review (Advice Review).

“This review is supposed to be focused on ending conflicted remuneration in insurance and financial advice, which is the root cause of many of the problems uncovered by the Financial Services Royal Commission,” said Cat Newton, Senior Policy Officer, Consumer Action.

The Advice Review Draft TOR states that it responds to Recommendations 2.5 and 2.6 of the Royal Commission on removing current laws and exemptions that allow commissions and conflicted remuneration in insurance (recommendations reproduced below).

“Inexplicably, the Draft Terms of Reference for the Advice Review says nothing about these issues and the Treasury’s landing page makes no reference to ‘conflicted remuneration’ or even ‘insurance’.

“The Advice Review cannot be said to be meaningfully implementing the Royal Commission recommendations without considering Commissioner Hayne’s commentary on the conflicts between interest and duty in financial services.

“These findings, and the evidence at the Royal Commission of atrocious sales behaviour motivated by commissions and sales incentives, appear to have been totally forgotten,” said Ms Newton.

Freedom Insurance admitted to the Royal Commission that its sales incentives to staff, including commissions, a ‘boat party’ and a trip to Bali, encouraged aggressive and inappropriate sales, in particular to vulnerable customers.

“The Advice Review is a critical opportunity to build a pathway to higher quality advice and end harmful conflicted remuneration in financial advice and insurance for good. It should be expanded to include the findings and commentary of the Royal Commission regarding conflicts between duty and interest in financial services and advice, and the benefits of removing all forms of conflicted remuneration,” said Ms Newton.

“The Advice Review should have regard to the need to ensure good consumer outcomes and preventing misconduct and harm. We also strongly recommend that the Interim and Final Reports, including the two volumes Case Studies and Appendices, are reviewed in full for the purposes of the Advice Review,” said added.



Consumer Action’s submission to the Draft Terms of Reference for the Quality of Financial Advice Review is here.

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.

Recommendation 2.6 – General insurance and consumer credit insurance commissions

The review referred to in Recommendation 2.3 [the proposed Quality of Advice review] should also consider whether each remaining exemption to the ban on conflicted remuneration remains justified, including: the exemptions for general insurance products and consumer credit insurance products; and the exemptions for non-monetary benefits set out in section 963C of the Corporations Act.



Mark Pearce- Consumer Action Law Centre
0413 299 567

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