Funeral bonds are not considered a financial product under the Corporations Act, and as such are exempt from the FOFA regime.
As a result, financial planners who place their clients in a funeral bond can legally receive a commission.
But two of the biggest providers of funeral bonds – namely Lifeplan and KeyInvest – have replaced their commissions structure with a ‘FOFA-compliant’ adviser service fee.
KeyInvest manager for financial services Andrew Meinel said the decision to remove commissions was largely driven by demand from the larger financial planning dealer groups.
“AMP came out pretty clearly: we want nothing to do with commissions. So we had to create a non-commission product,” Mr Meinel said.
“AMP were our biggest client at the time,” he added.
Mr Meinel was unsure whether the larger institutions, such as AMP, are familiar with some of the technical aspects of funeral bonds.
“I wonder how much they understand that it’s not a financial product. I don’t’ know the answer to that,” he said.
“Did they think it was a financial product and therefore it had to be FOFA-compliant?”
A spokesperson for AMP confirmed that KeyInvest is on the approved product list of all AMP dealer groups, and that the amendment to the product occurred when AMP made all its products FOFA-compliant on 1 July 2010.
“To be included on our product list – as per all our investment, superannuation and pension products – commissions would need to be removed,” the spokesperson said.
