Australia’s financial services industry has reached a critical phase and needs to shift its focus from a reform-centric view and think about operating in a post-reform world.
FPA chief executive Mark Rantall said the industry, in particular the insurance sector, needed to forge past the Labor government’s proposed Future of Financial Advice (FOFA) reforms and consider issues on a broader scale.
“Maybe we need to have a summit post FOFA when we know what the lay of the land is around insurance with the industry and product manufacturers to say ‘here are some of the problems we’ve got and this is some of the perception out there’,” Rantall said at a panel discussion at last week’s MLC Risk Specialist Retreat.
“[Ask questions like] how are we going to face into that and how are we going to resolve it collectively and then we start to self-regulate and get ahead of the curve rather than be behind and on the back foot.”
He said as an industry, there needed to be consideration that perhaps there were two different “speeds for insurance”.
“My solution would be get past FOFA and let’s have some forums how we solve the problem, not the government solve the problem.”
Financial Services Council chief executive John Brogden said it was important for the industry to recognise it was at a “critical phase”.
Brogden said to some extent it would be advisable to hold a pre-summit so that if the industry was aware of an issue that might become a problem in five years, it was worth building a solution or a process now.
He used churning within the insurance industry as an example.
“[We need to] work with the government to find a churning solution now because I don’t want us in a year’s time to think we’ve sorted all the problems out. We’ve got commissions right, we think we’ve fixed churning and we think prices are dropping aggressively and then something pops out that we thought we’d hide in the back room with the mad aunt and out it comes and we’re back behind the eight ball again,” he said.
While he gave no indication such a move would be made, Brogden said the FSC had looked at the churning ban adopted in New Zealand.
“I went and looked at it and it’s basically along the lines that if you resell in three years time you can’t take a commission. You might be able to take a basic fee, an admin fee,” he said.
“That wouldn’t kill us as an industry. Those for whom that spells the end of their business, they shouldn’t be in the first place.”
Association of Financial Advisers chief executive Richard Klipin said the industry had done too much navel gazing and it was time to act.
“I think the various advertising campaigns that are on the working templates is all about taking what’s happened in this world, in your practices and your clients’ lives into the front yard, the front fences of where real Australian live,” Klipin said.
