Synchron director Don Trapnell has again slammed life insurance companies and the Financial Services Council (FSC) on the clawback issue, but this time he’s offered an alternative solution.
Competitive forces should drive any adviser remuneration model, said Trapnell, who has claimed that this is the way that the length of responsibility periods have been decided in the past.
“What we are seeing now is life insurance companies, via their association with the FSC, working together to form a policy that imposes a uniform remuneration model with uniform responsibility periods on advisers. That is anti-competitive and Synchron will never support that kind of behaviour,” he said.
“In the 1970s, advisers had a three-year responsibility period. By the 1980s, due to competitive pressures, this moved to a two-year responsibility. By mid-1980, again as a result of competitive pressures, this moved to a one-year period,” he added. “These changes were the result of a competitive market at work.”
Trapnell believes that the current FSC proposal – which would see 100% of an adviser’s commission clawed back if a client’s policy lapses within one year, 75% within two years and 50% within three years – would end up punishing advisers who experience policy lapses due to factors that are outside of the their control.
“It’s a fact of life that client circumstances change and what once suited them may not suit them, three or even two years later,” he said. “This is not the fault of advisers and advisers should not be penalised for it.”
Trapnell has already stated that, should the FSC’s proposal be universally adopted, Synchron will consider making a formal complaint to the ACCC for anti-competitive behaviour.
Churning: life insurers under attack for punishing honest financial advisers