MAGAZINE OF CHOICE FOR AUSTRALIA’S WEALTH INDUSTRY
www.moneymanagement.com.au
Vol. 34 No 14 | August 13, 2020
INVESTMENT CENTRE
Small and mid-cap equities
21
26
RESPONSIBLE INVESTMENTS
40
TOOLBOX
Core alternatives for income
Tracking company voting
AMP facing ‘between 5 and 50’ ASIC legal/regulatory issues
LIF
BY MIKE TAYLOR
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LIF, life and tough times for insurers EVERY life/risk adviser knows that 2021 is a crucial year not only for their business but for the broader life insurance industry because that is when the Australian Securities and Investments Commission (ASIC) will review the Life Insurance Framework (LIF). But what has already become clear is that while the Federal Government scheduled the review of LIF back in 2017/18, much has changed including the factors which gave rise to the framework in the first place – specifically commission-based remuneration and so-called policy ‘churn’. Putting aside the impact of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry and the severe market disruption caused by the COVID-19 pandemic, significant shifts had already begun occurring within both the life insurance and financial planning sectors which have to be acknowledged as fundamentally impacting the fundamentals and therefore ultimately impacting ASIC’s review process. What is clear is that the issue of ‘policy churn’ which acted as the catalyst for the LIF has now been subsumed by the more current issues of thousands of financial advisers exiting the industry, the underlying profitability of some of the major offerings of the life insurers and the reality that the COVID-19 pandemic has significantly impacted the ability of consumers to even afford life insurance. And while the ASIC post-implementation review of the LIF will look primarily at the areas of policy lapses and adviser conduct, there is the reality that the financial services industry is almost united in its belief that commission-based remuneration should continue with consumers being given the choice of how they pay.
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Full feature on page 15
THE Australian Securities and Investments Commission (ASIC) has confirmed that AMP Limited is facing multiple legal/regulatory issues, some of them stemming from the Royal Commission. According to ASIC deputy chair, Matthew Crennan QC, AMP is facing at least five legal issues initiated by the regulator and probably more. Answering questions during a hearing of the House of Representatives Standing Committee on Economic, Crennan
declined to specify the exact number of legal issues but said that it was a “significant number”. Pressed by the committee’s deputy chair, ACT Labor member, Andrew Leigh, Crennan said that it was more than five issues and less than 50. Crennan signalled that at least some of those issues may become public in the next few months. Money Management sought comment from AMP Limited on the issue, but the company declined to formally respond to the issues raised.
Adviser exits due to banks restructuring: FASEA BY JASSMYN GOH
WHILE regulation has been one of the factors driving financial advisers to leave the industry, it is the restructuring across major banks and advice players that has left a large number of advisers leaving the industry, according to Financial Adviser Standards and Ethics Authority (FASEA). As part of the Financial Planning Association (FPA) congress, FASEA chief executive, Stephen Glenfield, spoke at a roundtable discussion and said there was no “magic number” of how many advisers were needed in the industry. “FASEA is a body that was there to put a series of legislative instruments and standards in place. The reduction you’re seeing in adviser numbers are driven by any number of factors, one of which is regulation but if you think about the restructuring across the major banks and advice players there has been an enormous shift in the advice numbers which has left a large number of people leaving the market because the jobs aren’t there,” he said. “The key to the future is that there needs to be demand for advice because demand will drive more business and bring more new entrants to the field.” Continued on page 3
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