Highlighting insurance as one area of concern, Chan & Naylor said that without commission payments, the vast majority of people risk becoming chronically underinsured.
The call follows a recent ASIC report, which found that 37 per cent of life insurance advisers failed to comply with the law when discussing products and were more focused on commissions.
“Vested interests clearly must be addressed and this will not be accomplished through self-regulation,” said David Hasib, a partner at Chan & Naylor.
“However the existing framework is robust enough to prevent risk advisers churning policies, and if commissions were removed altogether in lieu of a service fee then this would not correlate to a one-to-one premium saving for the client.
Mr Hasib said product commissions within the insurance industry actually work for the benefit of the consumer as long as the advice provided is transparent, helps the client make an informed choice and provides a product that best fits their needs.
Mr Hasib said he believes that stronger regulation is required to ensure greater enforcement of disclosure as well as an agreed industry consensus on standards but he does not agree with those who are backing a call for the removal of commissions in their entirety.
“Australians already don’t invest enough in their financial well-being, so why would they do so if they are expected to pay more for advice?”
According to Mr Hasib, the issue of conflicted remuneration has not been satisfactorily addressed by the proposed Future of Financial Advice (FoFA) reforms. As such he believes that the entire financial sector must be held more accountable.
“If we can remove the inherent, product selling culture of the 80’s & 90’s, then it will be to the benefit of all Australians,” said Mr Hasib.
“We do need stronger guidelines, but we also need clear transparency both for the industry and for consumers,” Mr Hasib said.