Advice firms are being challenged because an attraction problem is hindering insurance participation, according to Avanzare Group managing director Jaime Johns.
“When insurance splits continuously reduce and the cost to produce financial advice is going up, [people are] not getting the same financial reward for putting [policies] in place [at the point of claim],” she said at the Professional Planner Licensee Summit last week.
“At the end of the day, there’s a risk and reward problem. What is that going to attract people to give advice if they’re not going to be rewarded?”
Johns cited the income protection insurance changes a couple of years ago – which changed the caps on policies and introduced stricter definitions of disabilities – as a “real tipping point”.
“I noticed that a lot of advisers said, ‘That’s it, I’m done. I’m going to refer out now because it’s just too hard to get my head around all these policies’. Then we have a pathway problem.”
She added the experience pathway, which is now in Parliament after consultation of the draft legislation closed, will not sufficiently close the underinsurance gap.
“A year is not enough time, we do need to get [potential advisers and planners] in much earlier,” Johns said.
“We can own this and we can lead it and not wait for it to be wrapped in [the Quality of Advice Review], because there’s a lot of other great ways we can build a foundation on.”
One example, Johns said, is technology and digital advice.
Interest in digital advice has recently peaked, according to research released by AMP and KPMG in May; however, consumer take-up has yet to reach the same level.