In the wake of the release of the Trowbridge Report, forward-thinking advisers and licensees will make their own moves to address concerns raised in ASIC Report 413 into retail life insurance, including adopting new remuneration standards and advice quality controls, the Association of Financial Advisers (AFA) says.
AFA Chief Executive Brad Fox says the time is right for self-directed responses from the advice industry. “In recent months we have seen excellent examples of licensees stepping up to take leadership positions on issues like adviser education standards and professional association membership,” he says.
“In light of the ongoing industry negotiations to reach a unified position for the future of life insurance, there is a clear opportunity for licensees to implement their own solutions, particularly in relation to replacement insurance advice and adviser remuneration.”
Mr Fox says that many advisers have already begun the move away from high upfront commissions – those paying over 100% of the premium in year one – to sustainable hybrid models in response to training programs offered by either their licensee or insurers and to meet the expectations of their clients.
“I would not be surprised at all if we see announcements from licensees mandating new standards ahead of an industry wide solution being agreed. I think it is totally conceivable that some licensees will seize on the opportunity to address consumer perceptions by mandating that their advisers accept no more than a hybrid payment. This would certainly have the AFA’s support,” Mr Fox says.
Licensees are central to addressing the quality of advice concerns raised by ASIC, Mr Fox says. “Licensees will no doubt be taking a more proactive supervision role with respect to replacement product advice and there are simple yet effective ways for insurers to support licensees to do this. Insurer reporting to licensees can identify unusually high levels of replacement insurance advice, and licensees can also identify advisers showing a surprisingly high preference for using a particular insurer.”
The AFA has consistently maintained that the solutions to ASIC Report 413 lay with all industry participants playing their part. “Insurers, advisers, licensees and professional associations all have to carry their share of the load but no-one has to wait for the others to move first. Some clear industry leaders will emerge,” Mr Fox says.
