While the Deliver Better Financial Outcomes (DBFO) reforms has been a hot-button issue for the advice profession for quite some time now, one of the biggest points of contention between industry stakeholders in regards to tranche two has been the prospect of a new class of advisers, as announced by Minister Jones in December last year, that would allow insurers and super funds to provide simple advice.
The primary argument against this has been that the initial proposition would see businesses prohibited from charging a fee and receiving commission for the service of this new class of advisers, putting advice firms at a disadvantage as they, unlike super funds and insurers, would be unable to absorb the costs.
In a statement on Tuesday night, Jones provided a long-awaited update on tranche two of the DBFO, explaining that licensees will be allowed to charge a direct fee for advice provided by the new class of advisers.
While some institutions will likely opt to charge customers indirectly for the service, this change will allow advice businesses to utilise this opportunity in a financially viable way, which Jones said would deliver “neutrality across different advice models” while expanding the supply of advice.
Responding to the announcement, Council of Australian Life Insurers (CALI) chief executive Christine Cupitt said this is a “big win for all Australians who want to secure their financial future”.
“The positive impacts of these reforms will be felt over generations,” Cupitt said.
CALI has been vocal about their support for this proposition since its initial announcement, arguing it is crucial for helping bridge Australia’s advice gap.
“This had to happen. We can’t continue to have almost 3 and a half million people in this country who are underinsured and unprotected when times get tough,” Cupitt said.
“These reforms will allow Australia’s life insurers to provide a better customer experience to the millions of people they serve every day.
“Of course, this will only happen with strict consumer protections and appropriate qualifications to ensure that this is a reliable, trusted and safe choice for people looking to get advice about their life insurance needs.”
Outlined in the minister’s statement, this new class of advisers will be “restricted to providing advice on products issued by prudentially regulated entities”, helping consumers with matters such as choosing an insurance policy or basic questions about their retirement.
Furthermore, they will be limited to customer-initiated engagement for new customers, protecting consumers against cold-calling and unsolicited advice.
Australian life insurer TAL has also thrown its support behind the announcement, stating that this will make it easier for “financial advisers, super funds and life insurers to support customers through their lives”.
TAL group chief executive and managing director Fiona Macgregor said the reforms will help improve Australians’ access to affordable financial advice.
“We recognise that making decisions on financial products can be hard and believe that Australians should be able to access advice when they ask for it,” Macgregor said.
“Life insurance provides an important financial safety net for millions of Australians. But the reality is, many Australians remain underinsured and under-protected, unable to easily access the right advice to set themselves and their loved ones up for the future.
“Today’s announcement is a win for Australians. These reforms are critical to making financial advice more affordable and accessible.”
Meanwhile, MLC Life Insurance has voiced its support for the proposed reforms, particularly the modernisation of the best interests duty and subsequent removal of the safe harbour steps, as well as the changes to the statement of advice (SOA) and the introduction of the new class of advisers.
MLC Life chief executive Kent Griffin said the firm welcomes the proposed reforms, stating that they provide necessary clarity on the scope of advice institutions will be able to provide while “supporting the range of information and advice options available to [consumers]”.
“These measures demonstrate that simplifying regulations and maintaining strong consumer protections are not mutually exclusive. Together they will provide the industry with the clarity needed to innovate while giving customers greater confidence in securing their financial futures,” Griffin said.
“If fully implemented, these reforms will unlock access to simple advice so people can get what they need when they need it.”
AIA Australia also congratulated the minister on his “ongoing work” to expand Australians’ access to quality advice.
“As a life insurance and advice provider, we want to be able to help more people to understand their protection needs as their lives change, to right-size where needed and to assist with affordability. We believe the government reforms will be a huge step towards meeting an underserved need in the current environment,” AIA Australia chief executive and CALI co-chair Damien Mu said.
The insurer noted the government’s efforts to ensure an even playing field across the industry by making it financially viable for advice firms to employ the new class of advisers.
“Australians benefit when they have access to good advice, and we are so pleased that the government’s reforms will allow a range of institutions and advice models to provide much-needed advice efficiently and effectively,” Mu said.
Despite this update, it is still unclear when draft legislation for the second tranche will be made available.
So it now appears that the Life Insurers who supported the FSC, the Liberal Govt and the conflicted, uneducated consumer groups such as CHOICE in pushing forward the highly destructive LIF reforms in the name of profit are now well and truly on board with now further cutting IFA’s off at the knees in going direct.
For decades these companies supported and championed the professional Risk Advisers and it was what at least appeared to be a 2 way relationship.
How very wrong all those trusted Advisers were to think that in some way, the high quality, professionally placed, advised and managed risk business provided by IFA’s that supported a ” trusted” relationship between insurers and Advisers would ever be respected or truly valued.
What an abysmal disgrace the Life Insurance business has turned out to be, with no value or benefit whatsoever delivered to Australian’s.
The utter disappointment can never be measured.
God knows why Advisors have to pay lisensee fees etc , might as work inthis space
100% rip-off… PD days are a waste of time, almost always someone flogging product. Happy to pay for an annual random compliance audit by ASIC appointed auditor, including checking CPD.
So the Trowbridge recommendations decimate the life insurance industry and now we are all happy to have a new class of planner giving limited advice and all employed via the product provider ….. All care and no responsibility
CALI’s enthusiastic support for the DBFO reforms, particularly the introduction of the new class of advisers (NCAs), reveals a glaring disconnect between their stated goals and the realities of the reforms. Much like the FAAA, CALI seems either willfully blind or strategically naive about how these changes will impact their stakeholders and the broader insurance market.
CALI’s Misstep: Cheering on Their Own Decline
CALI hails these reforms as a “win for Australians,” emphasizing increased access to advice and improved customer experience. However, their focus on short-term optics overlooks the long-term consequences. The NCAs employed by industry super funds are not going to bolster the retail life insurance market—they will instead amplify the dominance of group insurance products within the industry fund ecosystem. This is a direct threat to the retail insurance businesses that CALI represents.
Industry super funds already dominate group insurance, leveraging collective charging and member retention strategies to lock in coverage. With NCAs now in the mix, they will be positioned to sell more group insurance policies under the guise of “simple advice.” This will further erode the market share of retail life insurance products, leaving CALI’s stakeholders—retail insurers and their advisers—struggling to compete. How CALI fails to see this is baffling.
Are NCAs the Answer to the Insurers’ Problems?
CALI seems to believe that NCAs employed by life insurers will somehow address the “advice gap” and revive their struggling premium inflows. This assumption is fundamentally flawed. Even with the ability to employ NCAs, life insurers face an uneven playing field. Industry super funds have a built-in advantage: collective charging subsidizes advice costs, and NCAs will naturally steer members towards in-house solutions, including group insurance.
Retail life insurance products, which typically require more tailored advice, cannot compete under these conditions. Rather than leveling the playing field, these reforms deepen the divide, leaving retail insurers unable to match the pricing and accessibility of group policies sold through industry funds.
The Bigger Threat: Industry Super Fund Dominance
The real beneficiaries of these reforms are the industry super funds. Their NCAs will act as extensions of their existing ecosystem, promoting group insurance and further consolidating their control over members’ financial decisions. This is a direct assault on the retail insurance sector, which CALI ostensibly represents. By championing these reforms, CALI is effectively cheering on policies that accelerate the decline of its stakeholders’ market relevance.
Does CALI Understand the Implications?
It’s difficult to determine whether CALI genuinely misunderstands the implications of these reforms or is choosing to ignore them. If they do understand, their support reflects a short-term focus on appearing aligned with government initiatives at the expense of their members’ long-term viability. If they don’t understand, it raises serious concerns about their ability to effectively advocate for the industry they represent.
A Broader Pattern of Complacency
CALI’s stance mirrors the FAAA’s complacency. Both organisations appear more interested in presenting a united front with the government than in critically assessing the impact of these reforms on their respective sectors. By focusing on narrow benefits like simplified advice or increased access, they ignore the larger structural shifts these reforms will enable—shifts that heavily favour industry super funds at the expense of retail insurers, independent advisers, and competition as a whole.
The Reality of the DBFO Reforms
The introduction of NCAs is not about expanding advice access or helping underinsured Australians. It’s about entrenching industry super funds’ dominance and enabling them to offer vertically integrated advice that locks members into their ecosystem. Life insurers and retail advisers will be left with fewer opportunities, shrinking markets, and increasing irrelevance.
CALI’s Failure to Lead
CALI’s endorsement of these reforms represents a failure of leadership. Instead of defending their stakeholders’ interests, they have aligned themselves with policies that will hasten the decline of retail life insurance. Their inability—or unwillingness—to critically evaluate the long-term consequences of these changes leaves their members vulnerable to an increasingly monopolistic market dominated by industry super funds.
In short, CALI’s support for the DBFO reforms is either a gross miscalculation or a complete misunderstanding of the competitive dynamics at play. Like the FAAA, they seem asleep at the wheel, oblivious to the fact that these reforms will harm the very stakeholders they are supposed to represent.