MLC Life Insurance has called for QAR reviewer Michelle Levy and Treasury to look at how more Australians can access financial advice, regardless of their wealth.
This week, MLC’s general manager for retail distribution partnerships, Michael Downey, said “successive and ongoing” regulation is leaving Australians without protection and vulnerable to life events.
“Extensive research shows unequivocally that people have greater peace of mind when they receive quality, life-long, financial advice. But after years of inordinate regulation, however well intentioned, we are haemorrhaging advisers who provide critical advice to clients in their time of need. The trend is not sustainable,” Mr Downey said.
“Unless we take steps to reduce the cost of advice, I have a real fear that only the wealthiest Australians will be able to afford to see an adviser. That means fewer people will have appropriate life insurance protection for their needs and they will fall through the cracks. Where is the fairness in that outcome?”
Through the QAR, MLC Life Insurance is advocating that commissions must continue to remain an option that supports everyday Australians, scaled advice should be tailored to the specific needs of customers and that the cost of obtaining personal financial advice should be tax deductible.
MLC Life Insurance has also called for the contentious Life Insurance Framework (LIF) to be maintained, just weeks after the Financial Services Council (FSC) recommended it be retained “because it has been successful in managing potential conflicts between advisers and consumers by providing an affordable mechanism for consumers to get personal advice on life insurance”.
“We must do what’s right for our customers and their advisers, which means ensuring more advice, not less,” Mr Downey continued.
“The recommendations we have put forward to Michelle Levy and her team are reasonable and we look forward to working closely with them over the coming months to ensure a positive outcome for all Australians.”
Mr Downey’s comments come after the Association of Financial Advisers (AFA) CEO Phil Anderson said that the QAR must look at the “significant layers of bureaucracy” forced on the advice sector in recent years.
On the latest episode of the ifa Show podcast, Mr Anderson said it doesn’t surprise him that many of the QAR submissions issued to Treasury have recommended the regulatory burden placed on planners be reviewed.
“When you think about it, we’ve had such a period of vigorous, almost constant regulatory reform that is just built over the top of each other,” Mr Anderson said.
“So we’ve had the FOFA reforms, we’ve had the LIF reforms, we’ve had professional standards. We’ve had all the recommendations out of the Royal Commission. On top of that, you’ve had DDO and a range of other reforms. It’s all just one layer on top of the other layer.”
Listen to the full episode with Mr Anderson here.
The advice industry needs product partners that are adviser friendly.
I think the life companies don’t know what to do right now – how to get out of this worsening nightmare as their wishes came true. They’ve relieved themselves of 2 things: 1) having to pay high commissions to advisers, their fave wish and 2) new business coming in the front door, NOT something they wished for OR planned upon.
I maintain that if there’s ANY chance whatsoever to resurrect the industry and attract newbies into it we need to enact 100/20 commissions (nothing less will do it), go back to max 1 year write-backs AND consult advisers directly and effectively to ensure COMPLIANCE/RED TAPE burden is cut immediately by 75% minimum. That last part should be as easy as the first two IF life coy CEOs, elites and politicians are prepared to listen and act.
One would think the CEOs would have ample motivation to get behind all these points, given their new businesses divisions are crumbling and in flames – are these people in hyperbaric chambers and cut off form the real world or what?! What on earth are these CEOs getting paid the big bucks for if not to increase sales and ensure their companies survives?!
It still perplexes me how the govt should have ANY influence how a client chooses to pay their adviser for risk advice – it is all fully disclosed now and the life companies have contracts with AFSLs/advisers based on corporations law. Why haven’t the lawyers put the govt/regulators in their place about this by now?!
Don’t forget the other questionable decision, that for APRA to force life companies to release their new substandard income protection policies. Advisers will no doubt be on hook as people complain when their claims are denied or altered (after 2 years) by the insurer, plus it will erode trust in the insurance industry.
Oh, absolutely! Don’t start me on these go-forsaken low quality ‘new’ IP products. They should be outlawed immediately. Client best interest with those? – yeah right! Disgusting!
100/20 commissions is ok, as long as the advisers that take them be upfront with the client that they are the ones that actually pay it.
Well, the SoA exists for this exact reason. It clearly shows the client where the money comes from for the first few years and who gets it (adviser/AFSL). This is a moot point. The only proviso is that ‘in the client best interest, of course, the adviser should also clearly verbally explain that whole situation. personally i would always give the client the option of fees for risk advice or commission. In 99.99% of cases, once I explained properly in a balanced and truthful way, the client would opt for commission. I have screamed this from the rooftops in this and other forums and STILL you will get industry ‘consultants’ and ‘gurus’ insisting that risk advise should be paid using the fee system. POPPYCOCK! It simply does not fly! Every risk adviser knows this by now, even those who are half asleep.
I don’t think the life companies were begging for it but I certainly don’t believe they anticipated the impact it has and will continue to have.
The unfortunate consequence is that a perfect storm was created by ASIC413, the RC then LIF. Couple that with an ageing population of advisers that were just too close to retirement to believe it of value to do the extra study and compliance work for the uncertain future remuneration.
Yes, many younger advisers have stayed and adapting as best they can but nowhere near the sheer size of the cohort of the (with respect) ageing advisers that have walked.
With the FPA posturing incoherently on the issues, CALI not even off the ground what can we really expect from the QAR.
Sadly the pure risk writer would be a forlorn figure at any PD day these days.
Shame really.
I’m not sure that age or education are significant issues in the decline of insurance advice. Plenty of younger, fully qualified advisers are giving up on insurance due to stifling regulation, inadequate remuneration, excessive clawbacks, and the decline in quality of IP products. I think there may be a lot of older insurance advisers who have chosen not to bother with the education requirements, given the industry is being killed off anyway by these other factors.
Absolutely SPOT-ON with all your points, Anon. Very well encapsulated!
So the insurance companies begged for LIF, thinking they would continue to bring in new business, without having to pay advisers fairly for their work. They also lied about churning to get a 2 year clawback. Now after seeing their new business crash they are asking for help. Advisers told them when LIF was introduced what would happened but they didn’t want to listen. Sorry you created this issue, deal with the consequences. It’s pretty easy, make insurance advice easier to provide and profitable, then advisers will write it. Fix this and remove the clawback and you might stand a chance.
Every Insurer, Adviser, & client should ‘slow clap’ ASIC regarding this…. What an absolute failure by the government in regards to the Life insurance industry.
This should be studied in textbooks for years, about government intervention into a free market and the resulting poor outcomes.
Spot on!
Not to mention ASIC licences the bad products and when the product fails they blame the financial advisers the users but claim ASIC did nothing wrong doing but charge annual fees for audits they don’t do anything for….. easy when you government gangsters
Indeed, very well said!
The first reason I stopped risk advising was the LIF which has failed advisers and customers in every way. The second reason was MLC’s appalling service