Speaking on a recent ifa podcast, Eugene Ardino, CEO of Lifespan Financial Planning, said the LIF has certainly been one of the most damaging pieces of legislation over the last decade.
In relation to the Quality of Advice Review (QAR) and its recommendations regarding life insurance, Mr Ardino said he is “glad” nobody is suggesting that it needs to be made worse.
“Everybody’s got mixed feelings about commissions, but at the end of the day, what’s more important? More consumers getting access to insurance advice?
“Because at the moment, unless your premium is quite high, advisers are just walking away from that advice because there are too many risks for the adviser. It’s a ton of work and consumers basically don’t like to pay fees unless they’re in the wholesale client area,” Mr Ardino explained.
Expounding on the topic, he noted that high-income earners are generally “quite comfortable” paying those fees.
“With all due respect, everybody wants those clients, but they generally have the capacity to pay whatever they need to pay to get the right level of adviser,” Mr Ardino said.
“If they want an adviser with lots of tertiary education they can afford that. I don’t know that we need to reform the industry just for them. They’ve got the ability to go and shop around for as long as they need to,” he continued.
“I think we should probably be balancing that with accessibility and also recognising that when consumers don’t get insurance advice, when they don’t buy insurance, that is going to strain the government, that’s going to strain the welfare system, and everybody hurts from that.”
Back in November, the QAR reviewer, Michelle Levy, published a snapshot of the data the QAR had considered on general insurance and life insurance, and a set of proposals.
Among those proposals, she suggested financial advisers, who provide personal advice to retail clients in relation to life risk insurance products, be required to obtain their client’s informed consent, in writing, in order to be able to receive a commission from a product issuer.
Subsequently, concerns were raised by advisers in relation to what additional obligations would apply in relation to disclosure, consent and ongoing services.
In November, in a post to his LinkedIn profile, the chief executive of the Association of Financial Advisers (AFA), Phil Anderson, revealed that Ms Levy confirmed at a meeting with the group that the consent requirement “would be a [one-off]”, and not an annual requirement.
“Where consent has previously been obtained from the client, it would not be required again,” he said.
To hear more from Mr Ardino, click here.
I want a Life Insurance CEO to have the courage and conviction to stand up and state that LIF has been successful for their company and their policyholders and to state exactly why this is the case.
C’mon…you had the conviction to vote for it, so let us know how it has gone for your company and the Life Insurance industry & for everyday Australians.
The whole issue with LIF is that the ease of providing risk advice was supposed to be a trade off for the reduction in upfront commission. I estimate the time taken to provide compliant advice that has a 50% chance of being supported in an AFCA complaint has more than doubled since it was introduced (you can’t make it more than 50% with AFCA). Another example of outright lies by numerous parties including the AFA, FPA, product providers and ASIC.
Well said Eugene. Mortgages are at an all time high and insurance at an all time low, the result of the very poor LIF legislation. If under insurance is the effect, what is the cause and subsequent remedy?
I really don’t see a problem. Unless dealing with complicated business or personal structures most insurance can now be done via direct deliver models. The current tools available on line are very good. The only thing that needs to be done is for any commissions to be stripped out to bring the premiums down to be consistent with a “self service” model. Sure that means advisers will be competing for a much smaller pool of clients but as with most industries the good advisers will benefit – its all part of change.
Yeh right let’s let the Banks and Life Companies flog to the masses Dodgy Direct Life Insurances that are:
– Unadvised
– more expensive
– worse conditions and clauses that make it much harder to claim
& No Adviser to help at the most critical time, being a claim.
The one good thing the RC did was mostly kill Dodgy Direct Life Insurance and it should NOT be allowed again.
My worry is CALI. If you look at the CEO’s that started CALI they are committed to retaining the LIF rates as is and were on the FSC board when these rates were pushed through. CALI has also admitted to wanting to gain control of the Life insurance code (just when it is becoming enforceable!). The BDM’s tell us that new business has died and obviously the LIF is to blame. My worry is that CALI will be a way for companies to get back to the bad old days of selling junk direct policies and making claims harder. Advised risk is good for the customers and keeps the insurers more honest on product design, underwriting and claims. I think the mindset at the top is not to allow themselves to become reliant on advisers again otherwise why have they not been lobbying for a return to a reasonable commission level when its so obvious it would restart new business? Yes they say they want to see commissions retained but the silence is deafening on a return to reasonable rates.
LIF is just another example of product providers and other self interest groups coming up with a lie (policy churning) to suit a narrative that they thought would benefit them (paying advisers less which they would pocket, while increasing premiums for clients which they would pocket too). It blew up in their face when clients and advisers walked away from their products. Advisers in particular made it clear what would happen upon enacting LIF, no one listened and exactly what was predicted did occur. LIF is a very bad piece of legislation that hurt clients, advisers and ultimately the product providers. This is what happens when you don’t listen to the two most important people in the advice process, clients and advisers. Unfortunately this happened again with the royal commission, and everything is pointing to it happening again with the law reform review. But the good news was academics, public servants and lawyers got paid enormous fees to produce such failures with no accountability or recourse.
Yep, couldn’t agree more with this article. LIF was an unnecessary and unmitigated disaster. The ‘people’ (to be kind) responsible for it should have civil (if not criminal) charges leveled against them. I’m talking politicians, certain judges, certain special interest lobby groups and certain individuals at life companies complicit. I am referencing the resultant suicides, clients being orphaned. adviser businesses ruined, clients without advice and a litany of other negatives for our once-great industry. All ruined by the folly of the above creatures simply seeking a job at the next election through convenient soundbites along the way. Why on earth can’t at least the politicians responsible be brought to justice? If it was a corporation behaving like this heads would roll and bonuses recalled. Why not with our politicians who play God with people’s livelihood AND lives?!
here we have more empirical evidence the conclusions reached for the provision of life insurance by the LIF review were manufactured before the reforms were enacted. The retail life insurance offering for clients (for the most part is dead in the water) too much risk for the adviser – but more to the point we now have a massive cohort of people that don’t have cover that would otherwise have the cover. totally laughable- if it didn’t affect the client’s financial position. Shame really.
Tell that to the businesses that had corporate super clients! Income went to zero, some with debts to service.
I thought consent was provided when an Authority to Proceed was signed after accepting an SOA with commission fully disclosed! Doesn’t Michelle levy already know this?