While ‘churning’ needs to be addressed, a lobby group of young advisers has warned that the FSI’s proposal on upfront risk commissions will further Australia’s “underinsurance problem”.
In a statement responding to the Murray Inquiry final report, the XY Adviser executive committee has outlined its response to a number of issues raised, including the proposal upfront risk commissions are no higher than ongoing.
“XY Adviser agrees that ‘churning’ of insurance policies is an issue that needs to be addressed,” the statement said.
However, it adds that the “proposed changes to insurance premiums will require most financial advisers to charge a fee directly to their clients for insurance advice to cover the costs of providing this advice” which, in turn, “will result in a lower take up of insurance by middle and lower income Australians, further increasing the existing underinsurance problem in Australia”.
“An unfortunate consequence of the proposal is that advisers will be only able to cater to the top end of the market, which does not address the churning issue,” said XY Adviser co-founder Ray Jaramis of Treysta Wealth Management in Sydney.
More broadly, fellow committee member and AP Financial Solutions adviser and mortgage broker Adrian Patty said the lobby group welcomes the report in general, and that XY Adviser endorses any policy changes that will result in better outcomes for the industry and clients.
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