Risk remuneration reform threatens IFAs
Some insurers taking part in the Life Insurance and Advice Working Group (LIAWG) must have “wanton disregard” for the non-aligned advice sector, two practice principals have argued.
“When the names of the self-serving executives are made public, I have no doubt that the IFA network will be abandoning the patronage of their insurance companies due to their wanton disregard for the IFA market,” the submission said.
“It is imperative to delineate the issue of consumers receiving advice that is in their best interests and free of conflicts from the wishes of the Insurers who appear to be hijacking the current debate in order to reduce their cost of sales to improve their profitability,” it said.
In a separate submission, AFA immediate past president and Joe Nowak Financial Services managing director Michael Nowak said the introduction of a level commission regime would have a negative impact on advisers not aligned to the insurers or financial institutions.
"I find it peculiar that this report could suggest that the use of only level commissions that may be as low as 20 [per cent] as this model would not support the provision of quality life insurance advice unless it was subisidised advice from, for example, an aligned provider," Mr Nowak wrote.
He said that the focus of insurers needs to shift from achieving competitive market share to raising levels of insurance among consumers and ensuring high quality impartial advice.
“To date, these companies have largely been spending their marketing budgets on promoting their own brands,” the submission said.
“This is totally understandable, however if significant changes are being proposed then I believe these must be backed by leadership to make a positive impact to achieve this group’s objective.”
“A conscious and co-ordinated effort must be made to grow the market rather than continuing with the practice of undertaking activities to grow their own market share which has largely been the case."
Both advisers questioned whether the interests of the FSC and AFA – who are co-managing the LIAWG process – are aligned or not, given their respective representation of insurers and advisers.