The AIOFP has stressed to Assistant Treasurer and Minister for Small Business Kelly O'Dwyer that if the Life Insurance Framework is introduced in its current form, it will hit "independent" advisers hard and see the rise of institutional businesses.
In a letter, AIOFP executive director Peter Johnston and chairman Peter Daly urged Ms O'Dwyer to consider the implications of the reforms for advisers, and especially for those who are small business owners.
"A very likely future market prognosis will be domination by the institutional vertically integrated models selling their own products through in house conflicted advisers and direct flawed internet/telemarketing sales," the letter said.
"The Independent adviser numbers will be devastated as the proposed structure is commercially unsustainable.
"We urge you on behalf of consumers, small business and the nation's future wellbeing not to allow the Institutions to act in the best interests of its shareholders (and bonuses to its Executives) but act in the general [community's] best interests by adopting [a compromise]," it said.
The AIOFP also conceded that the "ideal" future risk adviser will work on a fee-for-service basis; however, the association argued that both the industry and consumers are "not ready for this environment" just yet.
"Consumers are simply not accustomed to paying for risk advice and having institutions offering flawed policies directly to consumers is perpetuating precisely the same structure and culture, but with consumers the big loser," the letter said.
"History generously demonstrates that despite the initial political rhetoric about 'consumer savings' from price reductions, this will very likely not eventuate.
"Premiums are likely to increase over time, consumers will lose choice, protection and not get professional unbiased advice and assessment of their circumstances," it said.
ifa understands that the AIOFP met with Ms O'Dwyer on Monday 26 October.
During the meeting, the AIOFP called for the commission rate to be changed to 80/20 and for a clawback period of two years instead of the proposed three.
ifa previously reported that representatives from the AFA, FPA and the FSC met with Ms O'Dwyer to work out the specific details of the Life Insurance Framework, such as a definition of the clawback policy.
APRA-regulated super funds could create better member outcomes by taking the sam...
Australian high-net-worth investors lost more money than their global counterpar...
The negative impact of COVID-related market volatility on clients’ super inves...