In a communication to MPs on Sunday, AIOFP executive director Peter Johnston pointed to recent Plan for Life data indicating an 8.1 per cent year-on-year decline in new risk income sales, and a 9.2 per cent decline in individual risk lump sum sales in the 2020 year.
Mr Johnston said current declines in the risk market were “not sustainable” and could lead to the “collapse” of the retail life insurance channel.
As ASIC gears up for its review of the LIF commission settings in 2021, Mr Johnston said politicians were showing more interest in being educated about the impact of commission reductions, and their possible removal, on the life insurance market.
Mr Johnston said the development of the LIF had been driven by “institutions wanting to cut advisers out of the consumer relationship to sell them inferior insurance cover via telemarketing [and] online”.
“Thankfully commissioner Hayne exposed the sinister side of direct insurance marketing, resulting in the institutions leaving the industry, but unfortunately the LIF is still with us,” he said.
More broadly, Mr Johnston said the cost of advice had escalated due to “heavy, unfair and unnecessary compliance burdens placed on advisers that consumers are paying for”.
“Poor institutional behaviour within their financial advice culture exposed in the royal commission, combined with $40 billion worth of failed funds managed by them since the 1980s strongly suggests the financial adviser community has been unfairly dealt with whilst others avoid accountability,” he said.
Mr Johnston said the non-aligned advice community was in “desperate need” of political assistance to “eliminate the unintended consequences” of excessive regulation.
RIP Farsea. June 2021 cannot come soon enough.
Well when the adviser numbers are below 20K in 2021 and to 16K BY 2025. THE FSC, AFA AND FPA CAN HAVE A BIG PARTY ….. RISK advisers obliterated tick. Cleaned up the industry and turn out the lights on the way out. Giddy UP..
At least guys like Don at Synchron and guys like Peter Johnston are speaking up – all power and credit to them. This idiocy like LIF will indeed collapse the retail distribution through advisers. It is not rocket science to see and it is gobsmacking that it is still in play. This is NOT client best interests and the politicians are hypocritically responsible. The old “Im right Jack” has never before had a stronger showing among the elites ‘prescribing’ what is right for an industry of which they have little understanding.
Agent 86 you have nailed in exactly for so many risk advisers!!!
A little too late. These comments should have been coming out years ago from all the advice bodies. Still it seems AIOFP are the only ones wiling to stick up for advisers sadly..
. . . and Synchron – all of Don’s commentary is to be applauded!
The advice “gap” has simply been created by regulatory overload. Funny how most teenagers can afford to pay $55 a month for the most basic mobile phone plan (without annual opt-ins), but somehow this is too expensive for the average person seeking ongoing support for their super fund or to get retail insurance advice. When the Govt over-regulates, interfering in the market economy, services become scarce. Epic fail.
Well said
hear hear
Hard not to say, “I told you so,” but advisers have been screaming warnings about this for years…..
The implementation of LIF has not achieved it’s intended objective of enhanced consumer outcomes.
Firstly, the cost of providing advice has escalated considerably due to over regulation and duplicated compliance requirements and secondly the financial incentive or profitability for advisers to place new insurance business has been reduced dramatically.
This has now led to a lack of access to experienced risk advisers willing to take on new clients, a significant decrease in volumes of new business inflows and a rapidly increasing level of claims.
There is now less and less premium income to assist in offsetting the outgoing costs of meeting escalating claims expenses.
This is a recipe for disaster.
Like any business model, once the income can’t meet the outgoings, it is on a downhill run.
What needs to be very clearly understood here is that it also not simply about experienced advisers not placing new business or leaving the industry.
This is also about risk advisers being targeted and relentlessly accused of practices that in the main are not the day to day practices of quality, experienced advisers at all who are dedicated to providing high levels of service,advice and care to their valued clients.
As a consequence, many adviser’s self confidence, self esteem and self worth have been damaged .
Many feel they have been very unfairly treated over a number of years and when once they were positive, enthusiastic and proactive are now dealing with feelings of anxiety, depression and lack of direction and purpose.
The impact of the unfairness of the LIF model is not simply about the level of remuneration required to ensure the placement of quality risk insurance advice can be profitable for the adviser and affordable for the consumer.
This is also about the breach of respect that once existed between trusted advisers and the insurance companies they placed their client’s business with.
During the LIF negotiations, advisers very strongly felt let down and forgotten by the very companies they had long standing relationships with and what they thought was mutual respect for that relationship.
The Life Insurance companies let the advisers down and should have fought much harder .
The problem was that for many of them, their own potential profitability was taking precedence over those relationships. It was about corporate greed.
So the projected outcome of LIF that was so clearly and passionately argued against by so many knowledgeable and experienced industry experts is now coming the full circle.
LIF has been a failed and very costly experiment based on manipulated data and an ideological opposition to commission based remuneration from John Trowbridge, the FSC, consumer activists groups like Choice and CALC academics and ASIC.
The LIF was implemented for all the wrong reasons.
If something is not done right now to ensure the provision of quality risk insurance advice to consumers can be delivered on a profitable and sustainable basis and consumers can receive advice on an affordable basis then the current status quo will continue to rapidly worsen.
The destruction of the advised and retail life insurance business is not far away unless someone with some courage and clarity of thought can admit a gross error has been made and a solution implemented.
The value to client’s, consumers and the economy that can be delivered through high quality risk advice and financial protection for Australians is invaluable.
But it has to be profitable and sustainable to all parties and affordable and accessible for consumers.
This report is correct in all aspects ! Do the Life Company executives and others really care? So Sad to see a great industry being bought to it’s knees!
And where is the FPA and AFA activity/strategy re this matter……crickets??