Risk advice to have ‘significantly reduced’ by 2030
A whitepaper suggests there will be major reduction of risk advice by 2030, and that only clients with strong cash flow who can afford upfront advice fees will receive such advice from their adviser.
The knowITdigital whitepaper noted the future of life insurance advice will depend on ASIC’s response in 2021 to the Hayne royal commission’s recommendation that commissions be abolished entirely.
It said the abolition of commissions on life insurance products would destroy the business model used by advisers recommending 99 per cent of intermediated life insurance policies.
“While advice on life insurance products can still be provided on a fee-for-service basis, there is little evidence such a model would generate enough profit to sustain an advice business,” the whitepaper said.
“Similarly, there is little evidence that as many consumers would be willing to pay upfront advice costs commensurate with the planner’s efforts as are currently happy to pay the delayed costs provided by the commission-based model. If anything, research has shown upfront fees to be a disincentive to consumers.
“When this complete transformation of the industry is combined with the significant education and training requirements currently being overseen by FASEA, it is fair to wonder how many advisers who currently specialise in life insurance advice will remain in the industry in 2030.”
The whitepaper said online advice tools, such as insurance needs calculators and policy comparison sites, will have steeply risen in availability and popularity.
Further, it said lower-means consumers will likely have insurance promoted to them through avenues no longer encompassed by the term “financial advice”, and that it is likely they will come from such sources such as intelligent direct marketing, robo-advice products and consumer-driven information sources such as comparison sites.
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