Kicking off 2024, in January the Financial Advice Association Australia (FAAA) declared that the advised life insurance sector was “in crisis” following a discussion paper by the Australian Prudential Regulation Authority (APRA) on the Insurance Data Transformation (IDT) project, which the FAAA argued would have flow-on effects for the industry.
DBFO tranche 1
Discussions around tranche one of the Delivering Better Financial Outcomes (DBFO) reforms dominated the first half of the year as March saw the government introduce the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Bill 2024, the first bill to come out of the Quality of Advice Review, though this proved to be rife with drafting issues.
Despite the challenges and delays, tranche one of the DBFO was finally passed on 4 July to a chorus of welcomes from across the risk industry, with the Council of Australian Life Insurers (CALI) praising it as a “good first step” to addressing advice accessibility in Australia.
Though others weren’t so pleased with some of the final details of the bill, with the Association of Independently Owned Financial Professionals (AIOFP) executive director Peter Johnston arguing that the fee forms brought in with the legislation were “bad news” for risk advisers.
Not enough risk advisers; Talking about commissions
The lack of advisers providing risk advice continued to be a topic of conversation throughout the year, with Adviser Ratings’ February edition of the Musical Chairs Report revealing that just 480 advisers had produced half of the new business for 2023.
In order to combat this, Katherine Hayes, director and financial adviser of Hayes and Co Insurance Services, told ifa that, for the sake of the risk advice sector, insurance providers should employ “limited advice providers” to fill the gaps, despite many advisers railing against this suggestion.
Commissions were also a recurring topic, with PPS Mutual chief executive Michael Pillemer and shadow financial services minister Luke Howarth both raising the issue on separate occasions, raising similar arguments about the need to restore risk commissions to pre-LIF levels as a means of resurrecting the sector.
DBFO tranche 2: Here we go again
Speculation about tranche two of the DBFO was, of course, a hot topic in the latter half of the year as the profession awaited an update on the more substantial reforms.
The prospect of a new class of adviser (NCA) caused considerable uproar among professional advisers, though CALI argued on several occasions that they should be able to provide members with simple advice as a form of “basic customer service” as Australians struggle to access an affordable adviser.
December saw CALI’s wish come true as Financial Services Minister Stephen Jones delivered an update of tranche two, announcing, among other things, that NCAs would be on the docket for the coming reforms with insurers, super funds and licensees given the opportunity to employ NCAs and charge clients for their services.
This was particularly significant due to the initial announcement stating that they would be unable to charge for their services, leading to considerable outcry from industry stakeholders. With licensees and institutions seemingly pacified, Jones’ announcement was met with a hearty round of applause from insurers and super funds alike, though the jury is still out on how this will pan out for the advice profession.
Ending the year with a bang, MLC Life and Resolution Life Australasia announced they will merge, following Nippon Life Insurance Company’s acquisition of the latter, to form Acenda.
Despite such a big year of change, 2025 is set to be no less exciting as speculation about when the government will release a draft of tranche two and the looming federal election remain top of mind.
Why write risk? Commissions so low I don’t work for free and clients aren’t often in a position to afford increasing premium with fee for service.
Amateur.. Leave risk advice to the specialists..