Banks will come to dominate the life insurance industry as individual advisers lose clients through moving to the fee-based regime proposed by the Future of Financial Advice (FOFA) reforms.
That’s the conclusion of a survey by Beaton Research, which asked advisers how much business they will write if commissions on life products are banned.
The research found 77% of advisers expect any ban will result in a decrease in the amount of business they write, with only 2% saying an increase will occur.
“Advisers believe banning life insurance sales commissions will result in widespread changes to current market dynamics, competitive landscapes and consumer behaviour,” the Beaton report says.
“Many (advisers) predict a flight to retirement from the industry due to the challenges of selling insurance with a direct fee to end-customers.”
The banks are predicted to replace this exodus of advisers by using large marketing budgets involving TV or other mainstream media to influence customers.
Advisers are also concerned the banks, large insurers and industry superannuation funds will be able to disguise their fees to distort the true cost of the advice, the report says.
Beaton interviewed 528 advisers from across Australia, with 97% saying they sell life insurance products.
Just over 37% of advisers interviewed had 21 years or more experience as a financial adviser, with life insurance contributing an average 33% of their total income.
The survey also asked advisers how life insurance contributed to their income during the past 12 months, and advisers said it provided 54% of their total remuneration.
07 May
Posted by Allison Thomas as Corporate Finance
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The financial services industry has been unanimous in its condemnation of the Federal Government’s ban on life insurance commissions for products sold through superannuation.
Under the Future of Financial Advice (FOFA) proposals, the ban will apply to individual and group life insurance sales from July 1, 2013.
Financial Planning Association CEO Mark Rantall says the proposal will create a “two-tier system” for life insurance.
“We should be grateful that life insurance commissions have been retained outside superannuation,” he told insuranceNEWS.com.au.
“But we are not sure of the need for commissions to be banned within superannuation, given the underinsurance problem and no evidence of mis-selling.”
MLC Group Executive Steve Tucker says he’s “disappointed” with the life insurance commission ban.
“Commissions have a valid and important role to play as a remuneration option on insurance,” he said.
“Insurance is a very different product to investments, and applying a ban on insurance commissions inside super will have many consequences, which could mean a reduction in the number of Australians who have adequate insurance cover.”
Association of Financial Advisers CEO Richard Klipin says FOFA will increase the cost of advice to consumers and stop them seeking advice.
“One of the unintentional outcomes of FOFA will be that more costs will end up with the client,” he told insuranceNEWS.com.au.
“While clients may opt to put their life insurance outside superannuation, they will lose a number of benefits such as tax relief.”
Mr Klipin says the original intentions of FOFA were commendable, but the proposals have been “a big letdown”.
“The FOFA rhetoric has not been matched with strategy, and consumers have been hung out to dry,” he said.
“While it might be a victory for large superannuation funds and the superannuation lobby cheer squad, it is a dark day indeed for ordinary Australians and their ability to access affordable advice.”
The Self Managed Super Fund Professionals’ Association (SPAA) has welcomed some of the FOFA reforms, but has expressed concern on banning life insurance commission within superannuation.
SPAA CEO Andrea Slattery told insuranceNEWS.com.au the association argued against different rules on life insurance sales.
“There shouldn’t be different forms of advice (for life insurance),” she said. “Life insurance inside superannuation is there for tax
06 May
Posted by Allison Thomas as Corporate Finance
Greek Finance Minister George Papaconstantinou attended the informal meeting in Luxembourg called by Luxembourg Prime Minister and Eurogroup head Jean-Claude Juncker, the ministry said in Athens.
The talks were held “in the framework of the meeting of eurozone finance ministers who participate in the G-20 and the finance minister was called to participate for an exchange of views regarding the financial developments in Greece,” the ministry said in a statement.
The euro dropped to US$1.4470 from US$1.4530 late Thursday. It had traded at US$1.4942 on Wednesday, its highest level since December 2009.
Steffen Seibert, spokesman for German Chancellor Angela Merkel, said that “there is a meeting of some finance ministers that has long been planned. Greec
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