Advisers Still Uncertain About LIF Changes

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A majority of financial advisers still remain uncertain about key changes that will be introduced as part of the Life Insurance Framework (LIF) reforms, including start dates for commission caps and clawback arrangements and the extent of those arrangements, according to a new adviser survey.

Zurich Financial Services Australia Head of Distribution, Kristine Brooks
Zurich Life and Investments Chief Distribution Officer, Kristine Brooks

The survey, commissioned by Zurich Financial Services Australia and conducted among 200 active risk writers by Lewers Research, found that around half of advisers were certain of the start date of the LIF remuneration changes, including when commission caps would commence.

At the same time, 64.5 per cent were uncertain about the actual types of life insurance remuneration that were to be capped and 69 per cent were uncertain of the rules around grandfathering.

The survey also found that only 43.5 per cent of advisers were certain they understood the new clawback arrangements. Where a strategy had been put in place to deal with clawback, 25 per cent of advisers had put in place a formal retention strategy, 26 per cent were planning to charge a client fee to cover any clawback amount, and 23.5 per cent were likely to use level commissions for larger cases.

“…many advice practices still have a preference for up-fronts, and in this context we would have expected to see a greater understanding of the impending changes…”

The level of advisers who had modelled the impact of the LIF changes to their business cash flow was also below half with only 40 per cent indicating they had done so, however, only 18 per cent of advisers stated they would see more clients to offset any reduction in cash flow. Around one third of advisers indicated they would charge an advice fee to supplement commission payments, and 13.5 per cent stated they would increase existing fees charged alongside commissions.

Zurich Life and Investments Chief Distribution Officer, Kristine Brooks the survey results were of concern with the start date for the LIF changes being less than four months away.

“The industry has had a long time to prepare for these changes, and whilst they ultimately became law in February this year, the detail behind the changes has been known for much longer,” Brooks said.

“It could be that this lag, combined with a sense of fatigue around the whole debate, has seen LIF relegated from being a top of mind consideration,” Brooks said, adding the capping of up-front commissions and doubling of renewal commissions would alter the cash flow of life insurance practices.

“Although we have seen a definite shift towards hybrid commissions arrangements since the LIF changes were legislated last year, many advice practices still have a preference for up-fronts, and in this context we would have expected to see a greater understanding of the impending changes,” Brooks said.



2 COMMENTS

  1. Kristine is spot-on about fatigue. Bashing ones’ head against a brick wall of conflicted big-banks, an impotent conflicted industry body, an incurious conflicted media and an unrepresentative conflicted political community for 2 years is rather tiring. Once the earth was scorched by the above, we needed a nap.

  2. So to date we still are yet to define little things like what a lapse is or what a churn as opposed to best interest is. No idea. Yet the ideology of the product manufacturers with their compliant government ministers and a compromised set of associations such as afa and fpa remains. Everyone except the adviser and their client benefits. Product manufacturers get to increase premiums, have lower offerings to the consumer, pay less for the promotion of product to the IFA’s while asking the IFA’s to service the client, attend to claims as needed for lower remuneration. Nice isn’t it. And as for the useless swill we have as politicians, well they will do the bidding of manufacturers and kick the consumer also we mortgage stress, high taxes and oh yes, higher energy prices which will have a flow on effect to the consumer in terms of cost of living which of course will bite the IFA as the consumer cancels an insurance policy needed for their protection because of mortgage stress and cost of living concerns. We just keep going around on this. Who wins in this scenario?. Manufacturers of product as they get to charge more and deliver less value to consumers and less earn to advisers. Then the associations FPA and AFA as they get to promote courses for us to get through so that we can work in or run a business that is bogged down with mindless levels of compliance for less reward. So who loses.? The consumer as they become more likely to be under insured, and the IFA as per above. The politician, well they go without concern as for all of their incompetence, we reward them with hefty salary and pensions when they leave us with our mess. Our nation deserves better than the rabble we have leading us. Not just at the political level but also at our association level. Wake up folks. This is not how an industry let alone a nation ought be run. With questionable storms in front of us on infrastructure, reform on a structural level of our economy, an ageing population, financial stresses in our clients eyes as they move to retiring, I sometimes think our best days are behind us. I hope I am wrong and would very much like to be proven wrong. but self interest, indifference and apathy with incompetence does not make for a sound footing to build anything on. This seems to be our industry and our country. Sad.

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