The introduction of opt-in and the banning of commissions will see a significant number of Australian’s refuse advice, according to research conducted by the Association of Financial Advisers (AFA).
On the eve of the release of the final Future of Financial Advice reform recommendations, the AFA has released the initial findings of its consumer research, entitled ‘Risking Everything’, which suggest that consumers will be reluctant to seek insurance advice if they must pay for that advice upfront.
The research found that a commission paid by the insurance provider is both the most common (40.0%) and preferred (32.6%) payment method of those who receive advice on their life insurance.
Further, two in five of those not currently paying upfront fees and not listing it as their preferred payment method, said that they would not be willing to pay for advice in this way, even if it was the only option.
In addition, the study found that 61.4% of members who have utilised the services of a corporate super adviser say that the possibility of losing these services in an opt-in environment is of great concern to them.
“Ultimately what these findings tell us is that the proposed FoFA reforms around the possible banning of commissions on risk products and opt-in will, if implemented, have a devastating effect on ordinary Australians,” said Richard Klipin, AFA CEO.
Advisers, who do a great deal of good work for their clients… need to be paid
“Advisers, who do a great deal of good work for their clients – not only in assessing their needs but also handholding them when life deals them devastating blows – need to be paid.
“They have no problem charging fees for their services; it’s every day Australians, trying to balance ever-tightening household budgets that have a problem paying them,” he said.
The research, conducted by CoreData, surveyed corporate superannuation and life insurance clients.
Other key findings released to date include:
- Around half the survey respondents had life insurance (52.0%)
- Two in five (43.5%) say they are not likely to ever take out insurance
- The average person with life insurance is underinsured. Across all wealth segments, the average self-reported level of cover is just 5x earnings – half of what is recommended by Rice Warner, says the AFA.
The full research report will be released in May.
