A group of life insurance advisers have rejected the view the Life Insurance Framework (LIF) is workable for advisers and that adviser associations adequately represented their interests during negotiations around the framework.
The Life Insurance for Consumer Group, which is made up of an affiliation of advisers and licensees, have released the results of a survey which the group claims reveals the negative impact LIF would have on the clients, employees and small businesses of life insurance advisers.
According to the survey methodology, 5000 advisers were invited to respond with 509 actually doing so during a two and half week window in September.
The survey results, hosted at the Life Insurance Direct website, revealed 64% of respondents preferred an 80/20 hybrid commission model with a one-year clawback, while only 0.2% of respondents said they could work under the 60/20 model proposed under the current LIF provision.
“The conclusion is, consumers will not be able to receive quality, affordable and compliant advice under the proposed 60/20 model,” commentary included with the survey stated, adding that 83% of respondents believed the three-year claw back period would impede their ability to comply with best interest duty obligations.
The survey also found that 77% of respondents disagreed with the LIF model proposed by the Association of Financial Advisers (AFA), Financial Planning Association (FPA) and the Financial Services Council (FSC).
In response to this finding the survey commentary stated “this clearly indicates that even for those who are members with these bodies, the views the relevant association are putting forward to “represent the industry” are evidently quite the opposite.”
It is clear from these results that on the issue of LIF, neither the AFA nor FPA are correctly representative of the millions of customers who seek insurance from an adviser
“It is clear from these results that on the issue of LIF, neither the AFA nor FPA are correctly representative of the millions of customers who seek insurance from an adviser,” the commentary also stated.
However, the survey also found that around 40% or 202 of the 509 respondents were not members of any association and challenged the view that the AFA and FPA were representative of industry, stating “their reach and representation is in fact severely limited”.
“The opinions and impact measurement for non-members must be taken into account prior to major decisions being made that will affect “the industry” with the survey concluding that for “millions of advised consumers, …if their adviser is not a member of any association, their needs have not been represented through the current LIF proposal process”.
The survey also overwhelmingly rejected the suggestion that the LIF proposals would benefit consumers with 92.9% of respondents stating there was no consumer benefit leading the survey commentary to state that “the conclusion for consumers, is that the industry believe that LIF will negatively impact their ability to receive quality and affordable advice, which is contrary to stated objectives of LIF”.