ClearView Wealth MD, Simon Swanson, has told the House of Representatives Standing Committee on Economics that the life insurance industry’s long-term future hinges on a thriving advice profession.
Swanson told the committee in his opening statement that when advisers do well and the advice industry is strong, customers have improved access to quality advice and society benefits.
He also told the committee that reducing the compliance burden will go some way to improve the situation and that:
- Clearview maintains that people should be able to choose how they pay for advice – fees, commissions or a combination of both
- In addition, advice fees should be tax deductible
- ClearView urges the government to consider making life insurance premiums tax deductible “…like they were in the 1970s, when more Australians held adequate cover”
Clearview also welcomed the government’s decision to combine the life insurance and quality of advice reviews and “…we expect Treasury to find that the quality of life insurance advice has increased significantly in the past few years, reflecting the fact that advisers are more educated and qualified than ever before”.
…the industry must accept responsibility for its part in exacerbating the underinsurance problem…
He had earlier outlined to the committee how Australia’s underinsurance gap has widened over recent decades, noting that the industry must accept responsibility for its part in exacerbating the underinsurance problem. “Complacency has led to under-investment, mismanagement and lack of innovation.”
However, he noted that in recent times, over-regulation has also played a role. “Simplifying the way people buy life insurance would pave the way for digital solutions through both an adviser and directly which would provide greater access to the benefits of cover.”
Swanson said that currently, the compliance burden on advice businesses and major changes to adviser remuneration under the Life Insurance Framework is driving up the cost to serve and, in turn, the price of advice. “This has created serious unintended consequences for families, society and the government.”
Congratulations Simon – at last someone had the kahunas to stand up and say PUBLICLY what has to be said. I’m constantly amazed that the other CEOs of the life offices still apparently think there is still a short-term advantage to be had in letting LIF run just a little bit more at 60/20. It seems the CEOs, hiding under the skirts of the FSC, and not quite prepared yet to bite the bullet and PUBLICLY support 80/20 when they meet politicians.
Every adviser that has knowledge of statutory number one funds knows fully well that we are heading for disaster if new business for new lives doesn’t pick up. The only way that will happen is that if advisers are encouraged/incentivized/bludgeoned into writing fresh new fully underwritten business with a one year clawback. Everyone except ASIC, and some of the relevance-seekers in the Labor Party left seeking to perform politically for their masters in the industry funds, knows that advice fees are not accepted by todays insurance consumer.
So the tax deduction matter is a bit of a red herring because the client will have to pay the fee first, out of their pocket, and they don’t like that. Incidentally the matter of tax deductibility for financial adviser fees is one of the oldest arguments that is periodically put to Treasury. Their answer is always the same – ” that means less revenue, so what services are we cutting”
Unless advisers can be appropriately remunerated for advice AND implementation without the severe capital risk of a two-year clawback, there won’t be a life insurance industry in five years or even less.
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