The coalition has hinted that it will not eradicate commissions paid on life insurance products, acknowledging that financial advisers' bottom line has struggled since the introduction of the Life Insurance Framework reforms.
While the government's priority is to align financial advisers' professionalism and remuneration structures with other professional industries, Senator Jane Hume is not taking the future viability of commissions paid on life insurance products out of the equation.
"That doesn't mean that there is no future whatsoever for commissions - not at all. Parliament has continued to allow commissions in life insurance and FASEA has acknowledged that commissions are an acceptable form of remuneration," Hume told yesterday's Financial Services Council Life Insurance Summit.
"I recognise that a flat fee charged for advice can be a challenging business proposition."
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In the same breadth, Hume announced the merger of the Quality of Advice and LIF Review, which aims to provide Australians access to high quality and affordable financial and insurance advice.
"Consumers struggle to understand what they are paying for. They may not have the cash to pay upfront themselves. And advisers need to be paid for their work, work that is fundamental to the proper functioning of the life insurance market."
Association of Financial Advisers acting chief executive Phil Anderson, who also presented at the event, said the reality is that advisers are no longer able to work with clients that generate smaller premiums.
Risk specialists are also concerned about premiums increasing, he said, and they have to work hard to convince clients to stay committed to their life insurance policy.
Anderson predicts that more advisers will leave the industry - including risk advisers - who essentially are distribution arms for life insurers.
According to Rainmaker analysis of the ASIC Financial Adviser Register, 5142 advisers ceased in the 12 months to April 14.
Anderson is urging the government to include clients in the review - who are often the "missing voice" in regulatory reforms.
"Ask them, when given the choice between commissions and upfront fees, what would they choose?
"We know from experience and advisers who run practices [that] clients invariably choose the commission option," he said.