The harsh reality facing the life insurance industry is that even before the Australian Securities and Investments Commission (ASIC) completes its review of the Life Insurance Framework (LIF) specialist life/risk advisers are choosing to leave the industry.
As Money Management reported in early February, those life/risk advisers remaining in the industry have rarely been busier but less life insurance business is being written for the simple reason that many older risk advisers are leaving the industry and fewer generalist advisers see the economic benefit in writing risk.
This much is also being recognised by the major life insurers who recognise that not only has the LIF been an issue but also the impact of the Financial Adviser Standards and Ethics Authority (FASEA) regime and particularly the adviser exam. They recognise that some older and very experienced life/risk advisers are timing their retirements around the timetabling of the final sittings of the exam.
Asked to comment on the situation, TAL chief executive, Brett Clark, said the LIF review was coming at a time when there were already unprecedented pressures on the financial advice sector, as advisers were required to evolve their business and service models to adapt and continue meeting the needs of clients, in an environment of strengthened regulatory and educational requirements.
“As we look towards the post-implementation review of LIF, these are crucial considerations, and it is important that the review considers a wider context of change for the life insurance industry; that consumers continue to have choice and access to life insurance advice and products; and that the LIF exercise avoids a narrow review of simply whether life insurance commissions are good or bad,” Clark said.
“TAL believes strongly in the importance of a vibrant financial advice sector that offers high quality financial advice to customers. We are taking our own steps towards better supporting financial advisers, and the TAL Risk Academy is one example of that, but we are also working with other industry participants and stakeholders to ensure that the collection of changes being made to this sector, while improving outcomes for consumers, does not reduce access to those who depend on or benefit from it.
“Central to that is a well-considered commission model set at reasonable levels, with controls and consequences for poor behaviours, which strikes the right balance between cost, clear and transparent disclosure, consumer protection, and consumer accessibility,” Clark said.
He said the optimal outcome from the LIF review would be confidence.
“Confidence among both advisers and life insurers that the regulatory landscape supports both good consumer outcomes as well as a sustainable and effective financial advice sector. The effect of that will be advisers and insurers collectively innovating and investing with confidence, which has been sadly lacking in recent years,” he said.
“As many Australians face a more uncertain economic and financial outlook, and with increased pressures on our public health systems as well as households, the sustainability of a high-quality financial advice model and the role of financial advisers has never been more vital.”
ClearView managing director, Simon Swanson, also acknowledged the impact of the FASEA exam on the overall texture of the industry, suggesting that much would depend on how it appeared after the final exam sittings in the November.
He acknowledged the impact of specialist advisers choosing to leave the sector alongside the cost pressure being felt by the industry.
The sentiment among life/risk advisers was explained by two of the most experienced executives in the sector – Bombora Advice chief executive, Wayne Handley, and outspoken Synchron director, Don Trapnell.
Trapnell confirmed that specialist life/risk advisers working within the licensee were busy but that, overall, less business was being written while Handley said that specialist life/risk advisers were busy and in many instances their workload was increasing as non-specialists advice firms referred clients to specialist risk advisers.
“It’s a two-speed economy for us,” Handley said. “People who have the specialist capabilities are busy because of the referral work coming from those who don’t.”
“I’ve never seen opportunities more robust than they are at the moment but we’re losing guys because of the Financial Adviser Standards and Ethics Authority (FASEA) and regulatory requirements,” he said.
Trapnell, who has been a long-standing advocate of specialist life/risk advisers being subject to different education requirements to general advisers, said the real test would come when the time ran out for life/risk advisers to sit the FASEA exam.
“Some of the old and bold are simply not going to do it [the exam],” he said.