The new Life Insurance Framework (LIF) demands that many life/risk advisers will need to change their business models and that process should already have begun, according to a specialist financial services lawyer.
In a column to be published in the next edition of Money Management, Cowell Clarke partner, Catherine Evans said the LIF changes would most likely require a complete review of adviser’s business models and may involve confronting some difficult home truths.
“These changes are significant and could impact quite heavily on revenue streams for financial advisers who rely on insurance commissions for a key source of profit. The big question facing advisers will be how to make up for this loss of revenue,” Evans said.
“While there is a staged transition period to encourage a smooth transition, fundamental changes to one’s business model is not something that can be left to the last moment,” she said. “It will still require substantial forward planning that must begin now if not already in progress”
Evans said the insurance remuneration changes were likely to alter the landscape of the industry in a similar fashion to the way the Future of Financial Advice (FOFA) changes had impacted the broader financial planning industry.
“In anticipation for advice provided after 1 July 2016, it is advisable for businesses to start considering revenue models to minimise the impact of reduced upfront commissions on business operations and cash-flow,” she said. “Despite these changes, insurers and advisers will be able to grandfather existing remuneration arrangements entered into up until 30 June 2016.”
