The recently announced life/risk reforms for financial advisers struck a reasonable balance to guarantee the ongoing viability of personal risk advice compared to initial industry recommendations, DEXX&R said.
The DEXX&R Market Projections Report pointed out that the advice channel has been the single largest source of new business in the retail market.
“The recently announced life reforms, while subject to further review, strike a reasonable balance in capping up-front commissions, extending minimum adviser responsibility periods and ensuring ongoing viability of personal risk advice, compared with the risk of severe disruption to the advice channel combined with increased premiums payable by consumers implicit in the initial industry recommendations,” the report said.
While new sales of risk business had been flat in the past 12 months, the continued rise in in-force premiums was due to re-pricing of current business in both retail and group markets.
Individual lump sum in-force premiums were predicted to rise by 9.2 per cent per annum from $6.2 billion at June 2015 to $15 billion by June 2025, while group risk in-force premiums were projected to increase by 9.6 per cent from $5.7 billion at June 2015 to $14.1 billion by June 2025.
Meanwhile, the retirement income market was set to have the largest growth in funds under management (FUM) over the next 10 years, with total assets in the markets projected to increase by 7.1 per cent.
The market would grow from $608 billion at June 2015 to $1,210 billion in June 2025, with retail and industry fund pension accounts projected to have the largest growth over the next 10 years.
Retail allocated pensions made up 27 per cent of FUM at $165 billion as at June 2015, but this is projected to grow to $406 billion, or 34 per cent of total assets. Industry fund pension accounts currently held 6 per cent of total FUM, or $34 billion, but this was set to grow to $142 billion in FUM, or 12 per cent of total assets.
The self-managed super fund sector, however, was set to shrink in the pension drawdown phase, from $336 billion (55 per cent of total assets) in FUM as at June 2015, to $523 billion, or 43 per cent of total assets in June 2025.
