Address underinsurance with simplified advice process

Simplifying the advice process is needed to address the underinsurance issue Australia has, according to ClearView.

Speaking at a parliamentary committee, ClearView managing director, Simon Swanson said choosing the most appropriate insurance product for a consumer was difficult and needed a complex conversation with an adviser but that the process needed to be simplified though digital solutions.

“Our view is, if we can simplify the advice process, have best interest duty there, still have an adviser do the right thing by the customer that is fundamental,” he said.

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Swanson noted that as soon as a consumer was asked what insurance they wanted it was immediately personal advice.

“As soon as you go into advice you then have to do a full fact find – their needs, aspirations and so on – then you do a needs analysis, and then you do a statement of advice (SoA),” he said.

“Which I’m sorry to say an SoA is between 30 to 50 pages depending on the situation and if you include super it’s probably 80 pages and to be frank they are not a comprehensive document or a sense of ease for a customer to see.”

He said over-regulation had played a role and that the compliance burden on advice businesses and major changes to adviser remuneration under the Life Insurance Framework drove up the cost to service, and the price of advice.

“Advice affordability is deteriorating, at a time when awareness of the need for life insurance has never been greater, due to COVID-19 and record high levels of household debt. We believe that the life industry’s long-term future hinges on a thriving advice profession,” he said.

“When advisers do well and the advice industry is strong, customers have improved access to quality advice and society benefits.

“Reducing the compliance burden will go some way to improve the situation. We maintain 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.”

He noted there were less Australians with life insurance cover and the impact would be Australians falling back onto government social security was “not a good outcome” for society.

“We are working through to redesign products to make it more affordable but deliver on the claims outcome,” he said.

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I don't disagree but why should only risk insurance get the carve out? Will not retirement planning being denied by regulatory overreach for middle Australia not cost the country even more?

The risk advice process doesn't need an overhaul, the whole system does. Let's start by removing ASIC, no true progress can be made until that cancer is exorcised.

Great job Frydenberg, ODwyer, Hume, LNP, ASIC & Choice.
You must be so proud to protect consumers from Advisers. It’s almost total protection as very few people can afford advice.
What a stupid outcome !!!!
Bureaucratic Canberra Bubble Morons with Zero Real World understanding or interest in listening to Real World Advisers.

80page soa is a fraud according to a popular commentator
the second fraud is the idea that a big, expensive Statement of Advice (SoA) covering every aspect of their financial life is needed every time someone engages an adviser.

It’s not. Never has been. To justify expensive, ongoing fees, the industry has deliberately maintained the fiction that a 70-or-so-page SoA, costing at least $3000, is required by law."

Great post. I'll be sure to inform my next compliance auditor that they are engaging in fraud when they hand me another list of time consuming items I need to include in my SOA's, working papers, file notes and research. I'm sure it will go down well with my licensee and allow me to streamline my process and drop my fees.

Tman, read the FASEA code of ethics which is a requirement placed upon all advisers. You are flat out incorrect. The regulations stipulate that if it's not written down it never happened, therefore everything gets written down. It's not justifying fees is why they are so long it's covering the guilty until proven innocent regulatory rubbish environment we are locked into.

Do think advisers or clients value all that needless work...they don't. Only the regulator does.

You are aware are you not that we are legally obliged to provide our recommendations but also what have NOT advised and why we are NOT advising? How ridiculous is that!!

Please understand your subject matter before trolling about things that are more complex than you realise.

I really can't understand the popular commentator carrying on with this rubbish. maybe he doesn't understand where these large SoA's come from. they come from the dealer groups. the dealer groups own the AFSL, and the dealer groups are the ones who mandate large SoA's covering all aspects, with the FASEA Code of ethics overlay who can blame them. Advisers have to obey the AFSL owner's business practices which may be more onerous than the law (otherwise as you know they will just report a breach). the law does not matter to them.

ASIC are perplexed no one used the shortcut ROA for covid super release. no one in dealer land would touch it and we are all surprised ASIC is surprised that no one wants to touch it.

dealer groups in turn take their cues from AFCA decisions. AFCA apparently coach and mentor complainants, AFCA do not have to follow the rules of evidence. AFCA is a consumer body. it's a free hit for the consumer and complaints are encouraged, where the costs are borne by the AFSL who in turn extract that cost from the adviser.

so in summary, whether the adviser did the right thing or not they still have to pay for the AFCA process. AFCA coaches complainants and the complaints are more refined once the consumer makes a complaint with AFCA. this isn't fake news this is all confirmed as fact.

so unless the rules change and make it fair and balanced for all participants (remember no one is saying that consumers don't have a right to seek redress where they have been genuinely harmed)

so a situation exists where the adviser and the AFSL can be blamed for anything and they have to pay for the costs even where they did nothing wrong.

if a situation like this existed anywhere else how would you react? you would make sure that the SoA covered everything including incorporating everything from all AFCA decisions so you don't make any mistakes and things are double and triple checked and nothing is missed.

perfect SoA's tailored to the client's personal circumstances and needs and goals today and forevermore that includes taking into account the broad effects of the advice (that is left to the client to define either explicitly or should be implicitly known, and can be determined in 20 to 30 years time as there is no limitation on when the complaint can be made to AFCA) make the SoA a necessarily, very long and comprehensive document, and extremely expensive to produce.

whether the above is a bad outcome or not, is for our masters to determine. but for me, I will be producing a very long, detailed, and comprehensive SoA in accordance with my dealer group's preference and business practices.

if the commentator has an issue with the above, he should be taking it up with the government. another one blaming financial planners without knowing the full story.

What a long and complex answer...just like an SoA. Bahahaha

Unfortunately you also are 100% bang on!!

I believe Tman is referring to this piece written by Alan Kohler for the New Daily on 22/04/2021.

Please understand, i was also gobsmacked and mad after reading his article and understand your pain.
Just google "The great Australian financial advice frauds" for the article.
He absolutely has no idea about personal advice as his company jsut gives general advice via a general advice disclaimer.

to the commentator's credit, he does say, "the government is in on it". line 5 from top-down from the said article

Ah yes, Mr Kohler. Who falsely claimed he was an economist despite not having a single Commerce/Business/Economics/Financial Planning related qualification. Did an adviser get banned for the exact same thing?

Also bear in mind that "New Daily" is a union propaganda newsletter, paid for out of the retirement savings of "Industry" fund members without their knowledge, and emailed to them without their permission. The anti adviser article was probably written by the union PR team running New Daily, who then paid Kohler a fat sum to allow them to attribute it to him. (That fat sum would also have come from the retirement savings of "Industry" fund members.)

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