AFA urges caution over Trowbridge finding
The Association of Financial Adviser (AFA) has opposed the final recommendation of the Trowbridge Report, fearing advisers will need to charge clients additional fees to cover the extra costs.
The AFA, along with the Financial Services Council, jointly convened the group that made the recommendations in the report and said the recommendation to remove high upfront commissions will mean Australians will pay more for life insurance advice if the recommendations are executed.
"Ideally this final report would have our complete support but unfortunately, in its current form, it does not," AFA chief executive officer Brad Fox said.
"The majority of advised life insurance is arranged by locally owned small financial advice businesses. It is common knowledge that cash flow is the biggest reason small businesses fail."
"If advisers are to earn less than it costs them to provide financial advice, it is only a matter of time before they go out of business or stop providing this type of advice," he said.
Fox said the AFA proposes a hybrid commission model instead, arguing it provides the right balance between high upfront commissions which is "publicly unacceptable" and generating enough revenue for advisers to give quality financial advice.
"ASIC Report 413 grouped hybrid and level advice together in achieving 93% advice compliance, therefore we believe it is appropriate," he said.
As it stands, the recommendations will resolve the sustainability problem of insurers rather than improve advice or increase the number of people with life insurance, Fox said.
"It is essential that a comprehensive analysis be undertaken before any commitment to support these recommendations is made."
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Malavika Santhebennur
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