Mortgage broker Mortgage Choice has slammed the life insurance report by John Trowbridge and the Life Insurance and Advice Working Group, claiming the recommendations favour vertically integrated licensees.
Mortgage Choice Financial Planning’s general manager, Tania Milnes, argued that the recommendations “play purely into the hands of insurance manufacturers”.
“The proposed remuneration structures are likely to drive advisers to vertically aligned channels with new licensees shut out of the industry. It would be very difficult for a new licensee that is not vertically integrated to generate a sufficient return on the start-up investment required to build a robust model,” she said.
The mortgage broker said that while advisers would have to charge an advice fee to survive, consumers would not see a premium reduction.
Milnes predicts that practising advisers, especially risk specialists, would question their future in the profession, and new advisers would hesitate to enter the market as they would feel the financial pressure if they did not charge a fee.
Financial planning practices would also be compelled to advice clients who have the capacity fees, and who have more complex financial needs.
The recommendations also flout the ideologies behind the Future of Financial Advice (FOFA) legislation, as it would prevent consumers, especially wealth accumulators, from accessing advice, Milne argued.
The report recommended that financial adviser remuneration should be limited to 20 per cent level commission, in addition to an initial payment of $1200 for life insurance advice.
