Australia’s life insurance and corporate superannuation market is at risk of significant losses under the federal government’s proposed future of financial advice (FOFA) reforms, industry research has found.
Research from an Association of Financial Advisers (AFA) white paper, ‘Risking Everything’, conducted by researcher CoreData, found FOFA reforms of banning risk commissions inside of superannuation and opt-in ruling for clients poised the biggest threats.
More than 40 per cent of Australians who do not currently pay upfront fees for life insurance advice would not be interested adopting the remuneration model even if it was their only option, the research found.
Of those surveyed, 35.7 per cent said they have no issue with paying upfront fees for such advice, while 23.8 per cent would be willing to pay but would not be happy to do so.
“If the government does decide to go ahead and ban commissions inside of super we could actually see a lot of people who are currently covered dropping out,” CoreData head of Advice and Superannuation Kristen Turnbull said.
In terms of corporate superannuation, if all employees do not ‘opt-in’ annually to receive services from a corporate superannuation adviser it may be unfeasible for advisers and corporate funds to continue offering services, the research found.
“This has implications for both members and advisers. Advisers risk losing a valuable part of their business, while members risk losing access to professional advice,” the research said.
It found 28.9 per cent of corporate super fund members use the adviser provided by their corporate super fund as their primary source of financial advice, with 26.8 per cent said they use their own judgement and 14.2 per cent said they use an adviser outside of their corporate super fund.
However the research found 31 per cent said they would be ‘somewhat likely’ to pay upfront fees for external advice with 2.2 per cent stating they would be ‘extremely likely’ to pay fees.
CoreData compiled responses from more than 700 Australians for the white paper in March this year.
