The FPA has raised its concerns over a perceived double standard that has arisen from the banning of commissions on risk insurance and has called on the government to review its decision to implement this initiative.
Under the FoFA reforms advisers will no longer be able to receive their remuneration via commissions on risk insurance policies established within super funds.
The professional body has flagged three issues it feels the ban will do little to solve.
"The under-insurance issue in this country is a major concern. The cost to client is another. Just because commissions will go does not mean there will be a reduction in premiums," FPA general manager policy and government relations Dante De Gori said.
On this point, he said research the FPA had performed recently indicated the total cost to client for risk insurance advice might be higher if a commission-based remuneration structure was abolished.
"Thirdly, there is no evidence of public catastrophes in respect to commissions on insurance," De Gori explained.
He used an example of taking out insurance inside a self-managed superannuation fund (SMSF) to illustrate the confusing situation consumers may face under the new regime.
"Say a self-managed super fund member receives life insurance advice. Then no commissions can be paid. But then they receive advice from a broker in respect to insuring a property within the self-managed super fund then commissions will be paid," De Gori said.
"So there's a bit of a double standard to the advice a SMSF receives and how it pays for it," he added.
The FPA did however emphasis they were not advocating commission on risk insurance remain in place forever.
"We don't support commissions on insurance but we don't believe there is a better alternative at this point in time," De Gori said.
