Australian Financial Advice Association (FAAA) Chief Executive Officer Sarah Abboud has made it clear that the life risk advice area is on the agenda of the association’s advocacy efforts.
Speaking at the group’s roadshow in Sydney on Monday, Aboud explained that “the FAAA is concerned about what’s going on in this space.”
“I have seen figures of only 1,200 advisors nationally who specialize in this area. Told.
“Premiums are going up, and they are going up significantly, and there are several reasons for that. I can’t afford to give advice…the premium pool is changing very quickly and it’s becoming more and more difficult to do business in this space.”
A recent analysis by the Australian Prudential Regulation Authority (APRA) found that insurance premiums for financial workers, including accountants, financial planners and broker-dealers, have risen on average by at least 40 per cent since 2015. became.
Specifically, financial advisers found that the average premium for professional coverage (PI) has increased by 43% between 2015 and 2021.
“We are really concerned,” said Aboud.
There are fewer than 200 “pure risk” advisors in the country, according to a study conducted last year by Adviser Ratings.
The firm noted that its pure risk division fell 67% in less than a year, while trading volume in its risk division fell. “high risk“ Advisors have been halved.
“We currently have 225 advisors representing a quarter of our total workforce in Australia, with an average payout of $4 million per advisor,” said Advisor Ratings.
Advisors expect the Quality of Advice Review (QAR) to exacerbate the problem. That is, reviewer Michel Levy said in the final report that commission rates and clawback rates should remain at their current levels (60% upfront commission, 20% trailing commission, with two years of clawback). , said the adviser should seek a written opinion. , informed consent from the client, if the client receives it.
“If an advisor makes a profit on the sale of a life risk insurance product recommended to a client, the client should be obliged to communicate that benefit, and the client should be given the opportunity to consent (or not) to the benefit.” ,” Levy said.
Since her recommendation was made public, advisers have raised many questions about what additional obligations apply in relation to disclosures, consent and ongoing service.
Addressing the issue on Monday, Abboud said, “We have to see commissions continue as a way of paying life risk advisors.”
“There is a lot of evidence that not making it available will only lead to a depletion of consumer numbers for advice. We already know Australians are underinsured.”