Financial advisers have been “inundated” with enquiries from clients during the COVID-19 pandemic and people without advisers had struggled to find someone to help them, the FSC’s Life Insurance Summit was told.
By Lachlan Colquhoun
Dante De Gori, the chief executive of the Financial Planning Association (FPA), said the pandemic, which has created volatility on share markets, had also focused people’s minds on their insurances as they sought to protect themselves and their families.
“Advisers have been inundated by the general public, and this is where we have this ongoing discussion about the value of ongoing advice, because if you have ongoing advice then you have someone to talk to,” De Gori told a Summit session on retail insurance.
“Those who haven’t have really struggled to find someone who can help them.”
De Gori said the pandemic had also accelerated the adoption of technology by advisers, and by their clients and the pandemic had been a “final push” for many advisers to implement new technology.
“One adviser was telling me about Zooming their children in from overseas. Now they could have always have done that but it took the COVID crisis for that to occur,” he said.
“So geography is no longer the boundary for advice and I think that is a great opportunity going forward.”
Fellow panelist Phil Kewin, the chief executive of the Association of Financial Advisers (AFA), agreed that the pandemic had driven technology adoption, but said this had also exposed problems in processes.
“What it has highlighted is some of the areas where we haven’t adapted, and one example is in signatures,” said Kewin.
“With missing documents and wet signatures, it is still the old way of doing things, and that has really highlighted how cumbersome as an industry we can be in terms of documentations, and I think this is an opportunity to improve.”
The panel also discussed the review of the Life Insurance Framework by regulator APRA, with a consensus that it was too narrow in its focus on the issue of adviser remuneration, which had been slashed in the original 2018 reforms.
The third panelist, Zurich’s head of life Gerard Kerr, said LIF should not be “just about focusing in on the commission piece.”
“It’s bigger, it’s about a service and it’s about support to the community and you have to take that into consideration,” Kerr said.
“Unless we are careful, we are going to create underinsurance again, and advisers – if they run their business a certain way – they are going to have to say ‘no’ to people.”
The AFA’s Phil Kewin said that one of key issues out of the LIF process was that “clients want to have the choice as to how they pay for their advice.”
“Whether its commissions, fees or a combination of both, but they should be given the choice and the right disclosures,” said Kewin.
“I talk to advisers. If you are a holistic adviser and dealing with all the different mechanisms, yes you can bundle up the fee, but if you are a risk specialist, they’ve done it on an hourly rate.
“So if you don’t believe in commissions, fine. The advisor has to do this and this, and list it out and charge the hourly rate and give it to the client, and the client could then say ‘I’ll take the commission thanks.’”
Dante De Gori said that another objective of the LIF framework was to create a more simplified Statement of Advice process, but while this had been “ticked off technically” there was no evidence this had occurred.
“I haven’t seen any data and any reports on a simplified Statement of Advice (SoA) to indicate that it has assisted the advisors in any shape or form and reduced cost,” De Gori said.
“In fact, what we are seeing is the complete opposite because you try and fix a particular issue in isolation and pretend that there is nothing else happening.
“Life insurance is not separate to advice, there is market structure and other regulatory reforms. To think that the LIF framework could solve those problems is where I think the error has been and it’s very hard to see that it’s been successful when you look at those measures.”
The panel also included a poll question on whether a joint regulatory approach to life insurance, from both APRA and ASIC, was best for the industry.
This was resoundingly endorsed by 88 per cent of the session audience.
“When we work together with all the various parties we end up with a healthier industry,’ said Zurich’s Gerard Kerr.
“When we are not along the same lines, that is when we have bad or worse outcomes.
“No doubt there are challenges in our industry, such as the fundamentals of some products and these need to be reset with more solid foundations that will benefit the wider advice community and the consumer, but there needs to be a collective approach.”
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