IFAs most at risk from 'experimental changes'

Commenting on a submission made to the Life Insurance and Advice Working Group, ClearView said it has cautioned the inquiry that any “experimental changes” to adviser remuneration could “strangle the independent financial planning community”.

“Significant reduction in overall remuneration of financial advisers will severely impact the profitability and sustainability of independently-owned advice practices.

“[This will force] many advisers into institutionally-aligned dealer groups with narrow APLs as the only means to survive,” a statement from Clearview said.  

ClearView chief executive Simon Swanson said the submission also calls on the working group to focus on driving competition, innovation and improved customer outcomes by addressing a number of conflicts of interest.

“We believe there is an irrefutable case that the default position should be for an open architecture for approved product lists (APLs) so that advisers are not unduly restricted,” Mr Swanson said.

“Shelf space fees are inequitable in the financial services industry and we believe they should be banned.

“A number of dealer groups require upfront payments, which start from around $100,000 and rise to over $300,000 per annum for life insurance products, to be placed on their APL,” he said.

Mr Swanson explained shelf space fees lead to customers often being recommended a product not because it’s the most suitable or appropriate, but because of an insurance company’s willingness to pay that fee.

Within the submission ClearView also proposed the words ‘commission’ and ‘incentives’ be abandoned because of the negative connotation they carry.

Instead of these terms ClearView proposes they should be replaced with alternative terms such as ‘adviser service fee’ or ‘financial support’.