‘Pure risk’ adviser numbers diminish

Research from Adviser Ratings has shown that the pure risk segment has dropped by 67 per cent in less than a year, while the volume of ‘high-risk’ advisers has halved.

“There are now 225 advisers handling a quarter of all in force in Australia — averaging $4 million per adviser,” Adviser Ratings said.

Meanwhile, the firm found that with under 16,000 advisers currently operating in Australia, 77 per cent are now writing little to no risk, compared with 60 per cent last year.

“While some advisers who wrote a high volume of risk have exited the industry, others have told us they’ve retreated from it due to remuneration changes, complexity or compliance issues,” Adviser Ratings said.

Advisers expect the Quality of Advice Review (QAR) to further exacerbate this problem. Namely, in her proposal, reviewer Michelle Levy said while level or capped commissions would remain, advisers would need to seek written, informed consent from clients if receiving them.

“If an adviser will receive a benefit for the sale of a life risk insurance product they recommend to their client, they should have an obligation to tell the client about the benefit and the client should have the opportunity to consent (or not) to the provision of that benefit,” Ms Levy said.

Since her recommendations came to light, advisers have posed many questions in relation to what additional obligations would apply in relation to disclosure, consent and ongoing services.

As such, last month, the CEO of the Financial Planning Association encouraged Ms Levy’s final report to “make clear that where these obligations are already complied with in relation to personal advice by a relevant provider, no additional obligations are required to be met”.