The FPA has highlighted the impacts that the Future of Financial Advice reforms have had on risk advice fees and service offerings.
In its submission to the FOFA Post Implementation Review, the FPA said the costs associated with the implementation and ongoing compliance with many of the FOFA measures have impacted the costs involved in providing advice and created barriers to business growth.
The industry body said this is resulting in higher advice fees for clients and restricted service offerings.
In particular, it noted the impact the ban on commissions for both individual and group insurance has had on advice businesses, with some small businesses losing between 15 to 30 per cent of revenue.
The FPA said, as a result, some advice businesses have stopped offering a risk advice service “as the cost to implement advice is too high and clients are not prepared to pay a flat fee for this advice”.
“Businesses had to decide whether to keep clients or archive them as no revenue was coming in to support the ongoing service needed to provide life insurance advice, such as an annual review of the policy to ensure it meets clients’ needs,” the FPA said in the submission.
The ban has also resulted in the reduced availability of risk advice for clients, noting that some of them have found paying a flat fee too expensive for risk advice, the FPA said.
Further, it said it was not aware of any cases where an adviser provided a recommendation to move from group to retail life insurance that was contrary to best interests obligations.
“The FPA is not aware of any cases involving financial planners mis-selling insurance policies outside of superannuation to access commissions, where the policy offered by the client’s superannuation fund offered a better product for that client’s circumstances and needs,” the submission said.