Findings from Risking Everything - the Association of Financial Advisers (AFA)'s third tranche of research released yesterday - reveal that Australians who receive financial advice relating to their life insurance needs highly value that advice, understand the benefits of life insurance and have realistic levels of cover - however they prefer to have choices around how they pay for advice.
"What we discovered," said AFA CEO, Richard Klipin, "Is that people who receive risk-related financial advice are happy for their adviser to be remunerated via commissions and prefer to have choices."
The research was commissioned by the AFA, conducted by CoreData and sponsored by AIA Australia and surveyed corporate super and life insurance clients. Mr Klipin said the research findings confirm that some of the Government's proposed Future of Financial Advice (FOFA) reforms run counter to FOFA's primary objective - that is: to create better outcomes for consumers.
"The fires, floods, earthquakes, tsunamis and nuclear leaks of the past 12 months are bringing into stark focus the issues of risk for the Australian community," he said. "Risk management must be part of the national agenda for families, businesses, companies, governments and regions and yet, our research indicates that if bans on commissions go ahead, fewer people may get financial advice and therefore fewer may have appropriate levels of life insurance."
Mr Klipin said this was very disturbing given the already dangerously low number of Australians currently receiving advice.
"Only two in 10 Australians currently receive advice relating to their life insurance needs," he said. "This level will almost certainly drop even further if aspects of the FOFA reforms are passed through legislation. What that could ultimately mean is more people queuing up for Centrelink benefits - and that's something Australia simply cannot afford."
Key findings from the Risking Everything research revealed that:
- Consumers with an adviser are more confident, have more appropriate levels of insurance and greater control over their financial future.
- With two in 10 consumers in an advice relationship, Australians are under-advised and under-insured. The concern is that a number of the proposed FOFA reforms will ultimately exacerbate these issues.
- There is a clear need to educate consumers on risk - identifying, managing and mitigating risk so as to better protect themselves, their families and their assets.
Mr Klipin said another disturbing fact uncovered by the research was that Australians value their home and car more than their own lives.
"Australians believe insuring their homes, their cars and their health is more important than insuring their lives," he said. "Less than a third (29.3%) of those with life insurance and only 5% of those without life insurance rate it extremely important."
Mr Klipin said the financial advice profession needs to better communicate what those consumers who currently receive advice already know: that professional advice leads to better consumer outcomes and is worth paying for.