Gaining ground on under insurance

The 60th anniversary of the Association ofFinancial Advisers (AFA) during the year created a celebratory diversion from the pressing external issues it faced.

High on the list of these was the intractable issue of under-insurance in Australia, which saw the association participating in various in-house and industry forums dedicated to identifying reasons for it and finding ways to alleviate it.

The most recent example was an address by the AFA to the Investment and Financial Services Association’s Protection Gap Working Group, which has been set up to investigate aspects of under-insurance.

The AFA essentially repeated a call it made earlier in the year to the Senate Select Committee inquiry into super to have a minimum mandated insurance cover within the super regime, and also for an increase in the Super Guarantee levy (SG) from 9 per cent to 15 per cent.

“Our point is that there is probably a strong argument for having a minimum mandated insurance cover introduced as part of a Government initiative to try to close the under-insurance gap,” according to AFA chief executive Richard Klipin.

“If the Government doesn’t mandate this cover, then ultimately people who need the cover will end up on the Government purse — so why don’t we try to solve this problem at the front-end?”

Another broad strategy the AFA has employed during the year to redress under-insurance is the promotion of holistic advice among advisers, getting them to “talk to their clients about comprehensive risk management”.

“A major reason under-insurance exists is because not enough advisers are talking to clients about those issues, and, of course, because people don’t think it’s going to happen to them.”

Together with other organisations, Klipin said, the AFA has been “quite successful during the year in raising awareness among planners that you cannot build a house if you don’t have strong foundations”.

He added that the industry as a whole had also made “fair progress this year in increasing the number of Australians who are aware of the existence of a gap — which means there are more people addressing it either directly or indirectly”.

Succession is yet another issue the AFA has addressed during the year, searching for ways of overcoming the problems of an ageing adviser population.

“It begs the question of who is buying the practices?” Klipin said.

A related issue, and one which the AFA’s conference and roadshow revolved around this year, was about finding ways of providing the sector with the “skills set that a good adviser needs to succeed”.

“It’s about advisers having the right blend of hard technical skills, as well as people skills and the right ‘bedside manner’. As we saw with the Federal Budget this year, you can have a lot of technical skills, but when legislation changes these can become obsolete quickly.”

The superannuation and transition to retirement arrangements proposed in the Budget were welcomed by Klipin for “simplifying the super regime. It means our role as an adviser isn’t about helping people make the complex simple, but rather about focusing on building client portfolios.”

— Liam Egan