A swift move away from upfront commissions could spell the end of non-aligned advice, with only the large independents and aligned groups able to survive the inevitable drop in revenue, stakeholders have warned.
In the midst of John Trowbridge's report into the state of the risk insurance industry, Synchron director Don Trapnell said the raft of recent inquiries are pointing towards either no commission or level commission structures around risk — something he fears would not sustain small to mid size advice businesses.
"Only those with a very mature business will actually survive," he said, "And I'm talking 20 to 30 year plus, where their renewal commissions have built to the point of sustainability."
He said that there would be similarly dire consequences for the growth of the profession.
"If we move to a level commission structure, we will have no more new entrants into the industry because the cost of acquisition would far exceed the revenue being received… You just can't have that business model, you don't exist.
"The proponents for the level commission structure will say after four to five years, the adviser will be in front. They won't be around after four or five years.
Trapnell said the question must be asked "do we really want an industry that's dictated and totally manned by more senior and more mature individuals, or do we want a young industry where we get young vibrant advisers coming in?"
His sentiments were echoed by Mr Insurance director, PJ Byrne, who moved to a hybrid model a couple of years ago, but is still aware of the cash flow issues at a grassroots level.
"I don't know how the industry will grow to solve the underinsurance market if advisers can't grow their business," he said.
"It's very hard to fund a business without an upfront commission."
He said over a 12 year period, last year was the first time his business had the infrastructure to support moving away from an upfront commission model.
Any sudden change to commission structures could have frightening consequences for the industry, he added.
