Australia’s largest dealer group, Professional Investment Services (PIS), says banning life insurance commissions will impact many boutique licensees and may even threaten their survival.

PIS MD Grahame Evans says the dealer group supports some changes under the Future of Financial Advice (FOFA) reforms, but opposes some changes such as the ban on insurance commissions.

“The FOFA changes are not all to the group’s liking,” he said. “Opt-in and the banning of commission on insurance products inside super are all areas which cause concern to the group.

“The economics of this industry have developed to create a situation in which those who have more subsidise those who have less.

“While the idealism of a profession is certainly a very worthy goal, we must consider the impacts to the availability, cost and quality of advice.”

Mr Evans says the reforms will drive advisers back into becoming tied agents, which was the case more than 20 years ago when a life insurance adviser worked for the one life company selling only its products.

“The last thing we would want is to go back to a quasi-tied agency structure,” he said. “However, it appears with all the consolidation occurring that’s where we will end up.”

There is a growing feeling among independent dealer groups the reforms will favour institutions which will put pressure on boutique adviser practices threatening their survival.

Mr Evans says PIS is “extremely concerned” about boutique licensees that do not have the scale to vertically integrate.

“If I was a boutique I would be pressing the Government for some form of compensation like has been done for the dairy and fishing industries,” he said.

“It is evident to most that the value of the boutique licensees’ business will fall as a result of these changes.”