Financial advisers lost 15-30% of their revenue when the ban on life insurance commissions within superannuation took effect under the Future of Financial Advice (FOFA) reform, according to the Financial Planning Association (FPA).

In a submission to a Treasury review of FOFA, the FPA says some practices stopped offering advice in this area because “the cost to implement insurance advice is too high and clients are not prepared to pay a flat fee for this advice”.

Advisers have reported increases in premiums despite the removal of commissions, which should have driven down costs.

“There has also been anecdotal evidence… [of] a reduction in the number of consumers seeking and accessing advice on life insurance needs,” the submission says.

“Existing group clients have been cancelled, leaving them with no life insurance advice service and having to deal directly with product providers.”

Advisers have also faced significant compliance costs associated with providing life insurance advice.

The FPA estimates these as $5000 on training, $5000-$10,000 for introducing a new remuneration system – although some put this cost higher – and $5000 on IT changes.

“Some large businesses hired additional staff to address specific issues related to the implementation of this measure. Businesses had to decide whether to keep clients or archive them because no revenue was coming in to support the ongoing service needed to provide life insurance advice, such as annual review of policy to ensure it meets clients’ needs.”