Most financial advisers do not expect to see an increase in the amount of life insurance business they write after the Federal Government’s Future of Financial Advice reforms.

According to research house Investment Trends, 51% of advisers surveyed in the 2010 Planner Risk Report expect no change in their life insurance business, but 40% do expect an increase in life insurance business when the reforms come into effective in 2012.

The survey team spoke to 792 financial advisers covering all areas of financial advice, including commission on life insurance products.

Not surprisingly, 81% of advisers do not think commissions on life insurance products should be banned, while only 11% said they should be.

“Those who support a ban often said it avoids conflict of interest (33%); advisers should be valued by the quality of the advice they provide (23%) and it will result in lower premiums (21%),” Investment Trends analyst Recep Peker told insuranceNEWS.com.au.

Of those financial advisers who do receive life insurance commissions, 15% of their practice revenue was from upfront payments with 10% of income coming from ongoing commissions.

“In general there is a trend away from commissions, but this is not so apparent when only looking at commissions from life insurance advice only,” he said.

For many adviser practices, life insurance is still not the main income-earner, with only 31% of revenue on average coming from life insurance, Mr Peker says. This is up from 29% in 2009.

The survey finds a “wide gap” between what a client wants to pay for advice and what the adviser expects.

“The Future of Financial Advice reforms pose a challenge to advisers who are already struggling to align clients’ cost expectations to their cost of doing business,” Mr Peker said.

The survey found 48% of financial planners believe they won’t be able to service as many low-balance clients if commissions on new products are banned, rising to 62% if all the proposals are implemented.