Advice reforms introduced in recent years have added to the compliance cost burden facing advisers, contributing to the higher price that consumers must prepare to pay if they want professional guidance, a parliamentary hearing heard last week.

ClearView Wealth MD Simon Swanson told the House of Representatives Standing Committee on Economics on Friday that over-regulation has partially contributed to the underinsurance problem in Australia.

He urged lawmakers to consider allowing fees and life premiums be claimed as tax deductible items.

He says the compliance burden on advice businesses and major changes to adviser remuneration under the Life Insurance Framework is driving up the cost to provide advice and, in turn, the price of that advice.

“This has created serious unintended consequences for families, society and the Government,” Mr Swanson said in his opening statement to the committee.

“Advice affordability is deteriorating, at a time when awareness of the need for life insurance has never been greater, due to COVID-19 and record high levels of household debt.

“We believe that the life industry’s long-term future hinges on a thriving advice profession.”

He urged the Government to reinstate life insurance premium tax deductibility as a way of closing the underinsurance gap. The tax-deductible feature should also be extended to adviser fees.

When life premiums could be claimed as a tax deduction in the 1970s, more Australians had adequate life cover, Mr Swanston said.

“Reducing the compliance burden will go some way to improve the situation. We maintain that people should be able to choose how they pay for advice…fees, commissions or a combination of both.

“In addition, fees should be tax deductible.”