The life insurance advocacy role of corporate super advisers has been ignored during the Future of Financial Advice (FOFA) debate, according to the Corporate Superannuation Specialist Alliance (CSSA).

“We are in an advocacy role representing the company to obtain the best deals for the insurance component of a fund,” President Douglas Latto told insuranceNEWS.com.au.

“It is a time-consuming affair and because group life doesn’t pay upfront commissions, we will not be paid for this work under the new FOFA rules.”

Corporate super advisers have relied on the ongoing trail commissions to cover the cost of providing insurance administration services to funds.

Under FOFA legislation, these will be banned for life insurance sold with super.

“Many parties have assumed that all we do is provide personal advice to members and charge a collective fee across the membership,” he said.

“This is not the case. Most of what we deliver would be better termed as services, such as tailoring insurance benefit structures to suit the needs of employees.”

Mr Latto says the work involved in negotiating the insurance component of a fund can take two months, but in future an adviser will have no way of covering these costs.

“There is also the ongoing cost of renegotiating the insurance component as group rates are usually only fixed for a three-year period,” he said.

Another issue facing corporate super adviser is the grandfathering rights of the FOFA legislation.

“Presently we have no idea of what these grandfathering rights will be,” Mr Latto said.

“We don’t know if they will apply to the life of a group insurance policy or the employer agreement the adviser has with the fund. We are facing a great period of uncertainty.”

Mr Latto says some of these issues will have to be negotiated with the Australian Securities and Investments Commission when the FOFA bill is passed.

But the future is not all bad news, he says. Various government committees have recommended that Treasury talk to the CSSA about alternative models of remuneration that would follow the spirit of the FOFA reforms.

“This will be something we will definitely be following through with Treasury,” Mr Latto said.