APRA roundtable confirms importance of financial advice
A roundtable of life insurance executives conducted by the Australian Prudential Regulation Authority (APRA) has validated the importance of financial advice in delivering retirement longevity solutions for retirees.
APRA has released an outline of the roundtable, which also reinforced the desirability of a default longevity product regime, including delivery of a so-called “soft default option”.
APRA revealed that it had conducted an overseas study and that countries which had a high level of take-up of longevity products were “those with a strong level of compulsion or incentive provided by the government”.
Importantly, the roundtable acknowledged that falling adviser numbers and the cost of financial advice had been factors in the slow take-up of longevity products by Australian retirees.
“Stakeholders identified weak demand for longevity solutions as the key challenge impeding insurers from providing and/or further innovating longevity solutions and noted several factors that contribute to limited demand,” the APRA summation of the roundtable said.
“Stakeholders also highlighted that the complexity of the retirement ecosystem provides limited incentive for retirees and makes it challenging for insurers to design longevity products that are well-integrated within the system.
“Those factors combined with distribution challenges (e.g. falling advisor numbers, high cost of financial advice and barriers to scale up advice) has, based on APRA’s bilateral engagements, hindered take-up of longevity solutions for retirees that have a genuine need,” it said.
APRA said it had conducted a desktop research of longevity markets of four countries including, Netherlands, Denmark, United Kingdom and the United States of America.
APRA observed that overseas jurisdictions with a thriving longevity market, such as Netherlands, either have a strong level of compulsion or strong incentives provided by the Government.
“APRA also observed complementary factors that can contribute to an increase in demand for longevity solutions, but these factors alone don’t make a material difference to the level of demand relative to the compulsion and incentives factors. The complementary factors include:
- wide availability and easy access to financial education and/or financial advice;
- availability of quality data to enable product providers to design and distribute appropriate products to retirees;
- high level of trust in the system; and
- financially literacy initiatives.
Seems to be a regular media post now from APRA that they work in cahoots with Life Insurers and Industry Super to either want to flog these unwanted Lifetime Annuities via Back Packer call centres or make them compulsory.
Guaranteed both will be another massive Govt induced FAIL.
Given APRA can’t do it’s currently Regulatory Job properly, surely they don’t need to be force feeding the population this bad medicine
It would be interesting to know who was at the round table. Lots of talk about advice, but were any actual advisers in attendance or was it the usual approach of the regulator to make decisions and assumptions without any real consultation.
Actions speak much louder than words and they say that advisers aren’t valued and getting rid of them is the focus of both APRA and the insurers.