In a new whitepaper, former adviser and Property Funds Management Australia founder Barry Daniels has argued that "the re-emergence of the mutual insurance model in Australia could be the answer to the [advice] industry's future viability."
Noting that the mutual model "existed for the purpose of raising funds from its membership or policyholders which were then used to provide common services to all members of the organisation of society," Daniels said this was an effective business model until the 1990s, when "the industry lost direction resulting in a downward spiral."
That spiral, Daniels says, is reflected in the findings of the Royal Commission.
Daniels continues: "A horse with two jockeys can’t win the Melbourne Cup. This also applies to financial services with the competing interests between shareholders and policyholders."
The former group's interests, he says, will always prevail.
In justifying the potential success of returning to a mutual model, Daniels refers to data from the International Cooperative and Mutual Insurance Federation, which suggests the "cooperative insurance market has been the fastest-growing part of the global insurance industry" since the GFC.
"It saddens me immensely," Daniels writes, " to observe the vilification of advisers that have worked all their lives to assist Australians avoid financial hardship as the result of a crisis resulting from an accident, illness, injury or death.
"The vast majority are dedicated caring professionals that have been tainted and blamed for the failings of a few."
Daniels says that the end result of the industry's regulatory overhaul has been major institutions jettisoning their wealth and insurance arms, which then begs the question: "What exactly has been the benefit of the regulators' interference?"
Despite the "bleak picture" of the industry at the moment, though, Daniels believes this is the opportune moment to reconsider how advice should operate in the future.
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