Life risk advisers should avoid business structures based exclusively on commissions and start to look at ways to diversify their revenue,following the Financial System Inquiry (FSI) recommendations on life insurance and commissions.

"There has been enough noise around this issue that every commission based adviser should be thinking about how they will adapt if/when this becomes reality," DPR Accountants director David Rae told Financial Standard.

The FSI recommended that upfront commissions for insurance should not exceed ongoing commissions and said the government should ban all life insurance commissions if practices such as churning remain a problem.

Rae has moved away from life insurance commissions and now charges fee for service to all clients: "If a client has existing insurance and I can't remove the commission it is rebated or offset against their agreed fee."

He added that "we need to evolve and come up with innovative solutions, I don't agree with the argument that businesses won't survive without commissions."

Verante director and adviser Liam Shorte said that completely banning commissions "would reduce the business we write, especially with younger customers," who are more comfortable with ongoing commissions than with having to fund both the premium and the advice fee upfront.

"It would really hurt those businesses that are writing a lot of risk and especially those in more affluent markets as they currently receive very high commissions," he said.

Shorte added that "planners would need to start charging a fee for help through the claims process as this is a very time consuming process that up until now has been subsidised by the receipt of annual commissions."

JBS Financial Strategists director and adviser Jenny Brown noted that completely banning commissions "was tried in the UK via the RDR (their FoFA) and it didn't work, hence why it was reversed and commissions are now re-instated back."

Brown said that she believes that the FSI recommendation that upfront commissions do not exceed ongoing commissions "will deter those practices who are after continual payment of upfront commission, but not necessarily stop bad practice from some advisers."