What are the two most important factors that would cause you to change or consider changing dealer groups?

The move by Wealthfarm, one of Garvan FP’s biggest practices, to Synchron, is the latest in what appears to be a fluid market (see: Wealthfarm Joins Synchron). At present, all licensees are striving to put their best foot forward as many advisers consider which licensee will be the best fit for their practice in the lead up to the formal implementation of the FoFA reforms from 1 July 2013: “Do we stay with our current licensee, or do we move?”

During the last week there has also been a very active discussion within the Australian Risk Advisers LinkedIn network, where advisers around the country have provided their opinions about the important elements they believe should be considered when deciding whether to move licensees or to stay where they are.

The key factors listed in our poll are based in part on this adviser discussion.  They include:

Tell us what is important to you, either in terms of why your current licensee is the right fit for your practice, or why you are looking elsewhere, and what you are seeking…

When applied to financial advisers, the term ’salesperson’ is seen by many consumers as a negative attribute. This negative perception has been reinforced in recent times by events stemming from the Global Financial Crisis.

But regardless of whether or not financial advisers embrace the term, does this make any difference to our question of whether you can be a successful adviser without being good at selling? Does it depend, at least to an extent, on how the term ’selling’ is defined?

What do advisers ’sell’? In the past, many advisers have sold products. But in the natural maturing of the financial advice industry, most financial planners/advisers are now selling the value of their advice.

If advisers are paid for the value of the advice they deliver, then the equation of success becomes a function of how well the adviser can ’sell’ that advice to their client. Therefore, the better you are at ’selling’ your advice, the more successful you will become as a financial adviser.

Do you agree with this line of thought, or do you hold that you can indeed be a successful financial adviser without first being a good salesperson?

We acknowledge that the question of associating the terms ‘salesperson’ and ‘financial adviser’ can be difficult and more involved than the simplistic argument we have set out here. And we accept that each person will have a different vision of the meaning of success. We’re running this poll to offer you an opportunity to consider what, if anything, this issue means to your own approach to serving your clients’ needs.

Let us know what you think…

We are asking:

Do you support the class order relief exemption on opt-in for advisers who are bound by a code of conduct?

At the very end of the FoFA debate, Financial Services Minister, Bill Shorten, introduced the opt-in class order relief exemption, following negotiations with and between various industry interest groups, including the FPA and the Industry Super Network.

(This initiative was also accompanied by an announcement that the Government would table legislation by 1 July 2013 which would enshrine the term ‘financial planner/financial adviser’ in law.)

This easing of the proposed opt-in regime appears to be a positive step, at least for those advisers who will be operating under a complying code of conduct by 1 July 2013. However, the last-minute inclusion of this amendment drew a mixed response from the industry - not necessarily because of its content but because of its timing and apparent lack of consultation with all but a few of the industry’s key stakeholders.

If your current membership association’s code of conduct was not eligible for the opt-in class order relief, would this motivate you to switch to one that had an eligible code of conduct, or would you perhaps take out multiple memberships?

If you are not currently a member of an adviser association, would the opt-in class order exemption motivate you to join?

Let us know how important this opt-in exemption will be for you and your practice (or not!) in the new FoFA reform world…

Do you support the FSC’s latest policy proposal that advisers moving existing clients from one insurer to another within a five-year period will only be eligible for level commission?

The FSC’s new churning policy proposal, announced last week at its 2012 Life Insurance Conference, would implement a five-year restriction on remuneration for replacement business, where only level commission will be available to the adviser from the insurer.

riskinfo has confirmed that the FSC’s policy will apply for all replacement business, including that where the adviser submitting the replacement proposal is not the same adviser who originally placed the business.

This policy proposal is to be the subject of a three-month industry consultation process, during which the FSC will be seeking feedback from all stakeholders on this, as well as its two existing initiatives, announced in 2011, which propose:

• The removal of takeover terms for a policy or group of policies that are transferred by an adviser between insurers
• The establishment of a consistent adviser responsibility period across the industry of two years, with 100% commission clawback if the policy lapses with an insurer within one year, and 50% commission clawback if the policy lapses with an insurer during the second year

We have already received substantial feedback in response to the FSC’s policy announcement, most of which we have been able to publish, and most of which speaks against the proposal (see: FSC Churning Announcement…). Major themes to date include calls to ban advisers who churn, but not to financially penalise the vast majority of advisers who do not practice churning (however, the FSC argues that other remuneration options would still exist for the adviser to supplement the level commission, such as fee for advice). Other arguments relate to the impact of the soon-to-be introduced Best Interests statute, which many advisers argue would dilute the need for the FSC’s restricted commission policy. Others argue that life insurance companies will be the only ‘winners’.

But on the other hand, one adviser has commented:

“… insurers are commercial businesses. When we change policies within the first 3 years (or so), it can’t be very profitable where upfront comms have been paid. I agree that it is not necessarily ‘churning’ but it is a problem that ought to be solved.”

We would welcome your vote on this question and also your thoughts on this controversial subject…

The concern expressed by the Parliamentary Joint Committee on Corporations and Financial Services in making this recommendation to ASIC stems from a number of submissions it received, arguing that the retention of adviser commissions for risk advice outside superannuation ‘… encourages the retention of conflicted remuneration models.’

Our question (post implementation of the FoFA reforms) is:

Will you be more disposed to placing life insurance business outside superannuation in order to access commission-based remuneration?

The Committee, headed by MP Bernie Ripoll, said it is mindful of the prediction that in a post FoFA world, life-risk insurance will be the product most likely to provide advisers with commissions. riskinfo sees this statement as a ‘no-brainer’ because life risk commissions (together with general insurance and mortgage contract commissions) will be virtually the only mainstream financial advice products that will continue to offer commission as a remuneration option.

But to what extent will this influence your approach to the advice you and your practice deliver to your clients? Will it make a difference to you? Should it make a difference to you? What do you believe an ASIC shadow shop on this issue would find?

We cannot ask this question without addressing the proposed Best Interest statute, which will enshrine into law the requirement that the financial adviser must act at all times in their clients’ best interests.

Notwithstanding the proposed Best Interest statute, sections of the financial services industry still remain concerned about the potential for conflicted advice in this area.

(We note that individually-advised policies sitting inside the superannuation choice and SMSF sectors will still allow commissions to be paid, but that there will be numerous circumstances under which superannuation-based life risk advice will not).

We invite your votes and your comments on this issue…

At a time when community attitudes towards mental illness appear to be maturing, we are interested to know how well you believe your preferred insurance providers are currently dealing with mental illness at underwriting and claim time:

Are you generally satisfied with how your preferred insurers manage underwriting and claims processes for Australians where mental illness is a factor?

The finding that 25% of people who have experienced mental illness will not inform their insurer is taken from a survey on the recently-launched Mental Health and Insurance website service (see our story: New Initiative Assisting Mentally Ill Deal With Insurance). This new service aims to ensure that fair and equitable access to appropriate information is given to those with a history of mental illness when dealing with insurance companies.

In your experience, do you think Australians with mental illness are given enough information and afforded appropriate empathy when dealing with insurers? Are they able to properly engage with life companies on insurance applications and claims? Or do you feel there is more that can be done to enhance existing processes and communications for the benefit of both the insured and the insurer in this sensitive area?

Is your advice practice most likely to recruit additional risk-focused advisers in 2012?

Research published this week by Zurich suggests risk-focussed advisers are generally positive and optimistic about their prospects in 2012 (see: Risk Advisers Optimistic About 2012). This general optimism takes into account market conditions as well as Future of Financial Advice (FoFA) related issues.

On the other hand, a recent survey from eFinancialCareers says that only around 3% of advice practices are most likely to be hiring one or more risk-focused advisers (ahead of other occupations) during this year. While this was only one component within a broader survey, it does appear to be at odds with Zurich’s findings of the generally positive outlook for 2012 held by risk advisers themselves.

Other points of view suggest the implementation of FoFA will lead to significant job losses within the broader financial services sector (see: Industry Debates Extent of FoFA Job Losses), which must, if this eventuates, have a serious impact on the recruitment prospects for risk-focused advisers.

Within these potentially conflicting messages and opinions, we’re keen to find out where your own practice is actually positioned on this question.

Is your own firm most likely to recruit more risk-focused advisers this year, taking into account all the economic, social and regulatory factors impacting your business? Or will you be either maintaining your current ratio or more likely to recruit in other areas in 2012?

Are you more concerned with the nature of the proposed FoFA reforms or with the timing of their implementation?

Over the last year, many advisers have told riskinfo they have no significant issues with any of the proposed FoFA reforms, while an equal number have said they have very deep concerns about the impact on their practice of areas such as the opt-in process and the potential cost of annual fee disclosure.

Where do you stand? As the FoFA deadlines draw closer, accompanied by strong lobbying for implementation delays, are you generally ok with the reforms themselves, but have concerns about being ready in time? Are you ok with both content and timing? Or do you continue to oppose some of the proposed measures for the detrimental impact you believe they may have on your ability to deliver quality advice to your clients? What is keeping you awake at night?

Tell us what you think…

What single issue will have the biggest impact (positive or negative) on the profitability of your advice practice in 2012?

We want to know whether elements of the Future of Financial Advice (FoFA) reforms are at the forefront of your thinking in terms of financial impact on your business, or whether the major concern for your advice practice relates more to Australia’s stagnant economy or to other factors, such as changing licensee fee structures.

The final details for some elements of FoFA are still to be fully revealed, particularly for areas such as Opt-in, and it should be remembered that the legislation has yet to be passed by Parliament.

However, it emerged at the end of 2011 that there may be room for advisers and licensees to continue to access volume bonus payments for investment products as well as for risk products, as long as it can be shown that those volume-related payments do not represent conflicted remuneration (see: Door Open for Volume Bonuses to Continue). How important is this to you, compared with other factors that will potentially impact your financial bottom line this year?

Let us know what other issues you believe will have a major bearing on your profitability this year…

What should become the collective name for a group of financial advisers?

We have assembled a number of choices, from which we are asking you to select your top five preferences. Most of these terms represent positive attributes associated with financial advice, while others are just plain silly, but we liked the idea and included them anyway. Your choices are:

1. A commission of advisers
2. A conference of advisers
3. A fact find of advisers
4. An intelligence of advisers
5. A lobby of advisers
6. An opinion of advisers
7. A platform of advisers
8. A portfolio of advisers
9. A promise of advisers
10. A Ripoll of advisers
11. A solution of advisers
12. A statement of advisers (SoA)
13. A trust of advisers
14. A wealth of advisers

So, as you reach for your fourth helping of that tasty finger food at your end of year function, while scrolling through the latest updates coming through on your hand held device, we suggest you take a brief moment to reflect on this very important question and cast your vote.

Maybe you have your own ideas and we will welcome your suggestions, if you would care to share them.

We will report back to you in our last news email for the year next week and let you know the most popular choices…