January 30, 2015
The disciplines of financial planning and risk advice should be separated and the financial services industry should stop talking about the two professions in the same breath, according to Don Trapnell.
Mr Trapnell, Director of largely risk-focused licensee Synchron, argued that the methodology and skill set of a financial planner is totally different to that of a risk specialist, and no one person can excel at both. At the heart of his case is the contention that financial planners have ‘analytical’ conversations with clients, about facts and figures, whereas risk advisers must connect with their clients emotionally.
“If you are giving risk advice, you are talking about protecting a client’s current and future lifestyle and that of their family. That is an emotional conversation,” Mr Trapnell said.
“I know outstanding financial planners who give very good risk advice and I know exceptional risk advisers who give very good financial planning advice. But they are either a financial planner who gives very good risk advice, or a risk adviser who gives very good financial planning advice. I have yet to meet a truly holistic financial adviser.”
He also asserted that life insurance policies have more in common with household and car insurance policies than with a transition to retirement program or investment portfolio.
“For some reason, risk products continue to be linked together as financial planning products rather than insurance products. I do genuinely believe there is a strong case for separating the two.”
Mr Trapnell believes separate Australian Financial Services Licenses (AFSLs) should be issued for planning advice and risk advice.
“One licensee could hold both licences and their authorised representatives could be authorised in both areas, or they could be authorised to provide either risk or investment advice. I really don’t believe they should be bundled together, the way they are at the moment,” he said.
His thoughts echo those of some riskinfo readers, who have expressed their concern at potentially having to complete education requirements that do match their area of specialisation.
Commenting on our story about the latest PJC inquiry report into education standards, Brian Howard said:
“I would also add that it is about time that dedicated life risk advisers had their own category, outside of ‘financial planner’ and were qualified as such. A different qualification, exam and title. As a life risk adviser myself I am being tarred with the same brush as full financial planners, having to do irrelevant Kaplan CPDs and now these new mooted ‘financial planner’ exams. What a waste of my time! I don’t mind exams that test and prove me for what I do all day – insurance advice. To sit me down and test me on derivatives, options, structured managed products is a waste of my time and money. It seems a no-brainer to me, to treat us separately. Why is it not done?”
Regular contributor, Jeremy Wright, added:
“Risk writers are being forced to adhere to regulations, ongoing training and a plethora of rules that have no bearing on risk writers and add to the underinsurance epidemic, with constant distractions that have little to do with insurance advice, though take us away from doing what is the most important best interest duty, which is to get more Australians insured.”
In contrast, another reader (writing under the alias ‘Alleycat’) argued that“… you can be an expert in super, investments and risk. You just have to put the time in to be educated. I was an insurance specialist and NSW Agency Manager for a major life company that’s still in existence. I lectured on income protection insurance to life agents of all persuasions on behalf of the old LUA and I was a graduate of LIMRA. I went back to University to study tax law and complete my DFP via Deakin University. I also hold a CFP designation and have run an insurance and financial planning business since 1990.” (See: Blanket Approach to Risk Commissions Unwise – FPA)