Interim findings from Elixir Consulting’s latest Adviser Pricing Models Research suggests more risk-focused advisers are developing fee-based remuneration options for their businesses.
In releasing a small selection of initial findings, Elixir MD, Sue Viskovic, noted, “We have certainly found more advisers are charging some iteration of fees for their risk advice, and the numbers of those replacing commissions with fees have lifted from the last report two years ago.” Viskovic added that her team was “…discovering some interesting techniques being used, and opinions of advisers who have commenced the process.”
We have certainly found more advisers are charging some iteration of fees for their risk advice…
Other interim results include the finding that three-quarters of financial advisers have raised costs over the past five years, while less than one in five has kept them at the same level.
The group found that advisers who have responded to its pricing model survey are only making about a third of their targeted earnings. Viskovic said while the average earnings before income tax (EBIT) that advisers were targeting was 35% (after a normalised salary to principals of $150,000), the average actually being achieved was 13.5%.
Advice businesses which were reaching an EBIT above 30% averaged 27 new clients in the past year, according to Elixir, with advisers preferring new clients who were referred without the adviser asking for the referral.
Given this finding, Viskovic said it was not surprising that 75% of advisers reported an increase in costs in the last five years compared to 17% who reported no cost increase.
The research survey, which is also looking at the specific amount advisers charge for initial, ongoing, risk only and limited advice as well as when fees are introduced into the advice process, closes shortly, with full details of the findings set to be released next month.
Based on these findings the latest Riskinfo poll asks the question:
“Will you be making changes to your business model to accommodate the remuneration changes contained in the LIF Reforms?”
Click here to vote or comment.
Does anyone do risk only on a fee for service only?
Well said Aaron…. you are oh so correct.
Those advisers claiming this so called high moral ground (fee for insurance advice) are doing so via the cost of such services being subsidized by exorbitant investment / strategic advice fees….. I call them the “Fee Justifiers”…. these advisers whose ground gets shakier and shakier as the benefit to their client versus the fees they charge requires more and more justification, until there are no more tricks or complicated strategies left to confuse the client and the client decides they can get better or the same returns with less complicated, more traditional investment strategies, without the need for the Fee Justifier meetings/ reviews…..
….and this insurance advice fee for service model gets worse when the Fee Justifiers have a client make a claim on their insurance… guess what the fee Justifiers either want to charge a fee to manage the claim (when the client is most vulnerable and in need of money), or outsources the claim to the insurer (how is that in the clients best interest?), or they drop the ball completely. This especially happens when they start to have multiple claims…. ie: 10-20 or more claims going on in any one year.
Where as the Risk Adviser take prides in helping clients with claims regardless of the time and cost to us because that’s our business and model.
Well stated ‘RiskHelper’ (great name BTW but you should use your real name!) – You make sense and successfully cal out these shady “Fee Justifiers”. I’m with you; if there’s a risk-only adviser out there who knows how to charge $3K+ fee on top of an average wage earner paying $3K+ premium I’m all ears. I’ve been with major life company-owner dealerships through the years and NONE of them have been of any help in this regard. All while I paid them a BILLION BUCKS in dealer fees as a pure risky! Go figure . . . Cheers ‘Helper.
@ Aaron Zelman
Yes,……. the ones that write no more than 5 cases a year or the premiums are in excess of $10,000. Why,…. because it costs on average between $1000 – $2000 for every case you put on and it costs $1000- $2000 for every case you do work for,….. that doesn’t complete
Try adding those costs to the standard Nil commission model where the rebate to the client is no more than 30.0% on a fee for service arrangement.
Then you have to sue your “might have been client” for the money when they decided not to pay you.
Otherwise like accounting practices, you’re carrying debtors of around $180,000 p.a but you need a revenue stream of around $800,000 to support chasing those debtors through debt collectors or the courts.
Such is the stupidity of those who think otherwise and the weak Liberal government, the FSC and ASIC.
M/s Viskovic has a vested interest in promoting this kind of rhetoric.!!
You’d think this experiment that resulted in this rubbish being tried in the UK and failing the consumer miserably,…. was forced to revert to the commission model.
By the time the so called smart people find out that this doesn’t work, many risk only advisers will no longer be in business.
Well said Alleycat.
About 12 months or so ago I asked those who believe that clients will “happily” pay a fee and a premium for their insurance to provide a working example of just how this works. I also emphasised that this is Risk Only – it does not apply to the financial planners who charge a fee for their overall services. Do you know what? No one would respond!
Let’s look at a quick example. A mum and dad client pay a premium of $3,000 pa and currently the adviser is paid commission from that premium, be it upfront, hybrid or level.
But if the commission was deleted altogether, the premium would reduce by 30%, i.e. $2,100. But we are now being told that clients will pay a fee to compensate the Risk Only adviser for all of the work he has done. Chris Unwin stated in Risk Info that if he charges $300 per hour and it takes 10 hours from start to finish, his fee is $3,000. So can someone please explain why a client is happy to pay a premium of $2,100 plus an adviser fee of $3,000?
Warren, Alleycat & Steve, re Warren’s post: I recall you making that open request a year ago or so on here Warren – no takers then and none now. Unless Sue Viskovic comes on here trying to defending the indefensible we probably won’t hear from anyone else either.
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Sue Viskovic, I reject outright your assertion that pure risk advisers can charge a fee, if they are working in anon-high net worth market and do not also do ‘other’ financial planning or accounting. Look NO FURTHER than the example given by WARREN B in his post. When oh when are you people going to get this through your heads? That is, if you want to get it through your heads – I don’t think you do these days and I think you have decided on a mantra and agenda of the opposite for reasons best known to yourselves. What risky’s like us must remember is that the life companies and associated ‘consultants’ and ‘special’ interest entities are aiming for is the abolition of advisers. Tell me otherwise, I dare anyone as logic and evidence to hand conclusively say otherwise. . . . explain the lower commissions AND the deathly silence from life companies, explain the 2 year clawback period – explain life company acquiescence to things like these.
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Explain to me how and when the life companies fought for advisers in just these two areas. There are one or two life companies that are with advisers but they are overwhelmed by the others who want advisers gone. look at the systems they are implementing, look at the changes to claims that are underway through robo advice when an adviser is not involved. The vast majority of life companies and larger dealerships pay nothing more than lip-service to advisers. No, they didn’t fight for us because they want pure robo-advice channels distributing their product and client-best-interest though advice from advisers be damned.
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How nice for the life groups in this era of increasing costs and compliance NOT to have to pay these pesky advisers. So transparent I don’t know how any adviser can not see it clearly. We are a dying breed and it is older ones like me that are the fortunate ones. I can sell up and retire whenever I choose but the young ones who have already made full commitment to our once great industry cannot get out so easily. They will muddle through until there’s no commissions left and a 5 year clawback will see them OUT due to non-viable finances in their businesses. They will end up as employees of the banks working in the insurance arms making God knows how much plus sick leave and holiday pay. They’ll never get to know the true wealth and freedom the industry gave us before the mega groups, politicians and the politically correct got involved and thought they knew better.
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Me? I’ll stick around ’til the new idiot compliance regime and educational regime becomes untenable. I have nothing against learning but it must be relevant. I’m not going to spend thousands on unrelated educational topics just to continue to look after my insurance clients – ridiculous. Where’s the industry consultants championing the cause for a separate risk licence. Where are they Sue Viskovic?!! They’d be better off all ’round doing that rather than incessantly trying to convince risk advisers that fees will work. Sheeeessshhh!!!
You know Warren, as simple as your excellently portrayed scenario is illustrated there, the people pushing the barrow that we should charge fees will pretend you never said it. It is the only way for them – to ignore, ignore and ignore.
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I have posed similar scenarios directly to people and posted the same on here and other places. ABSOLUTELY NOBODY in the ‘Fees-Should-Be-Charged-By-Riskies’ brigade has ever even so much as attempted a response to such an example. The reason is because there is no answer and, as in your example, we cannot charge a mum&dad client a fee on TOP of their multi-thousand dollar yearly premium. Utter poppycock these consultants go on with. When was the last time they were in the real world and/or out there with ordinary Australians helping them budget and afford good life/income or trauma cover? When, if ever?! Putting mouth into gear before engaging brain – that’s the majority of these bought and paid for consultants. Sickens me. God knows what they charge the life companies or whichever entities contract them for this dirty-wash-water “research”! Fancy paying for research so flawed. Stupid and embarrassing thing is that it is so easy to prove wrong. Go figure, crazy world these days Warren. Everything back to front and upside down. People and companies have lost common sense and gained political correctness. Some trade-off eh?!.
I’d like more information on the survey –
How many advisers were surveyed?
The article states the advisers are ‘risk focused’, how many are actually ‘risk only’?
How many ‘risk only’ advisers replaced commissions with fees from the survey? How many were there on a fee only structure 2 years ago?
I have been discussing and presenting the option of commission or fee only with tables showing the difference in premiums in my client SOA’s for two years now. To this date not one client as elected the fee only with no comms. In fact I’ve had two clients only recently baulk at the advice as in my explanation of the how I’m paid tables thought I was recommending I charge a fee for advice and remove the comms!!!
So try and tell my clients of all ages that they should be paying fees only not commissions for their Risk protection plan! It’s a clear NO from them!!
Erm… wow it feels like stepping into a lions den here. Folks, I’ve been buried neck deep in analysing the research with my team for the past week and am looking at at least another week of long days and nights, so I’m going to make one comment with multiple points here just to put a few minds at ease. I’ll try not to be so offensive and aggressive as some of the comments here. I get cranky too when I’m misrepresented by people who take a single piece of information out of context and make incorrect assumptions, accusations and put words in my mouth that I have never uttered.
So here goes, then I’m going to mic drop and get back to work now that I’ve put my kids to bed. Feel free to book some time with me if you’d like consulting support, or come chat with me when I’m at a speaking engagement. That’s right – I make a living out of helping advisers to stay in business, not pandering to product providers, regulators or anyone else for that matter. I know the value of what I do and I have a family with 4 children, so at some point I need to draw the line between what is conversation and support for the profession and what is professional skills that will benefit others and warrant charging a fee for. So here are more words than usually preferred in a whole article, to satisfy my indignation at some of these comments.
1. If you read the article again and not jump to conclusions, these initial findings were shared from an initial analysis of the research data while we were still accepting submissions – yes, we released initial findings to generate interest and encourage more advisers to participate before we closed it off with 322 complete, bonafide participants. And yes, we will release parts of the information over the course of the next few months, to share the knowledge, and unashamedly encourage people to purchase the research to get more detailed knowledge. Look at my point 3 to understand why.
AND we did not state that lots of risk specialist advisers had REPLACED commissions with fees … how about, instead of getting emotional the minute you hear about others who have a different model to you, and jumping to conclusions then name-calling and denigrating others’ choice of how they do business, you actually read the whole article – and then look back at others I have written?
2. I – and none of my team – have ever stated – online, in person or from stage – that we believe commissions on risk should be banished and the best option is to charge fees. You won’t hear us telling anyone that you should switch to a full fee model for risk advice but you WILL hear us argue when you say it can’t be done. Why do we argue? Because it can be done – and is being done by advisers around Australia…that doesn’t mean we think you should do it – or that it’s a better model than any other – but it can be done. To date we’ve found it’s mostly financial advisers who have done it – and not just wrapped up with their full advice – they provide it to clients as stand alone advice too. Again – because they choose to! I would never falsely state that this is a better model than commission.
What I will yell from the rooftops though is that if you can continue to build a profitable business and be around for the long-term for your clients on the new commission model that’s awesome…but I know many of you can’t and that requires looking at your options and working out how you’re going to survive, for the sake of clients who need you – and your own. That’s the only barrow I’m pushing.
Until now, we had met quite a few risk specialists who subsidise commissions with fees, but had not heard of a risk specialist who has replaced commissions altogether with fees … but in this research process we have found one who gives his clients the choice and has so far had 6 clients choose the full fee, nil commission option out of the 25 he has offered it to. The remaining 19 still paid a fee for his initial advice, but they chose for him to receive commission for the implementation. Again, sharing this knowledge doesn’t state it’s the way of the future – or that it’s representative of the whole market – it’s simply really interesting to see how he’s done it and what he found in the process.
3. Warren, a number of years ago I did respond to just about every comment in a thread that was posted on an article I wrote here in RiskInfo – http://magazine.riskinfo.com.au/20/busting-the-risk-commission-myths/#.WNuvMBKGM3g as well as a number of other articles. I decided after that process that took most of a few days that I would refrain from trying to answer comments as I have clients to help and a business to run. It’s such a complicated area that I committed to finish writing my book on the subject, which I did and released it last year – Worth Paying For… I answer every question in there – and do it justice, rather than trying to respond with a short word count.
4. Elixir Consulting has undertaken this pricing research of the entire advice market approximately every two years, with the intention of understanding the models, techniques and numbers that are successfully being used in the marketplace – because our profession is helping advisers to build a better business and serve their clients better, and we know this information is helpful and powerful in the hands of advisers. In this fourth edition and the last, we have collected and included a lot more data on risk advice, when it’s included as part of a comprehensive financial plan AND when it’s provided as stand-alone advice. We are not a quant-based research house – we are a coaching firm, who seek the data to understand the intricacies, not quote statistics. We do this research on a qualitative basis – collecting the headline numbers and the techniques used and also drilling down into the detail by interviewing those with interesting models and to collect a deeper understanding of what’s working and what’s not. We are not commissioned or contracted by any product providers to do this research and we do not enter it with any preconceived ideas or intentions to prove a particular point. We do this of our own accord, at our own expense, and then we offer the research out to the market – to advisers, licensees and product providers who can buy the research if they choose to tap into the knowledge, and some buy it to provide it to their advisers. It’s a bloody mammoth job and we take it seriously. We don’t price it all that cheaply either because it’s really valuable information and we know we hold a priveleged position of trust where such a number of advisers will share their info with us on a confidential basis. I’d love it if we made a fortune out of it, but I’m satisfied that it usually makes enough to cover costs and pay for our time, and more importantly, makes us better at our jobs and empowers our clients to make their own choices with the benefit of a broad knowledge of what others are doing.
My ‘vested interest’ as suggested by Alleycat in doing this research is first and foremost to understand what’s happening in the market so we can keep getting better at what we do. The large majority of our business comes from personal referral from advisers we have helped, and you only get that when you’re professionally competent and help them get real results. It has also meant that we are getting engaged by insurers to help them help advisers – and to also help them understand the challenges faced in adviser businesses and how they might help them in product design, adviser support etc. I happily declare my vested interest in seeking out alternative ways of pricing and sharing them with advisers so that they can stay in business after the reforms, largely because our whole team have their own very intimate experience with insurance advice and we’re all massive advocates for it. Your role (and ours) is too valuable for us to come up with poppycock ideas that are unproven and then tout them around and see advisers go out of business because they turn out not to work.
Mic drop, I’m out, back to work. Poppycock indeed!
Sue,
Raising 4 kids and running a Business, is a herculean task and that is a great achievement you should be proud of.
However, I feel you have either consciously or unconsciously been marketing your Business to promote “attention seeking headlines” and then build your consulting advice around those headlines, which we all know have been full of mistruths.
I have been a successful Financial Planner for 30 years and we have clients that have Businesses with turnovers from 50k to 1 billion dollars a year, as well as executive employees.
Our Business has done extensive consultations with every client demographic and the vast majority of them have rejected even a nominal fee to cover our costs for service around life insurance advice and 100% of them said NO to paying fees that would recoup our costs and enable us to make a profit.
You have admitted there may be NIL “risk only”” advisers out there providing a nil commission, 100% fee only model and your research found only one adviser who gives the clients this choice, with only 6 clients taking up this offer.
You are in Business and it is your right to promote your service based on your research.
We all know that perception carries a lot of weight and limited research carries limited data that can be extrapolated to a wider audience to enable consultants to promote their thinking and agenda.
However, you have oversimplified what actually happens in the real world of risk only advice and have misaligned what clients will and will not accept.
You are treading on thin ice when it comes to the area of risk only specialists and what your perception is in the area of what clients will pay fees for.
Obviously, you do not want to give away too much free information and your teasers are designed to attract paying customers to your Business, though unfortunately
what you have disclosed, actually reinforces what many advisers have been saying for years after consulting with their clients, in that clients will not pay fees that cover a fraction of the cost to deliver the advice.
Your message has mellowed recently, though the damage has been done, with vested
Interest groups who have listened to yours and other Companies limited research
with flawed data, to justify their actions around the LIF regulations.
I hope that your research was based on a misplaced sense of doing good work,
( which unfortunately in this case, your research was seriously flawed ) and not from
another agenda.
Jeremy, all I can say – other than ouch – is that our research is not seriously flawed – and I have little control over the headlines that publications choose to place on their news reports.
We have always been honest about our research – and have NEVER had an agenda other than to encourage more consumers to protect their families properly and get professional advice to do so. We encourage people to use our services, but if our advice and support was so flawed as to put people out of business – we would not be in business some ten years on.
I don’t believe our message has mellowed – when it comes to charging fees for insurance advice I have always stated that it is complicated and that advisers should choose a model to suit them based on their business… and not to fall into the trap of thinking the way they have done it to date is the only way.
Disappointing to read some of these comments.
Publications like RiskInfo are interested in fostering informed debate on contentious issues relevant to risk insurance.
Writers like Sue are contributing to this debate.
We all benefit from this contest of ideas. That’s how we learn, and to learn well one needs to move outside one’s echo-chamber and hear ideas that one may not be 100% comfortable with.
I suggest you read Sue’s books. They tackle this esoteric niche very well, and are probably the best summary of the issues available. They are remarkably cheap, and remarkably discomforting, which is what a good book should be.
Don’t play the man in this contest. It’s not nice and it adds nothing to the debate.
Challenge the ideas instead.
My view: LIF is an existential threat to 100% risk advisers because commission incomes will fall by up to 40%. Most clients are not keen on paying for risk insurance advice. That’s a fact. So you have no choice but to evolve to provide a broader range of services on a fee for service basis.
Feel free to tell me where I have it wrong.
Terry, it is not about where you have got it wrong.
It is about honesty and the reality of what is the future of providing Life Insurance advice as a stand alone Business model, without the need to cross subsidize from other areas of advice.
The Life Industry generates over 44 Billion Dollars p.a., so it is not a start-up
industry that requires funding from other sources.
The potential of the Life Industry is substantially higher than the current model. One example is Business / Keyperson Insurance which is a huge market, that has hardly been touched.
There must be accountability on all sides of the equation, which to date, has not been forth coming.
We have no issue with change, we have lived with change for 30 years.
If Life Companies improved their processes and made the purchase, administration and servicing of Life products a more seamless, cost effective model, then a reduction in commission would not be a big issue.
However, the current inane, standard response to rising lapses and claims, is to increase premiums at rates way above inflation, which causes more lapses and exacerbates the industry woes.
There has been no regulatory push to make Life Companies more accountable and efficient, hence, push back from advisers who understand this industry and who want to make some positive change.
People seem to accept the status quo. Wrong.
Nothing good is achieved by rolling over and accepting bad policy which leads to bad results and a worsening position for clients, advisers and the Life Companies.
The Government, clearly does not understand the issues and it is up to us to fight against inaccuracies and mis-truths, or the retail Life Industry will decline
further until it is totally unviable for advisers to advise in this field, which is self-defeating for every body.
I get back to main point.
A line has to be drawn in the sand and hard decisions need to be made,
starting with a simple question.
Does the Australian Government, the Australian public and Life Companies want advisers to look after existing clients, seek new clients and to provide quality Insurance advice, products and administration services for the Life Companies and for all Australians, as a viable full time occupation to grow the Industry?
Or do we let it all collapse and fall back on inferior policies that will not pay claims, or have insufficient cover due to no professional advice being available anymore?
Hopefully self-preservation amongst Life Company executives will prevail and they will get intelligent advice from professional experienced people who can guide the Life Companies in the right direction, so the Life Industry can grow and be profitable for all parties and to allow the general public to still have
alternatives to attain excellent advice in a manner that they can choose.
Terry thankyou for your comments, and sharing your views.
Comments are closed.