Consumers Open to Insurance Advice Fees

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Increasing numbers of financial advisers are charging fees for life insurance advice but few risk-only advisers have found a fee model that will work under the new Life Insurance Framework regime, according to research conducted by Elixir Consulting.

Elixir Consulting Principal, Sue Viskovic
Elixir Consulting Principal, Sue Viskovic

The research, which forms the fourth edition of the Adviser Pricing Models Research Report, found that around a third of advisers charged a fee for insurance-only advice with another 12% charging a fee on selected occasions, and only a handful charged any form of fees for ongoing insurance advice.

Elixir Consulting Principal, Sue Viskovic said the shift towards fee for insurance-only advice partly busted the myth that consumers would not pay fees for insurance advice but warned this approach was likely to be unsuitable for risk-only advisers.

“Whilst pricing is often talked about, the intricate detail of how advisers charge for their services is still elusive to most…”

“Whilst removing all commissions on risk can work for an adviser who is building their business on comprehensive advice, and providing insurance-only advice in a limited number of circumstances, our research suggests that it will have dire consequences for the risk specialist adviser who relies on their long-term clients for their recurring income and the asset value of their business,” Viskovic said.

While the research, which collected data from 320 advice practices on how they charged for a range of advice services, including life insurance advice, provided insights into fee models and pricing, Viskovic said it also showed that advisers were still working out how to price their services.

“If you’d told me a decade ago that we’d now be in an environment where every adviser has to charge a fee for their financial advice, and yet there is more confusion and curiosity about pricing models than ever, I’d have probably laughed” Viskovic said.

“Whilst pricing is often talked about, the intricate detail of how advisers charge for their services is still elusive to most; today it remains a very private and commercially sensitive topic.”

Further details about the research are available in the May RiskInfo eMagazine in the article: What They Don’t Tell You About Providing Nil-Commission Risk Advice



9 COMMENTS

  1. The reason advisers don’t charge fee for service is the fear of losing a prospective client before they even start. After all, with so many advisers around, why would a prospect choose to pay a fee when others will do it for nothing?
    The solution is to go to clients with something they can charge a fee for and not all other advisers have or do. So if they now offer money management as a service and can show clients why they need insurance, they are in a far better position than going in empty handed.
    Helping clients with money management and debt elimination can be easy given the right program and it is seen to be helping clients rather than selling. Products are just a natural add on to the solutions to the problems exposed in the money management program.

    • Well said, NobbyK. What you’ve written here makes good sense. Overall money management is what you’re about. I can see some issues and hurdles to overcome in implementing such a strategy but ultimately it should pay off.

      • It’s actually quite simple Paul. I have the program, you need to workout the fee. I have advisers who are choosing to charge an annual service fee and including this as part of their service offering. http://www.MoneysMoney.com

  2. Charging a fee for an advice document and then collecting the commission and ongoing fees and then charging for claims support is not a ‘fee for service’ model so put that rubbish to bed. Equally waiving advice fees on risk as you collect them on the wealth side is nonsense – that is just charity – not fee for advice. Yes you can do all the above but a fee for service model in risk is simply charging a fee for the advice and letting the client see if they can source cover. If they cant then that is not the advisers fault – they have given the advice and should be paid for it? Apparently anything else the adviser does for the client, has no value so should not be charged for!
    All fairly irrelevant as advisers will have to leave the field of mum and dad insurances as it is too expensive to service when a consumer can pick up insurances with no underwriting and no advice fees. Of course they will have a 30-40% probability of having any claim denied and the comparitor they use will most likely only be the insurance companies that that comparitor is owned by which, incidentally, will be just as expensive or more than intermediated advice – oh and they will be charged commission based fees by those companies but no advice documents are necessary.
    Kudos to the regulator, the FSC and both sides of government – great result for the Life companies.

  3. Personally I am “sick to death” of the way some so called experts try to “sugar coat” charging fees to mum and dads for life insurance policy advice !! Mum and Dad look at insurance completely differently to say a business and it’s partners requiring a key man or buy sell arrangement being established
    Life insurance income protection TPD etc are at the very best a necessary “evil” if we can get away with out having it good!! It’s the old “moto” “it won’t happen to me”
    To charge a fee on top of this expense is only going to confirm that ridiculous thought and hence they will go without or go online and take their chances
    People are ” bailing” out of Heath insurance due to cost but believe it’s ok as they can fallback on Medicare ??
    This coupled with let’s not have insurance will put unbelievable pressure on our health system but no one seems to see that The answer it seems is increase the premiums reduce commissions and worry about legislative change later ( after I have served my term and am on a pension) let someone else worry about it !!

    You cannot charge mum and Dad entities fees on risk !! It has been said a thousand times they will not pay it unless it’s mysteriously wrapped up in an overall investment type plan
    Can someone explain this at the next PJC enquiry

    • What has bugged me from the outset Ken, is that too many of these types of articles make reference to advisers who charge a fee but in all reality it turns out that most, if not all, are planners whose fees relate directly to the planning services they provide. If they do charge a plan fee, then of course they will probably reduce any insurance commission and can afford to do so.
      Even in the above article, the first line states, “Increasing numbers of financial advisers are charging fees for life
      insurance advice but few risk-only advisers have found a fee model that
      will work…” – are these “financial advisers” in fact planners who offer other services outside of risk? I wish there was always a clear distinction between the planner who is able to charge a fee for their planning services and the risk only writer, especially among those who state that clients are happy to pay a fee for their risk only advice.
      I find it rather interesting that despite these so called experts supposedly helping risk writers develop a fee model, the admission has been made that few risk-only advisers have found a fee model that will work! Come on guys, share your ideas with your colleagues on risk info.

  4. Unfortunately, Business owners will not pay a fraction of the time and cost to provide Business Insurance advice.

    The time and expertise required to advise in this area and the complexity involved, means substantially more work.

    We have provided Business Insurance advice for many years and have had the same response from all Business clients, which is NO to paying a fraction of what it costs to provide the advise, let alone the implementation costs.

  5. Where in the report does it show ‘consumers are open to insurance advice fees’?. Yes consumers are open to paying advice fees for ‘bundled advice’ we already know that, but for Insurance advice alone? No they are not!.

    Up until NOV last year I was producing two insurance tables and options for clients.
    A) Fee only of $1,100 and $660 with commssions removed.
    B) commission only.
    Of the 15-20 SOA’s presentations ZERO elected to proceed with the fee only.

    So lets gets serious here. The correct headline is ‘Advisers are open to insurance advice fees’.

  6. I think “that it will have dire consequences for the risk specialist adviser” is correct. 99% of customers simply will not pay fees for risk only advice. Its that simple. The same insurance company execs who stitched up risk advisers through the FSC and LIF will no doubt scratching their heads in the future wondering why new business is plummeting. But its simple economics. If you are a risk specialist you will be financially better off sitting on your trails, not writing new business or doing something else.

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