New research has revealed that many advisers will be charging more for their advice services as a result of the implementation of the Life Insurance Framework reforms.
This finding has emerged from early data released to Riskinfo by research firm, Investment Trends, as part of its 2017 Planner Risk Survey. One of the questions in this year’s survey, which is still collecting data, asks advisers about the extent to which they agree with a series of statements viewed in light of the Life Insurance Framework reforms.
52% of advisers said they agreed with the statement: “I will charge more for the advice I provide” (as a result of these reforms).
The suggestion here is that most, if not all, of advisers agreeing with this statement will re-shape their advice proposition to include a fee for advice component to compensate for the restriction in the upfront commission levels allowable once the LIF reforms take effect. At this point, it is unclear about the extent to which the client will actually pay more or whether any (presumed) premium reduction due to reduced commission levels will simply be balanced against a new or higher advice fee.
Of equal interest, however, is the implication that the remaining 48% of advisers did not agree with the statement that they would be charging more for their advice post the implementation of the LIF reforms.
Other early findings in this year’s Investment Trends Planner Risk Survey that relate to the introduction of the LIF reforms include:
- 47% agreed that “I will focus on strategic advice”
- 31% agreed that “The financial planning industry will be better off”
- 26% agreed with the statement that “Australians will be better off”
Riskinfo emphasises these are initial finding only, as the survey has yet to close. We will report other early results next week and will also deliver the Investment Trends analysis of these results in future articles.
We encourage any advisers who have yet to do so to participate in the Investment Trends 2017 Planner Risk Survey. Click here to take the survey (incentives offered).
It’ll be interesting to see how many stay in the industry when push comes to shove on charging and getting paid fees for advice! Consumers are already struggling on current incomes to meet daily living expenses without having to pay further annual fees to advisers in the realm of $3000 to $5000 on average. The direct marketing arms of the insurers and online marketing with salaried staff will win out over the majority of advisers.
The only way to get a competitive advantage is to offer something the others don’t.
What is gratifying to know is that the incomes of Bank Financial Planners will not decrease as a result with the drop in up-front commissions.
Many lament the likely loss of Risk Advisers but fear not this will only occur outside the big banks.
It is also pleasing to know that as trail commissions increase to 30% there will be no increase in the incentive of other Planners/Accountants to ‘steal’ clients without even having to do an SoA or RoA.
Bravo to all those who have looked at the ‘knock on’ effects of this legislation.
Even ScoMo agrees wage growth is NIL. The idea of finding Mum & Dad clients willing to pay $3000 for life risk advice is ludicrous when other options are available. However it has been reported that direct sales are barely growing. Sooner or later the geniuses that run the non-bank insurers ( and who dabble in “advised “and Direct sales ) will realize that there will be no growth in advised sales when LIF gets to its projected conclusion. But a lot of us cannot wait until the lights are turned on again.
@NobbyK,
Correct !!
How many advisers will be able to carry a book of debtors like many accountants do, without arranging a collection agency or going to court to be paid by their ex-client.
Pick a number, $10,000, $20,000, $30,000 ,,, $50,000 ….and still think they are going to be able to stay in business.
This is what the spinal deficient “left” have saddled the life & financial planning industry with, without understanding the processes and the consequences to both the consumer and the independent adviser.
Are we talking about planners who offer services other than insurance? The article states “advisers”, but what percentage of those who took part in the survey are planners as opposed to risk only advisers?
If there are any risk only advisers out there who have clients who are happy to pay a fee for their advice and pay an insurance premium, then please share their model on RiskInfo. NB – this is risk only, it is not to include other services the adviser (planner) may offer.
If the commission is reduced then the insurance premium is reduced by 30% as we all know.
For example – let’s assume that the annual premium for a risk only client is $3,000. Under the current structure, the client pays only $3,000 from which the adviser receives commission. If the commission is reduced altogether, the premium reduces to $2,100. The adviser must be paid somehow and charges the client $3,000 for the amount of time and effort involved in getting the cover in place. So can someone please share on RiskInfo why a client is happy to pay $5,100 as opposed to $3,000?
Because their “fee for service” risk only adviser is a master salesman and can convince clients to pay more now and save over the long term. Of course it would take around 4 years and is also on the assumption that no additional fees would be charged for a review. You see the best part is that even if any future review found that an alternative product would better suit their needs they will get paid a fee again or more likely the client will reluctantly accept their inferior product as they do not wish to pay for the advice or wait for it…the client will go direct. SIMPLES
@ Warren B
You are CORRECT !
The whole thing is a “crock”.
It didn’t work in the UK and the inmates running the asylum (government) have learned nothing because they don’t care about “small business”.
They are the facts of life… unfortunately.
The article refers to the possibility of reduced premium costs ? Do they believe in the tooth fairy too??
Of course there will be the possibility of reduced premiums
We now have a situation where the big 4 banks and AMP will have paid advisers.
They can then slash premiums in Yr 1 and add in compensating increased premiums in subsequent years like one current insurer already does with their Yr 1 Stepped premiums.
The big 4 banks and AMP can then publicly beat their chest and stress that they
. do not charge commissions, (no ‘clawbacks’) and
. have slashed premiums
both of which are true.
Our businesses of course will be unaffected and in no way will the ‘Big 5’s’ behaviour be construed as anti-competitive.
LIF was step 1 in a well thought through strategy which our Government and our Professional Associations saw through and in doing so made sure that our interests and those of the general public were protected.
It is reassuring that LIF is making consumers better off.
It is one thing to state you will charge clients a fee that will cover costs and provide sufficient revenue to make a decent living advising clients on their personal and Business Life and disability needs.
There is only one thing stopping this fantasy coming to reality and that is the clients willingness to pay, which as of today and for the foreseeable future, has a zero chance of success.
Any person who provides Risk only advice and states that they have a successful model where clients are willing to pay fees that match the work required, then may I respectfully suggest you take a closer look at your Business model and pinpoint your exact time spent and total Business expenses outlaid that relate to and conform with the Best Interest duties around providing advice.
As to the Holistic Advisers who provide risk advice as part of a broader service, may I also suggest you look closer at your Business model, as cross subsidisation is not a smart long term strategy, it is a short term assumption that dilutes your overall service and leads to a lower standard of advice and if your Client suffers a long term disability and the discount risk advice is lacking in quality, the client will not hesitate to take a closer look and take action against the whole Business.
It is simple.
Each component of the financial planning area, must be a standalone Industry that can provide sufficient revenues to support that field.
The Life Insurance Industry has vast resources. What it lacks, is forward thinking managers that can look past the rhetoric and get common sense advice that is in the world we live in, not listen to far fetched theory from self Interest guru’s pushing their own barrows, with little understanding of the Life Industry and this continual rubbish of people being willing to pay high fees, which they will not.
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