June 27, 2017
Will the Life Insurance Framework remuneration model allow a risk-focussed advice business to remain sustainable?
- No (54%)
- Yes (31%)
- Not sure (15%)
Adviser opinion is divided on the future outlook for risk-focussed or risk-specialist advice practices under the Life Insurance Framework remuneration reforms.
As we go to print, 47% of advisers taking our poll have said the LIF remuneration model will not allow a risk-focussed advice business to remain sustainable. However, 35% say the 60/20 remuneration model will be sustainable for risk-focussed practices, while almost one in five (18%) remain uncertain about how things will work for risk specialists under the LIF reforms.
One possible post LIF future will see risk-focussed/risk- specialist practices incorporating both commissions and fees in their business model. This has been suggested by risk advice expert, Chris Unwin, whose remarks about the future of specialist risk advice businesses formed the basis for this poll (see: Three-Step Proces to Charging Fees for Risk Advice).
…the large majority of risk advisers will more than likely embrace a commission and fee based remuneration model
In his response to comments from last week, Unwin has made it clear that he is not advocating the removal of commission based remuneration, “…but with all of the changes that the regulators have made and also threatened to make in recent years, I do believe that risk advisers need to prepare themselves for becoming more fee orientated,” he said.
Unwin believes the large majority of risk advisers will more than likely embrace a commission and fee based remuneration model “…especially if they are dealing primarily with Mums & Dads as clients”, he said, adding “I believe that even Mums & Dads would be able to find a way of paying between $500 and $1,000 for the preparation of an SoA and assistance with the underwriting process provided they can see the value of this assistance.”
The need for risk advisers to focus more on creating, adding and communicating value for their clients is a key point Unwin was seeking to make, “…and I believe this is probably more prevalent amongst newer advisers rather than long in the tooth ‘riskies.’” who have historically been much better trained in how to build stronger and more lasting client relationships,” he said.
…even Mums & Dads would be able to find a way of paying between $500 and $1,000 for the preparation of an SoA
Does this perspective contribute to addressing the future vialbility for risk-focussed advice businesses? Will there be a proportion of risk-specialist practices that will operate under a purely commission-based model (60/20) that will deliver a successful business outcome that will be complemented by other risk specialist miodels that will combine commissions and fees? Or is either model a bridge too far for some risk-specialist advice businesses? We welcome your contribution to this issue as our poll remains open for another week…
Or are both of these possible models a bridge too far for some existing risk-specialist advice businesses? We welcome your contribution to this issue as our poll remains open for another week…
Chris Unwin is running a series of Risk Workshops in all five major capitals in July/August, during which he will focus to a large extent on Step 2 of his three-stage process for charging a fee for risk advice, ie how to add more value.