LIF – Seven in Ten Advice Business Models May Change

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Have you made changes to your advice business model to accommodate the remuneration changes contained in the Life Insurance Framework reforms?
  • Yes (40%)
  • No, I won't be making any changes (32%)
  • No, but I'm still considering possible changes (28%)

Our latest poll results suggest almost seven in ten advisers have changed their business model in the lead-up to the Life Insurance Framework transition period, or are at least thinking about it.

In the most even spread of results we’ve seen, 35% of those responding to our poll said they have already made changes to their advice business model to accommodate the LIF remuneration changes, closely followed by another 34% who said they haven’t made any changes as yet, but are considering it. The remaining 31% have voted that they won’t be making any changes.

While it’s not likely that all of the 34% still considering changes will eventually do so, it’s also likely that many of them will.

This suggests a significant proportion of advisers, presumably most of them risk-focussed, have identified their existing business model will not survive the LIF remuneration restrictions, or at least not continue to be a commercially robust model.

…we are discontinuing writing risk new business and concentrating on other business

But all is not necessarily as it seems. For example, one adviser noted this:

“I answered yes to this survey but that is because we are discontinuing writing risk new business and concentrating on other business. I wonder how many of the yes votes are in the same mindset.”

For this adviser, sadly, his business model changes include the cessation of advising on new business risk which, if replicated elsewhere, means less consumers will receive the risk advice they need.

The same adviser continued:

“Writing new risk business will be unprofitable and even those that concentrate in this area will be better off just sitting on trails for a few more years then getting out.”

The passage of time will reveal the extent to which this prediction will be borne out, but we hope it will not be the case.

Does your own view reflect this gloomy assessment of the future viability of risk advice businesses? Have you found a path that will allow you to continue to deliver risk advice while operating a commercially successful business enterprise?

We invite you to share your own views on this question as our poll remains open for another week…



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3 COMMENTS

  1. The adviser’s “gloomy assessment” of the future as Risk Info has put it, is not so much a negative approach as it is a realistic one. It all goes back to a flawed ASIC audit a few years ago, the shocking proposals put forward by the FSC in 2015 and the continued nonsense that followed. To paraphrase the only MP who understands our business, Bert van Manen – the risk adviser has been so unfairly targeted and treated throughout this exercise. So what do we expect? But then again, only time will tell…..

    • Businesses are changing to survive not progress !! How can you progress when income is reduced outrageous red tape in extended claw backs are not properly understood and 2 years is too difficult to comfortably manage because premiums are constantly increasing at record levels pushing people into inferior policies or cancelling altogether because of affordability
      Business growth through change is not a priority here
      Survival is paramount

  2. This is just unfortunately a financial reality. For example if you are risk focused and have say $200K trails coming in a year and write $200K new business with office and a staff member cost of say $150K. Post LIF the new business income reduces to $100K and you then have your office costs greater than new business. So commercially you are far better off closing the office and sitting on your trails running this from home.
    This will be the reality post 2019 and then say you are between 55-60, why would you hang around to take a degree? Financially much better off sitting on trails and looking after existing customers only and not writing new business and getting out a bit earlier than planned.
    If you are not just risk focused the same applies, you are financially better off concentrating on other business areas.
    The insurers seem to think that advisers will just suck it up and work at a loss or that customers will be more than willing to pay fees to make up the shortfall. They are sadly mistaken on both counts.

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