Life insurance advisers are set to depart the industry en-masse in the next five years, Synchron Director, Don Trapnell has claimed.
Trapnell said, “A mass retirement date for life insurance advisers is looming and that date is 31 December 2023”, which is the day before new education standards become compulsory.
He referred to a number of industry surveys that estimate the level of advisers departing the industry will range from around 16 per cent to 34 per cent.
Trapnell said the projected numbers of advisers intending to step out of the advice sector in the next few years highlighted that the mandatory education requirements announced by the Financial Adviser Standards and Ethics Authority were over-prescriptive.
“A Government which goes headlong in pursuit of regulation to the extent that it kills off an entire sector of an industry does the community a grave disservice. The industry is not that sick. I believe it is akin to a doctor over prescribing medication to patients and in the process killing them,” Trapnell said.
“A mass retirement date for life insurance advisers is looming and that date is 31 December 2023”
He also said it was his belief the Government was trying to force life insurance advisers to become full service financial planners, and it was ‘inappropriate’ for life insurance advisers to have to hold the same education qualifications as financial planners.
“Risk advisers need qualifications in life insurance. Their job is to arrange insurance so that their clients are financially protected should the main income earners die or become unable to earn an income,” Trapnell said.
“To do this job, they do not need to understand transition to retirement strategies, the intricacies of managed funds, or the latest superannuation caps legislation. That kind of education is not appropriate,” he added, repeating his call for a separation of the two advice disciplines (see: Trapnell Calls for Separation of Risk Specialists).
Trapnell added the departure of life insurance advisers would also have a negative effect on consumers who would be forced to buy life insurance directly from life insurance providers without the benefit of advice.
He said Synchron would continue to call on the Government to allow streamlined education pathways for the differing financial advice disciplines.
Well, hasn’t this been the agenda all along?
“Life insurance has more in common with household and car insurance policies” well that certainly does support the position on the one hand, but is the suggestion that we should also be providing advice on household insurance and car insurance or… Oh dear.
Good article from Don. He certainly knows where it’s at in our industry. Sadly, his words will fall on deaf ears and there will be no going back from here on the government’s part. It seems to me that some very savvy, much switched on life-risk advisers will not only ride this out; they will prosper from this monumental regulatory debacle. However, it will take serious thinking, planning and implementing to get there.
As it stands, the government is dismantling the life-risk advice industry which, as we know, has been with us for over 150 years. If we don’t adapt to change we’ll become like the horse and cart when the motor car was first introduced. That is the challenge we all face.
In his analysis Don is correct, but the very large costs will not be apparent to the Government(s) until the volume of Life insurance sales drop like a stone over the next 2-4 years.
Remember Life sales represent a large company tax collection plus the GST plus the state stamp duties at 10% on each contract and renewal.
Thus when the stupidity of this decision impacts in Fiscal terms to Govt revenues then and only then will the politicians understand that they have been had.
In theory investment funds are designed to prosper for both client and adviser. By contrast life insurance and its ancillaries is sometimes designed to fail for the client or not provide the best result. Investment and Insurance are worlds apart. They only come together when you want to fund insurance from investment.
I think Don is spot on with his comments education is not the problem it’s the over emphasis on obtaining ridiculous degrees to help someone understand some pretty basic things
Protect what you love and own !
I am one of those people wrestling with retirement should I shouldn’t I ?
I think many are hoping that common sense will prevail and a level of education applied that is consummate with the knowledge level required and previous industry experience
There will be others who benefit greatly though once these books of business become available for purchase probably at a reduced value due to the “flood” they will create in the market
What is really the lose in all this is the experience that those retiring will take with them something you cannot learn from a book or achieve through education no matter how many degrees you obtain
The UK worked out it was wrong when they went down this same path many years ago changed it back but are still suffering the under insurance costs and lack of sound advice lost when they enacted it
New Zealand explored the fee versus commission aspect and decided it was irrelevant commission was a standard type of remuneration and changed nothing
But not us ! Our elustrios leaders have paid no attention to any off this and gone ahead with an even more convuluted plan of restriction of trade and over education models.
Hopefully someone with power and foresight will wake up on this and give it the proper review it requires before the industry is completely “stuffed” I am sure this is the only reason people have not already left ! They are hoping for some sort of sanity to prevail
Who wants to be the most educated person on the Dole Cue ?
Ken if you are anywhere near retirement age, near or in your 60’s and you have no debt and enough in your super/assets, just do it! It’s not a hard decision and life will be bliss.
Retired life can be busy, keep good health and do all the things you want to do. I am so glad to be out of that industry and haven’t looked back.
Remember this, every extra day spent working is one day less in retirement!
Problem is Don, you are expecting an understanding of the industry from a Govt that has been led by the nose to achieve this exact outcome. Want insurance, just come direct to the FSC members. I guess if my business is not sold in the next few years its value will halve, fantastic thanks Trumble and O’Dwyer!
You’ve all, including Don have missed the most salient point.
The LIF legislation after 2020 will be the catalyst to destroy the Life insurance industry and see an exodus of advisers leave when you all will be reduced to accept 20.0% level commission.
When this happens, you will need to find and write 5 times as many clients for the 1 you wrote last year to earn the equivalent amount of income.
If none of you see that then you’re all in the wrong business.
The fee for service model is a myth !!!
Its not just over education. Its over compliance, reduced commissions, 2 year claw back,
coupled with forcing risk advisers to be registered tax agents ($600) and join the FPA who dont actually do anything (another $600 pa) so we can tell clients that income protection can be tax deductible if its held outside super and Life Insurance in super should be paid to dependants.
We actually cant help clients anymore. Its too costly and the threat of being sued is too great. Best to just work for one of the direct insurers and provide clients with junk policies which dont pay out. At least then we wont have to do SOA’s or comply with the BID.
Risk advisers will be leaving in droves.
Separation of Risk Specialists should have occurred in 2001 when FSR was introduced and each advice discipline dealt with separately and changes introduced to suit the differences of each. Perhaps we wouldn’t be where we are now if it had been.
There are so many things wrong with FOFA and LIF BUT if you take a step back and ask, “How did we get here?”, then the overarching answer is that ASIC and the Government initially thought that all the original changes would insert ethics into people that are never going to be ethical. You either have a good solid ethical character or you don’t, and no amount of lecturing is going to change that…people who think they are smarter than the Licensees and Regulators will always think they are…I agree with Mervin C Reed…unfortunately change will ONLY occur when the government of the day learn about how their imposed regulations are further adding to their budget deficit woes.
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