December 4, 2018
Risk advisers are unlikely to survive under the LIF changes by selling more insurance or seeing more clients and should consider expanding their services or implementing a mixed fee and commission model, according to ClearView.
The life insurance provider also recommended that risk specialists consider diversifying their skill sets or partnering with advisers who provide non-life insurance advice to meet a growing demand for holistic advice.
ClearView made the recommendations in a recently released whitepaper – An Advice Revolution – authored by General Manager, Distribution, Christopher Blaxland-Walker and Head of Distribution Strategy, Kathryn Williamson.
The paper stated “a key strategic priority for practices should be to boost their fee income and expand the scope of their advice”, adding, “This is doubly important because it’s only a matter of time before there are renewed calls to ban insurance commissions altogether”.
It claimed there were only four ways risk advisers could increase their revenue:
- See more clients
- Sell more insurance to existing clients
- Charge a fee for insurance advice in addition to commission
- Expand the scope of the advice.
The paper added the first two options were not sustainable and would not halt a decline in revenue.
“In order to maintain the same level of cashﬂow under LIF, advisers need to see 25-50 percent more clients in 2018 and around double the current numbers from 1 January 2020…this is just to stand still,” the whitepaper noted.
“…to maintain the same level of cashflow under LIF, advisers need to see 25-50 percent more clients in 2018…”
Additionally, further sales to existing clients still had to meet their best interests and they must be able to afford the extra cover, leaving the third and fourth options, or a combination of both, as the only viable strategies for sustainable growth, according to the paper.
The benefits of these strategies would be to produce an additional income source, be paid even when a client does not proceed with a life insurance application, and reduce the impact of clawbacks, the paper stated.
The whitepaper also highlighted that remaining a risk-only adviser was an option and “…there’s a strong case for being a specialist in any occupation, provided you’re an exceptionally good operator and can continue attracting and winning new clients,” the paper added.
At the same time, it warned that Australia’s ageing population was seeking more holistic advice that considered their total financial needs and goals, and research suggested the best strategy for most advisers was to expand their value proposition.
“For many advisers the idea of strategic advice is not new. They’ve been doing it for years (it’s called financial planning),” the paper stated, adding advisers were at a crossroads and would be required to make a choice.
“They can choose to accept regulatory reform and make changes to grow their business or do nothing and hope for the best. Both options carry a degree of risk. Arguably, doing nothing is a bigger risk given change is inevitable,” the paper noted.