Respected industry coach, Chris Unwin, has renewed his call for advisers to re-think how they add value for their clients.
As the industry edges towards the final stage of the Life Insurance Framework remuneration reforms – where upfront commissions will be capped at 60 percent from 1 January 2020 – Unwin says it’s becoming ever more critical for advisers to deliver a quality advice experience which in turn creates the perception of value in the mind of the client or the prospective client.
Unwin says the delivery of a quality advice experience and having that perception imprinted in the mind of the client can open doors to new advice business model possibilities that don’t necessarily rely on commissions to be sustainable.
While Unwin believes risk commissions will eventually be banned, his message to his peers is that, as long as a quality advice experience is delivered and is perceived to have been delivered, clients will be prepared to pay for that quality advice service.
Unwin stresses there are three crucial elements associated with advisers delivering value:
- Creating the value experience in the first place
- Clearly communicating that value to the client or prospective client
- Differentiating the adviser’s value proposition from other advice services the client may be considering
He says there are many steps that can be taken during the initial advice process that demonstrably deliver value to the clients, such as:
- Positioning personal protection needs within the context of the client’s overall financial plan
- Pre-positioning a client ‘wants analysis’ rather than going through the motions of a standard client ‘needs analysis’
In terms of then communicating that value, Unwin said it often comes down to individual mindset: “Most of the problems advisers experience in communicating their value is in their own mind; not in their client’s.”
…paying for quality advice will become an expectation of quality clients
He added that awareness in the client’s mind of the value the adviser delivers stems from having the perception of enjoying a quality advice experience, rather than a transactional one, concluding that: “In future, paying for quality advice will become an expectation of quality clients, which in turn opens new possibilities as to how the client will be prepared to pay for that advice experience.”
Unwin stressed that this nuanced change to how an adviser delivers value – and is perceived to have added value – is an approach that can and does work within a commission-only model or within an advice business model that’s based on a mixture of fees and commissions:
“In the end, it’s up to the individual adviser as to which business model best suits their advice proposition,” said Unwin, “…but they can and will have more opportunities to sustain and grow their business in future if they take the time now to reassess how they deliver a quality advice experience.”
Chris Unwin is delivering a national roadshow series of ‘Value Proposition Workshops’ for advisers from late November…
Chris, I would like to present you with a simple example – mum and dad clients pay $3,000 pa for their risk protection. If commissions are banned as you believe they will, the premium reduces by 30% only, i.e. $900, to $2,100. But the adviser must be paid and according to you, if the adviser positions themself correctly, the client will be happy to pay a fee for the service AND a life insurance premium. When you were hit with this example on Risk Info about two years ago, you stated that you would charge $300 per hour for 10 hours work, i.e. $3,000. Which means that the client will be paying $5,100 in total under your example. You were also asked to please explain why a client would be better off paying $5,100 as opposed to $3,000? Unfortunately you never responded. So would you please explain to all of us ignorant risk specialists who have been around for decades and who know our clients better than anyone else, how a client is better off under your proposal?
Furthermore, you’ve made no reference to ongoing or trail income. Does that feature in your thinking? Or are trails wiped out as well? The point with all of this Chris, is that if commissions are ultimately banned, it will signal the end of the retails life insurance industry. That is not negative or closed minded thinking – it is pragmatic.
Your points and stats are well articulated here, Concerned. Because insurers have paid us commission for so long, we might lose perspective on fees. $300 per hour is not difficult through commissions, but unless we’re lawyers, the public will generally baulk if we ask that figure of them.
So for Chris’ suggestion to work in the comparison you’ve shown above, the figure we ask would need to be significantly less than $300/hour. I do agree with Chris Unwin on this point though: the government will eventually ban life-risk insurance commission as a form of remuneration.
That said, why hasn’t real estate commission come under fire if “commission” is such a seemingly ugly word?
cars, furniture, caravans, Select et al and various “comparison” sites – all commission. For some reason however, it is risk advisers who are the conflicted ones. What about the conflicted board of FASEA, more conflicted than any adviser. This is a witch hunt pure and simple. When they ban commissions, as they did in the UK the whole industry will turn to s***. By then there will be few risk advisers left, many businesses & lives destroyed. The industry funds must be laughing their conflicted heads off.
When did they ban life insurance commission in the UK?
1/1/2013
This only relates to investment products. They still receive commission on all risk products.
Exactly David They looked at the mess removing commission from Investment products caused and stopped short of extending it to Risk Products which was the next step in their process.
Why is it that no one has taken notice of this ? We already have issues with the banning of grandfathered commissions and unless you have been in the industry 40 years no one would know the reason that it was commenced in the first place ! It had nothing to do with establishing some form of conflicted remuneration which now seems to be the “go too” statement for every payment made these days. I have already explained this in length some risk info items long ago to Im not going to do it again.
New Zealand looked into the risk commission area 2 years ago and decided to leave it as is due to the immense mess they saw looming by removing it.
Once again who took any notice ? NO ONE !
AS SURE AS THE SUN WILL COME UP TOMMORROW ANY FURTHER COMMISSION REDUCTION OF ANY TYPE WILL SINK THE RETAIL INDUSTRY AS WE KNOW IT !!
Chris, you are stepping in deep water.
I challenge you to an open debate on your assumptions around Life Insurance and how you interpret the best way forward.
You are part of the problem, not the solution.
I know you are promoting your Business and that is fine.
What is not fine, is how your views are not helping the Life Insurance Industry, you are hindering it.
You are correct and do have a valid position with your workshops to better align and educate advisers on how Australians require Life Insurance advice and the benefits of getting that advice, however you are totally wrong with your views around fee for service.
Lol. Chris, the irony is palpable. Quite clearly the penny is yet to drop for you that you will have no business if commissions are banned and perhaps you should be pivoting to a new value prop. Upskilling advisors with respect to risk is as dead as the rest of the industry if what you believe is true.
Still yet to ever meet or even hear of a risk specialist running a successful fee for service practice however ive heard of countless ones that have tried and reverted back.
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