Renowned US business coach, Dan Sullivan, says all financial advisers must get used to a future without commissions.
Mr Sullivan advocates the need for all advisers, irrespective of the nature of their services, to charge a fee for the wisdom and advice they deliver to clients and that they should move away from commission-based remuneration.
Mr Sullivan says there is an inevitability that all commissions will eventually be banned, in what is a world-wide trend, and suggests advisers accept that an ‘old game’ is ending and a ‘new game’ is beginning.
Our latest poll question asks:
If all commissions were banned, would your practice be able to survive and prosper under a fee for advice structure?
In a brief, 7-minute message to Australian advisers, courtesy of Leading Minds Academy (click here), Mr Sullivan articulates the logic of his position and tells advisers that now is the time for them to consider their ‘Plan B’.
While Mr Sullivan encourages advisers to maximise the remaining opportunities associated with a commission-based remuneration structure, he says their Plan B should involve setting up their advice proposition in which clients remunerate the adviser for the wisdom, thoughts and advice they deliver, rather than for the commoditised product that is usually associated with that advice.
Within the life insurance sector, Mr Sullivan’s implied message is that insurance advice will be sufficiently valued by clients, who will be prepared to pay for that advice and adopt insurance products appropriate to their needs.
Do you agree? Do you accept that banning all commissions, including risk commissions, is inevitable? Could your advice practice operate and be profitable if all commissions are banned? Let us know what you think…
I think that advisers should not worry extensively over change. Change is often disruptive but only due to the emotional response of those who perceive they are affected adversely by the change and respond accordingly. Change always takes longer than the original idea that is the catalyst and quite often due to the emotions involved in change, the outcome is often very different from the original concept. This will be the case with the advice industry over many years to come. FOFA is not the first change and it will not be the last. While I do not see a commission free industry in the short term, I do believe that the industry itself and government reform will move us to a predominantlt fee for service model over the next decade and beyond.
Hey Mark, while I agree wih you that change is inevitable, I am concerned about how long it will take for consumers to accept fee for service for risk insurance.
We have a relationship with an insurance brokerage and accountancy firm who refer prospective clients to us for risk insurance and income protection insurance. Most of these are from the building industry.
If we inform them that there is a fee for us to research all the product providers for an insurance policy that most suits their needs, they tell us to forget about it because they can go elsewhere and not be charged a fee. The problem is that nearly all of them to do not understand or want to know about ‘best product’. They just want ‘cheapest product’.
While we have TV advertising from product providers promoting the availability of insurance without underwriting questionnaires and fees, how can we have them accept a fee for our service? Additionally, if you informed them that we do not take a commission on the product they purchase from us but we charge them a 75% “fee” on the premium, what do you think they would say?
Many good advisers may have to leave the industry before as you state: move us to a predominately fee for service model over the next decade and beyond!!
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