Advisers have delivered a clear message that the viability of their practice would be seriously compromised if they were forced to charge fees for life insurance advice. As we publish this story, three quarters (75%) of advisers responding to our latest poll have said their advice practice would not survive and prosper if they were forced to charge a fee for life insurance advice.
The remaining quarter are evenly split between being uncertain as to whether they could survive (12%) and those who believe they will (13%).
While this poll is asking what is currently a hypothetical question, the potential threat to the status quo for many advisers is real, particularly given the stance being adopted by the Accounting Professional and Ethical Standards (APES) Board (see also: APES 230 Could Damage Advice Businesses…).
The consistent message from financial advisers, both in response to this poll and previously, is that clients (consumers) will mostly not be prepared to pay a fee for life insurance advice. While there are a number of advice practices that have found, or are finding, ways to charge fees for risk advice, they remain in the minority, and mostly serve the very high net worth end of the consumer market. The general ‘mood of the meeeting’ is encapsulated within the following comments we have received:
“… my business could not survive without commissions.”
“… my business could not survive without commissions.”
“… the vast majority of people seeking risk advice would never pay the sort of money I require to research their needs and/or to process their SoA’s and applications through underwriting.”
[on insurance advice] “You and I know how valuable it is and we can justify a fee but the clients, in the main, do not see it this way.”
“Clients DO NOT want to pay for insurance advice directly. The plethora of direct insurance suppliers and others providing general advice will ensure that they retain this attitude.”
“We have … been told ‘No, I’m not willing to pay a fee because I can go online or speak with someone else who will give me a cost without charging a fee.'”
The question of how a financial adviser should be remunerated for the life insurance advice they provide to consumers is both simple and complex. The simplicity relates to the adviser being entitled to be paid in a fair and reasonable manner for their services. The complexity relates to what is considered to be conflicted advice or conflicted remuneration, and whether it is real or perceived.
Is it possible that a viable life insurance industry could exist in Australia without adviser commissions, but with advisers? Tell us what you think about this important and fundamental question…
Insurance is sold not bought. It is difficult enough to source new clients without then having to impose a fee to come and see them Some one has to pay for the advice and commission is a simple low cost structure for clients wanting advice.
The alternative will be no advice direct insurance and we all saw how well that worked in general insurance in the Queensland floods. I have actually resigned my 20 year membership of the PNA accounting body because they will be telling me I can’t receive a commission. It’s ludicrous!
I dont see the problem with receiving commissions from risk advice. It doesn’t impact the cost of cover in a dramatic way, and most insurers pay around the same rates.
Why do they feel that it needs to be addressed? I’m yet to see any good evidence that would positively impact the consumer, and the advice given.
A fee based service model will not work for the vast majority of clients, potential or existing, let alone the advisors who service them. I have advocated a Hybrid or Level commission model for almost 20 years so that advisors can demonstrate their dedicatation to client service. If this helps increase persisancy premiums will come down as a consequence & it’s a win-win for all.
Correct me if i am wrong, but is not stockbroking conducted with a commission based remuneration model. Why has this industry been exempted from this ridiculous postulating. Why? because the unions don’t wish to give broking advice, but give them time.
Interested to understand how you all recoup the cost of preparing SOA’s for clients that do not proceed with your advice.
Comments are closed.