LIF – Three Advisers in Ten Will Leave the Industry

What is the most significant change you will seek to implement in your risk-focused business in response to the New Life Insurance Framework?
  • Leave the industry (38%)
  • Increased focus on business efficiencies (22%)
  • Deliver more holistic, broader advice solutions (20%)
  • Not sure (8%)
  • Specialise in advising higher net worth clients (7%)
  • Other (5%)

Our latest poll suggests a significant number of risk-focused advisers will leave the industry, rather than operate under the proposed Life Insurance Framework reforms.

Responding to our question, which asks risk-focused advisers in particular to consider the most significant change they will seek to implement in their business in response to the Life Insurance Framework proposals, 30 per cent said they would leave the industry.

As we go to print, 27 per cent say they will increase their focus on business efficiencies, while one in five (20 per cent) are saying their most significant change will be to look at delivering more holistic, broader advice solutions.

To date, 10 per cent of advisers say they don’t know what they will do, and we don’t know whether a 10 per cent ‘Don’t know’ response represents a low or a high number, in terms of how the overall adviser population is reacting to this critical issue.

Judging by adviser comments so far, there is a strong sense that the issue of improving efficiency within the advice network must be a shared responsibility. Life companies in particular have been singled out in the comments we’ve received:

 Advisers can be streamlined and honed to maximum efficiency, though it all falls down if the retail Life Companies are still struggling to update their systems and administration protocols…

Seeing that the Life offices have been the main perpetrators and supporters of commission reductions they need to get their administration up to speed and take more responsibility…

Meanwhile, this adviser comment articulates the complexity of what a post LIF solution may comprise for an advice business:

The problem with straw polls like this one is that there is often no single right answer. we will look at reducing costs as well as widening our offering, this in and of itself will see us then dealing with a more affluent client, deserting those we would normally consider important to our business…

Continuing with the theme of deserting clients, another adviser commented,

If one third of advisers exit the industry and much of the rest have to concentrate on high net worth customers only to survive then the access to advice for every day Australians IS GOING TO BE WORSE

Even though another adviser comment has confirmed some life companies are already issuing notices about 1 January 2016 remuneration changes as provided in the LIF proposals, this debate is far from being resolved. We will update our readers as further events unfold, while this poll remains open for another week.


  1. It may have been worthwhile to have the option “Nothing” available. “Other” doesn’t quite feel right when you feel there is no need to make any changes.

    Possibly another option: Move to Level Commissions if they stay at the current level.

  2. It seems to me that when the dust has settled and we have a clear path we can make more informed comments. For me, the following seems to be the case as it stands.

    If what’s proposed goes ahead with 3-year write-backs, with commissions eventually reducing to 60% etc, and with considerably ramped-up compliance requirements to deal with the industry offers no future for many of us.

    There’s simply no financial incentive to enter the industry and the incomes we once enjoyed will require three times the amount of work to get there. Eighty percent of that will be dealing with back-office matters including compliance. These activities earn us no income, but if we aren’t up to speed with them we’ll lose our licences and/or face prohibitive penalities. Who can earn a reasonable income when he see clients/prospective ones in just 20% of his time?

    Clearly, big business is driving this so as to regain control over the industry they once enjoyed. We face a seriously challenging battle.

    • in the 1980s and early 90s, we had a 4 year responsibility period for commission on personal super and 2 years for risk. We were paid 65% upfront com on term life with 5% ongoing and 40% on IP with 10% ongoing. You had to convince the client that the company you represented that your policy was the best against what your competitor was offering. You could not shop around for the client to find the best product for there needs. Most adviser income was new business with little trail income. You had to collect a cheque from the client to get the policy completed, no online apps, BPAY or credit card deduction.

      We now have 50% or more of income as ongoing and increasing. Our businesses as a consequence are worth more. We can take over servicing rights of other companies product or sell any product we like from any company. We are paid far more than 20 yrs ago.

      We are in the world best business and this was said to me 35 yrs ago and still stands today. We control the time we work, have no limit of income and can sell what we build and our standing in occupation list is higher regardless of the recent press.

      Life is GOOD!

      • Yes Nick I was there from 81 to 95. What you forget is the amount of over regulation and overkill information overload we are now obliged to Dump upon our poor hapless clients. It only confuses and annoys them to the point that they avoid “advice” at any cost.

        If the industry wants us to stay it has to be made simpler. Oh, and all indoor staff should have to prospect and write one case a quarter to get a reality check.

      • We should endeavour to make every day a diamond as you’ve implied, Nick. However, while it’s true that remuneration back a long time ago had its own drawbacks, you haven’t mentioned modern-day compliance and poor processing of apps. – online or otherwise in your comments.

        Those days we could spend 80% of our time in front of clients with max 20% of non-income producing paperwork and followups. Not so today. It’s reversed and we’re justly rewarded for the work we do now. We need the patience of Job! If it goes back to lower commissions and massively-increasing compliance and other down-time it will take the smile off the faces of even the most upbeat of us.

      • Nick, yours is the first voice of reason I have read! We will adapt and we will thrive!
        Well said Nick! Good on you!!!!

  3. Heavily reduced commissions with the added cost of a 3 year writeback spells disaster for cashflow for Financial Planning business in Australia.

    The best strategy for survival in the new planning world is to sit on your trail and not write new business – starve the insurance companies of new inflows – we’ll see who has the last laugh then!

    • Like your thoughts Dean,
      All our new business moving forward is going to those that didn’t sell us up the creek. It also looks like we have lots of reviews to do between now and the 1st of January.

      • I would also agree, if all of the IFA’s were to do this then there would be no new business for the Life Companies to process, therefore the need for underwriters, new business support staff, and BDM’s would disappear. I would love to be a fly on the wall when each of the State Managers have to report the reasons for the decrease in their new business budgets to the Life Company’s CEO’s next year, and the owners [ THE BANKS ] reaction to the loss of new business income.

        The only other country in the world [Netherlands] that has tried anything like this suffered a -35% decrease in new business inflows in the first year after they introduced it which resulted in 10 out 13 insurance companies leaving the Netherlands market.

        I wonder how many insurance companies will be left in Australia in January 2017.

    • I agree Dean,
      We all starve them of new business inflows for 3 months and see what happens!What an opportunity for an overseas company to enter the Life Insurance market.

  4. With a reduced focus by advisors on risk advice clients will be left to own devices so will move to direct insurance. The end result will be inadequate cover and inappropriate cover.

    Why is the regime so onerous for advised insurance cover and so lax for direct cover?
    The compliance arrangements should be the same no matter how the product is acquired.

  5. As at 11.02am the rate rose to 39% of advisers who will leave the Industry with 23% looking at delivering more Business efficiencies, which may be more expense and time, only to be stuck with inefficiencies at the retail Life Companies area that drags advisers back again.

    We then have 17% who will deliver more holistic advice, which means moving away from Life Insurance advice to more profitable Financial Planning areas.

    We then have 9% who are not sure and 7% who will only focus on high net worth clients.

    The end result is a disaster for all Australians as there will be less professional Life risk advisers, with the inevitable decline in decent Retail Life Insurance coverage and a explosion of direct unregulated rubbish that achieves nil benefit, at the expense of thousands of jobs that will be lost and millions of under-insured Australians.

    The Government do not understand the retail Life Industry and it is the job of the AFA and FPA as well as the Life Companies themselves to make them see the very bleak future for retail life Insurance, if nothing is done to fix the obvious problems.

    It would also be nice to involve experianced advisers who work directly with clients and also ask clients themselves what they want.

    The answers might surprise the Government and disappoint the vultures who feed of our Industry and create false problems to benefit only themselves.

  6. I urge everyone that can make it be at the AFA Annual conference and vent your anger and astonishment at his ridiculous set of circumstances brought on us by ineffective leadership and bueracratic B$*^ S**%.
    The AFA says they have allotted 30 minutes to an open forum !?? Really ?? this is a major event in Australia’s Life Insurance Life Line I don’t think all day would be enough ! However lets all be heard as one and maybe ? just maybe something good might come out of this mess ??

  7. @ Nick Tunbridge
    You are correct about the past but all you had to do is actually ask the client name, DOB, smoker/non smoker, contact details and how much they wanted cover for, and you sold the policy, ……most times from the back of your car.

    Think about what you have to do today to get a case on the books,. from Data Collection to an SOA and all that goes with that from having a reasonable basis together with disclosure and what else was considered, presentation of the SOA and maybe complete an application and maybe get paid if you can get the application through for the most part inexperienced underwriters and deal with average administration.

    Sounds like a piece of cake doesn’t it.

    That’s why we need to be paid more because today with compliance we have to do more !!!!

  8. We need a Four Corners investigation into these reforms to shine the light on how the FSC managed to legislate profitability under the guise of increasing better advice and consumer outcomes.

    Does the AFA receive payments from Insurance companies or not? Can someone please enlighten me?

    • I am in the fortunate position of having a decent trail and not needing to write new business, this will also leave me with zero compliance issues as long as I offer my clients a review every 12 months. The trail grows at a minimum of 10+% a year with CPI and some stepped premiums so better than selling up and sticking the money with a bank!
      I would take the opportunity to review as many clients as possible especially if they are with a bank aligned insurer and upgrade them and your trail to hybrid and level
      make hay while the sun is still shining a bit??

      • Great idea! I can’t wait for someone in the mainstream media to get a hold of a comment like that and see where it gets everyone.

  9. @Nick Tunbridge,
    Mate if you think people are going to sell their business to you or anyone else for a song…. you’re not on the same planet as the rest of us.

    @ Mark,
    Your plan sounds like a great idea until the Life company increases the premiums to a level the client can’t jump over. For example, Comminsure increased old IP policies with Lifetime benefits that never had claims by 53.0% over a 2 year period, simply because they didn’t want those legacy products on their books.

    TAL recently increased their Group Life/TPD rates by 85.0%. (to which we received no commission from the outset)
    The option is we can do nothing and take the risk of losing our client
    We can a we have chosen to do, is rewrite a client based on 50.0% commission with TAL retail and give the client a 50.0% discount on his proposed Group premium.
    ASIC and the FSC would call that churning
    This is part of the future environment, if we allow it to happen.

    I’m sorry but some of you have no idea what the costs to your businesses are going to be or how the future proposals will effect what you do if these changes are allowed to happen.

    There is a need for those who purport to represent all of us to stand up and be counted, not acquiesce and capitulate to those who for over 100 years have managed to profit from the system we currently work under.

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