The AFA’s 2015 Life Insurance Roadshow series has been preparing advisers for the inevitable, and at times confronting, transition to a significantly different risk advice future.
Presented to packed adviser audiences around the country under the theme of ‘Facing into Transition’, this Roadshow was added to the AFA’s schedule following the release of the new Life Insurance Framework proposals, which in turn were initiated in response to ASIC’s 2014 Review of Retail Life Insurance Advice and the resulting Trowbridge Reform Model recommendations.
In a future advice environment in which proposed changes include cutting the maximum upfront commission level by 50 per cent, and extending the responsibility period for new policies from one to three years, adviser audiences are being taken on a journey that positions the changes within the prevailing political climate, but where strategies and potential solutions are being offered.
At this week’s Melbourne Roadshow, AFA CEO, Brad Fox, set the scene for advisers by summarising a timeline of events that has led to the current period of ‘disruption’. Some of Mr Fox’s observations included:
The AFA is seeking commitment form insurers to guarantee no premium increases during the first three years…
- If the AFA had not been a part of the Life Insurance and Advice Working Group, and had not teamed up with the FPA in negotiations with the Financial Services Council, critical decisions would have been made without an adviser representative voice at the table
- If the industry does not deliver a consensus Life Insurance Framework package of proposals, it is likely advisers will be restricted in future to level commission-only or fee for advice remuneration options
- While accepting the unfairness of a three-year clawback provision, this element needed to be accommodated in order to retain a 60/20 hybrid commission model option for advisers
- The AFA is seeking commitment form insurers to guarantee no premium increases during the first three years a life insurance policy is in force
- While the digital revolution may cause further ‘disruption’ to the industry, it will never replace the glue that binds the trusted adviser to their client
Organisational Psychologist, David Peake, spoke to his audience about coping with change. He explored the types of responses typically associated with change, from early adopters to more negative approaches, and from positive acceptance to total denial. He noted that true change always starts from the inside and works its way out. He talked about why people resist change and how to identify and remove the barriers.
Elixir Consulting’s Sue Viskovic then shared with advisers the latest findings she has compiled that serve as examples of how both holistic and risk-focused advice practices can structure their businesses to include advice fees in their remuneration models for life insurance advice. Ms Viskovic broke down all the elements usually involved in delivering a life insurance advice solution, and applied average time and cost amounts to those processes in order to arrive at a typical ‘cost of advice’ scenario.
The next message in this logical sequence of presentations, which commenced with setting the scene, followed by consideration of coping mechanisms for impending change and a robust and honest assessment of current trends in cash flow and alternative remuneration strategies, was a discussion of both theoretical and practical advice scenarios by two highly successful advisers in Russell Collins and PJ Byrne.
Mr Collins emphasised the critical role played by the advice process in negating the impact of a three-year clawback provision, which can significantly reduce or even eliminate lapses within the first three years. He told his audience this could be achieved by structuring an advice process in which the client was the effective decision-maker within parameters set by themselves. He spoke of delivering an advice process that will make advisers proud of their persistency rates, rather than concerned about their lapse rates.
Meanwhile, PJ Byrne shared his own, sometimes difficult journey in transitioning from upfront to hybrid commissions and then introducing advice fees into his risk-only advice business. He noted one very successful method he uses for minimising lapses involves asking the client and his/her partner, if appropriate to sign a document acknowledging their decision to cancel the life insurance contract, thereby transferring full responsibility for the decision to the client.
A panel discussion completed the half-day event, during which the presenters as well as life company senior managers responded to adviser questions from the floor.
This roadshow presentation by the AFA succeeded in facing and addressing the key issues for advisers stemming from the new Life Insurance Framework proposals, and offered a pathway for risk-focused advisers to assist them with the transition to a new advice environment which will commence from 1 January 2016.
AFA has accepted the three clawback for advisers? Thanks for that! Ever thought of using a similar tactic to the insurers seeking to destroy AFA’s? Media releases about how many IFA business will be sold and jobs lost, customers no better off due to mass conflicted advice and no premium reductions and all for the benefit of the banks & other insurers. Isn’t hard is it?
The AFA are completely out of touch with its members and its a real concern that they are so heavily funded by the instos.
I would urge Riskinfo to run the story on the campaign being run by the AIOFP as IFA has.
They have a templated letter to send to your local MP and even provide the email address for all MP’s so it’s a simple 2 minute task. This letter allows you to let your local MP know about the impact the 3 year clawback will have on customers and advisers and the impact of job loses and greater underinsurance and less risk advice.
It’s time that the AFA members show government that they do not agree with the decisions made by the banks and insurance companies to increase their own profits and that the management of the AFA have not acted within the interest or wishes of its members in agreeing to the 3 year clawback.
We need Brad Fox to be a stronger leader and representative and act more like Peter Johnston of the AIOFP.
If he chooses not to do so its vital that AFA members voice their own opinions to goverment directly.
in all fairness AFA toughen up and if you were in our shoes what would you like done?
I was at the AFA event and I thought Brad Fox did a good job of explaining that reduced commissions were being pushed hard by a desperate government looking for easy wins in an environment of media sensationalism and consumer group lobbying.
However I did not get any sense of why 3 year clawback was on their agenda. This is not an issue that generates headlines or votes. It is not necessary to control churn, now that we have a statutory best interest duty. So why is it on the government’s agenda? I suspect it is not actually on anyone’s agenda except the FSC. I don’t see any reason why AFA or FPA should be giving in to this.
It was particularly galling to see FSC reps up on the stage trying to tell us how much they care and how we all need to change to survive, when they are largely responsible for much of the problem.
I have just got back from the Sydney roadshow and it seems that the AFA have been cowed into submission and even though nothing has been presented to cabinet, the theme of the day seemed to be, to accept your lot and adapt to the unfair system being thrown at us.
The organisational Psychologist, made reference to change and are we adopters or whingers, though he did say that regarding change, WHY you need to change in clear simple language, is vital.
The irony is that we have not had any clear simple language around these issues yet and there has been no specific rules laid down or even debated yet, even though it seems to be a laid down conclusion that the advisers must pay, though we have not been told for exactly what?
There seemed to be great consensus that clients will gladly pay for everything we do.
I think someone forgot to ask the clients WHAT exactly they will gladly pay for.
I did a Business Insurance course run by Russell Collins in1988 which was great, though Russell admitted he has not been an adviser for over 5 years and it has been in the last 5 years that the world has radically changed and we now have hundreds of
direct product floggers and a new world of technology that is changing the world we live in and will continue to be a massive disruption to our lives.
The assistant treasurer gave the AFA representatives 20 minutes to put their case and it is patently obvious Josh is out of his depth or does not care, though this does not mean we have to take this lying down.
Josh is a here today, gone tomorrow politician and he is employed by us, so we need to stop the cowing and start demanding verification and full explanation of his position around the Life Insurance area and WHY he thinks the way he does.
There are many aspects of the changes we can live with. The current 3 year clawback position is not one of them.
Would all the faceless commentators stick their comments where they fit or identify themselves. If you are so clever in your opinions, we’d all like to know who you are. And what’s with the bagging of Brad Fox. I don’t think he’s the one out of touch. The only constant is change. Get used to it.
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