Time to Separate Product Manufacturers and Distributors?

5
Should the industry consider separating life companies and ownership of the networks that distribute their products?
  • Yes (79%)
  • No (15%)
  • Not sure (7%)

Our latest poll asks whether the industry should consider separating product manufacturers and ownership of the networks that distribute their products.

This is one of those questions that is raised on a regular basis, but why are we asking the question now?

In recent weeks there have been announcements from National Australia Bank of its intention to sell 80% of MLC to Nippon Life and from Suncorp Group that it will ‘transition’ away from ownership of Suncorp FP and Guardian Advice. Is this the start of a pattern?

When first announcing in October that it was in talks with Nippon Life, NAB’s chief executive Andrew Thorburn said the Group was pleased to pursue how a partnership could enhance the experience for its customers. This is naturally a crafted statement, but can we read into it, at least in part, that a better customer experience could be delivered if the the insurer was not also the owner of the distribution of its own products?

Meanwhile, in announcing Suncorp Life was cutting ties with Guardian Advice and Suncorp Financial Planning, Acting Suncorp Life Chief Executive, Jeremy Robson, said the move away from self-employed, aligned advisers would simplify the Group’s distribution model in line with its strategic priorities and in the interests of advisers and customers.

…more advisers are beginning to apply a dollar value to the quality of the advice they deliver

As 2015 draws to an end it would appear that more advisers are beginning to apply a dollar value to the quality of the advice they deliver, rather than subscribing to the traditional model where the life insurance product of choice determines who remunerates them. This growing or emerging disconnect between between ‘product’ and ‘value of advice’ becomes a natural ally in support of the notion that the adviser should be removed from any direct ties to the product that forms part of the solution that respects the best interests of the client.

Another factor is the issue of perception. While the vast majority of all advisers serve the best interests of their clients (and always have), there remains a gnawing perception in the mind of the consumer (for ‘consumer’, read ‘consumer advocate’) that the advice they receive may be tainted because the adviser is licensed through a network owned by the company whose name appears on the client’s policy document. The separation of life company ownership from distribution networks would also remove this perception of conflict, even if that conflict between choice of product and client best interest is only an issue of perception, rather than reality.

So, it’s over to you to continue this conversation.  As always, let us know what you think…



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5 COMMENTS

  1. A statement of ” It would appear that more advisers are beginning to apply a dollar value to the quality of the advice they deliver” Can we ask, based on what evidence, or is it a handful of advisers out of many thousands have made a statement and this is the basis?

    I know my advice is worth Hundreds of dollars an hour and worth thousands, based on what my decades of experiance, provides clients.

    The only problem with my expectation of my worth and what clients will pay, is a defining difference, as after all, I do not pay me for my expertise, my clients do and they will not pay a fraction of the total work required to provide a comprehensive service.

    We keep getting hoodwinked by theoretical guru’s who preach that clients value and will pay us vast amounts for our expertise and advice.

    The advice portion takes up only a small fraction of the time and expense to get appropriate types and levels of cover on the books, which to a client is admin stuff that they will not pay for, no matter what the guru’s say.

      • If you are a financial planner Andrew, charging your clients a fee for service on top of risk advice, then stay out of the argument. On the other hand, if you are risk only adviser, then please back up your words with a working example of how a mum and dad client are happy to pay a fee for the advice and their ongoing insurance premium (which will only be reduced by 30% if you take no commission).

      • In some ways we’re still back in the Flintstones era, Andrew. What Jeremy says here is true. He’s no doubt done some outstanding work for his clients as he indicates here. Even so, advisers still aren’t given the respect we deserve because to many we’re still salespeople, not advice providers unlike doctors, solicitors, architects etc. Your comment about being ‘not worth it’ is out of order, but ‘not articulating your value’ is still a work in progress.

  2. Do we really know about this gnawing perception? Have there been any surveys about it? Or are are we just hypothesising? I suspect customers care less than is being claimed. If confidence in the industry has been dented recently, it’s due to problems far more concerning than perceived independence of advice. And surely most of the value of advice comes from financial planning or risk management, which should be independent of any ownership concerns, rather than product selection, which is potentially subject to conflicts of interest.

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