The ongoing discussion around adviser remuneration under the Life Insurance Framework (LIF) is not purely about fees or commissions but about who sets the model for how an adviser is paid and how their advice is valued, according to the author of a new book.
Elixir Consulting Managing Director, Sue Viskovic says LIF has created polarising views around fees and commissions with many advisers believing they cannot survive in a revised commission environment while others believe commissions are incompatible with professional advice.
Viskovic said she had addressed these two views in her recently launched book, Worth Paying For, because it was a complex issue that could lead to a decline in risk advisers unless better solutions could be found to surviving after the introduction of the Framework.
According to Viskovic, there is a sense among some advisers that it was impossible to move away from the current commission model but she said there were advice businesses that had made the move to a mix of fees and commissions, hybrid models or fee only and were now thriving.
“It is not simple and it is not an overnight switch, it does take a fair bit of work to make it happen,” Viskovic said.
“This is about the next phase of advice because in the past advisers have not had to think too deeply about the structures of their businesses.”
“The book is not about fees or commissions and which is a better model but about the services an adviser provides and what is the minimum recoverable amount an adviser needs to run their business,” Viskovic said.
“It asks whether commissions will meet that amount and if not what else would be needed, including fees, to generate that amount.”
Viskovic said the book encouraged advisers to make decisions for themselves around their own value and what they should charge for advice instead of letting these factors be set by others.
“This is about the next phase of advice because in the past advisers have not had to think too deeply about the structures of their businesses. They are all client focused but when you look at the commission model in use it is not perfect and advisers can take control instead of letting life insurers set value for them,” Viskovic said.
She admitted that a shift to a new business model would not suit all advisers and some would stick with current models while some would move out, but this would not lead to the end of risk advice.
“I don’t believe the shift is being entirely driven by life insurers looking to maximise profits as we are also seeing pressure from consumers and the Government for change, which for advisers will require absolute commitment,” Viskovic said.
“These may mean some of those who planned on retiring in the next three to five years will move that forward, but the current crop of advisers who have started to make changes are doing well and will continue to do so because they have created business plans and service propositions that present advice that people want to pay for.”
An excerpt from Worth Paying For can be found in Riskinfo’s most recent e-magazine, available here.
Sue, if you think your view of the world is sustainable, why aren’t you still doing it ?
Here’s the basis for another book, why don’t you write one on how fees for selling a house, a car, buying a shirt or skirt from David Jones is far better for consumers, the sales people and the owners of those businesses instead of building into the sale, a commission payment.
Who knows you might even graduate to selling ice blocks to Eskimos, but only on a fee paying basis.
Really ??? I know you have all heard this before ! But !! Try selling a life insurance policy to a average mum and Dad on a average income and ask them for an equivalent fee to the premium they are paying and see what happens !!
It’s not just my opinion ! only advisers who are incorporating Super, Investment and sometimes much more into their recommendation can get away with the fee of true value for effort as a “blanket cost” for everything they are including in their recommendation.
You simply cannot charge a fair fee on a risk only product to the majority of Australians. They wont pay it !! yet we are expected to do every possible investigation into their needs process it into an SOA call the client make an appointment { in my case at least} many after hours or on a weekend, sell the benefits, make alterations if required complete the paperwork, arrange the completion, deal with outstanding requirements, attend to chasing up medicals { as the people the insurers use are slow to say the least }. ETC ETC.
Yes I hear you say involved it is ! But no matter what the client understands you have to do there is still that “affordability” factor and they simply wont pay a fee. They will go direct !! pay no fee, get no advice take a chance that what they are sold is really what they want ? and they will get paid at claim time without an adviser to assist them through the maze of paperwork and requirements that come with making that claim. But for the client the best thing as far as they are concerned. THEY DONT HAVE TO PAY A FEE ?
Sorry but for those of us who have been around long enough to know “Its human nature” With everything not just insurance.!
Comments are closed.