New research released by MetLife Australia reveals ‘commission’ isn’t a dirty word, but suggests financial advisers should consider implementing a range of payment options to suit the individual needs of clients.
The insurer says in a media release that the MetLife Adviser-Client Relationship Report 2019 found that for the majority of consumers (78 percent) with life insurance purchased through an adviser the preferred payment structure for future advice was an upfront fee for advice if that meant lower premiums over the lifetime of the policy.
The report reveals that, when asked what types of advice consumers would be willing to pay a fee for, the top drivers cited were:
- Building up investments (54 percent)
- Saving for retirement (50 percent)
- Getting life insurance (46 percent)
Matt Lippiatt, MetLife Australia Head of Adviser Experience, said: “Our industry has traditionally operated on a commission-for-advice model which has proved to be a highly effective charging method, however it’s clear from the research that customers are looking for options when it comes to how they pay for their financial advice.
“There’s a growing number of consumers who are interested in fees as an alternative payment structure for risk advice which means it’s important for advisers and product manufacturers to offer consumers multiple options when it comes to paying for financial advice,” he said.
Lippiatt also noted that consumers don’t have a problem paying for their insurance advice by way of a commission taken from the product, but there is an opportunity for greater education around how they work.
“Advisers who are embracing highly transparent charging models and have systems in place to continuously educate clients about the value they provide seem well placed to thrive in this environment,” he said.
The report also noted that for SMEs, the top reason for seeing a financial adviser was seeking out life insurance (59 percent),” the insurer notes.
It says that these findings indicate consumers have a range of preferences when it comes to paying for financial advice, highlighting the importance for advisers to consider offering a variety of payment structures to clients.
The insurer says the report, which is now in its second year, is the largest quantitative study of its kind and includes insights from consumers and small to medium enterprises with up to 20 employees who have life insurance purchased through a financial adviser and consumers who are very likely to see a financial adviser about life insurance in the next two years.
The research also pointed to a lack of awareness around the commission advisers earned.
The research also pointed to a lack of awareness around the commission advisers earned, with just over half (55 percent) of consumers unaware of the amount of commission their financial adviser receives.
“Despite this, when asked if removing commissions would impact the likelihood of seeing a financial adviser, nearly half of consumers indicated they would not expect the removal of commissions to change their willingness to see an adviser, while only one in five (19 percent) said it would make them more likely to see an adviser.
“With the Australian government considering the removal of commissions, it is important to understand how this may impact the degree to which consumers are insured,” the insurer says.
“Nearly three quarters (72 percent) of consumers thought removing commissions would result in more people being under-insured, which may be due to the perception that this would lead to higher up-front fees resulting in people choosing lower levels of cover.
Consumers and SMEs considering changing their advisers
In part of his introduction to the full report Richard Nunn, CEO MetLife Australia, notes that the research also found that one third of consumers and half of SMEs are considering changing, or no longer using their adviser in the next 12 months.
He writes that this is a concerning statistic “which highlights how important it is for advisers to demonstrate the ongoing value of the service they provide. Advisers can’t take their clients for granted. With such a high proportion of consumers and SMEs looking for change, advisers must constantly be looking for ways to build trust and develop genuine relationships with clients”.
“It’s no surprise that honesty and trustworthiness are the major factors people consider when choosing a financial adviser.
“Those advisers who take the time to have deep and ongoing conversations with their clients about their individual needs, and demonstrate the benefits of personalised and tailored advice, will likely gain a competitive advantage,” Nunn writes.
Click here to view the full report.