Advisers Should Consider Multiple Remuneration Structures – Research


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.

MetLife’s Matt Lippiatt … it’s clear from the research that customers are looking for options when it comes to how they pay for their financial advice.

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.


  1. I believe Life Insurance advisers have a right to know the level of detail asked of the consumers who were contacted as part of this research. For example, were they general type questions along the lines of – are you as a consumer prepared to pay an upfront fee to your adviser if the premium was reduced?; Or did the questions go into a greater level of detail such as making the consumer aware that the maximum reduction of any life insurance premium would be 30% while they will be required to pay a fee to their adviser of around $3,000? Knowing how the questions were structured makes all the difference!
    Or is this another example of an insurer stating that LIF is here to stay – advisers just have to accept it?
    Would someone from MetLife please have the courage to answer these questions.

  2. Metlife have made the same mistake of all previous Entities who pushed their false and inaccurate survey responses of a willingness for Australians to pay for advice.

    They never clarified what people are actually prepared to pay for.

    Advice is the smallest time and cost component of the total work provided.

    Australians do not care that the vast majority of the cost is, as far as they are concerned, irrelevant compliance and admin stuff that they do not read, are not involved with and are not interested in paying for.

    There is this continued push that holistic advice is the future and Risk advisers will need to evolve and expand their services.

    I would suggest that this thinking has been where their argument falls over.

    Life Insurance is a standalone industry, even though it continually gets linked to the Investment Industry and hey presto, they are the same.

    Airline, train, car, trucking and maritime are all part of the transport Industry and therefore should all follow the same traffic rules and regulations.

    To the theorists, this would make total sense as transport is transport and therefore must be treated the same.

    Theory normally does not equate to reality.

    the Life and Investment Industry are all part of Financial Planning and advisers must follow the same regulations and training, which is good in theory and does not work in the real world.

    Metlife, your intent may be good, however your research is flawed.

    Australians will not pay a fraction of what it costs to provide Insurance Risk services, which is so much more than just advice.

    • And to follow on with your transport analogy all those industry participants should have the same licence to do vastly different things. Only Govt manipulated by lobbyists could be this wrong.

  3. Whatever Matt is on I want some of it. He must have found John Lennon’s rose coloured glasses. I particularly liked the reference that some consumers preferred that upfront fee for advice “if that meant lower premiums over the lifetime of the policy.” Current experience would destroy that proposition as wishful thinking by the client and deception by insurers, particularly post LIF.
    I have no idea who MetLife have been talking to in this survey but they sure as hell not talking to my customers. Take a couple with two kids, a $500k mortgage and $30,000 pa school fees with $200 K gross income. A comprehensive protection plan for both parents would involve premiums somewhere between $4,500 and $5,000 per annum. Under LIF Stage 3 , I will receive commission of 60% or around $2,700.
    For strategic advice, “reasonable” product research and a detailed and compliant analysis of their situation, including an analysis of their existing superannuation schemes and their wonderful default cover, I will need to have prepared either two SOAs or one very large and incomprehensible joint SOA. After that there’s the business of implementation – getting the proposals on the books, contesting conservative underwriting decisions, following up inefficient requests to doctors for information, not to mention explaining to the client they can expect their premiums to increase by a minimum of 10%-15% every year ad infinitum, not including age-based indexation.
    For a case this size pre LIF,I used to receive a minimum of $4,900 for round about 20 hours of work or a minimum or $250 per hour, a reasonable hourly rate before I paid my dealers clip and met other ever increasing costs of business.
    So, under LIF Stage 3, I need to charge in at least a fee of $1200-$1,500 just for the advice. I am taking the capital risk in that a two-year clawback will impact on me severely if the inevitable events of life imposes stress on that those clients and they can’t continue the policies. Marvellous system!!! The risk is all mine and before the Industrial Revolution that type of industry was known as the feudal system.
    So I’m asking my clients to spend $4,500 a year minimum on life insurance premiums, some of which may be tax-deductible. On top of that I’m asking for an advice fee of $1,200 for a total client spend of $5,600 in the first year to give me an hourly rate of $285. Less than 10% of my clients will accept such a proposition, regardless of how good I am as an adviser and the demonstrable quality of my strategic advice.
    The insurers know what is happening. Those same insurers are traipsing off in a conga line to a coalition government arguing that ASIC should not be allowed to collapse life risk commissions in 2021 as proposed by Hayne. Wonderful ! But those same life insurers are failing to take the next step of arguing the bleeding obvious that the true impact of LIF on genuine new risk commissions is a 40% reduction in new business premiums, which is not sustainable by any life insurance company operating in Australia for any extended period. Risk advisers of voting with their feet and their wallets and once they get a reasonable price for their book of business will be departing in droves if FASEA and LIF are not fixed.
    So instead of producing glossy “fluff” marketing articles, telling us how advisers should be charging fees solely for life risk advice, I strongly suggest the insurers on the FSC, which from time to time represents life insurers, go back to government and insist that LIF be dragged back to an 80:20 commission setting, with a one year clawback as existed pre-LIF.
    Surely life insurance executives in Australia who are paid extra ordinary salaries to predict the future, now understand that if a few risk specialist advisers actually survive LIF and FASEA, those specialist risk advisers will indeed be looking to a purely fee-based regime, thus recommending life risk products on nil commission. And surely those same executives understand that advisers who take nil commission are not at all concerned for the continued administration and retention of those policies( thus requiring less admin staff), because they, the advisers, no longer have skin in the game. That imposes even more costs on insurers just to keep business on the books.

  4. Oh dear. Another flawed survey commissioned (bad word) by an industry that doesn’t seem to want to face up to the real world’s experiences. The insurance industry is in self imposed decline. New business is limping in and will continue to reduce under the current regime and this will have a severe effect on the wonderful, legalised ponzi scheme (which continues to need new clients to pay the claims of the existing) that is insurance. Specialists servicing existing clients rather than write new business at a loss. Planners don’t want to know about insurance.

    I am not unusual. I have let go of my new business staff and anticipate writing around 25% of what I wrote last year, and from what I hear I’m still one of the more productive ones.

    Clients in bad health will continue cling to their cover while healthy policyholders reduce and cancel policies just like always. The difference is the healthy ones are no longer being replaced with new clients, making the pools top heavy and increasingly unprofitable into the future.

    Of course, so many of those responsible for the changes have now left the industry, relieved they will no longer be in the firing line when the fallout from their bad decisions is realised.

    Re the survey:
    How many of those surveyed would have responded favourably if asked, “In exchange for an ongoing 30% premium reduction, would you be willing to pay a non-deductible (and non-refundable) upfront fee of between $3,000 to $5,000? IF your applications are subsequently accepted (*meaning you haven’t wasted the initial fee), will you then agree to pay further non-deductible fees of $220+ an hour for all servicing matters in the future, including regular policy reviews (at a minimum 4 hours per year)?

    Note the service fee is based on not only the time taken to provide the required service but also the additional time required to satisfy the stringent compliance and licensee rules around client contact.

    Miss a premium? Approximately $220. Change bank accounts? Approximately $440.
    Move house? Approximately $110. Reject indexation? Approximately $330. Check if there are better options? $660 + another $3,000 – $5,000 if the decision is made to change insurers. And should you ever need to make a claim, the same service fee will apply. For a lump sum policy this would be minimum of $2,000 (but MUCH more for some claims including TPD) and $500 – $1,000 per month for an ongoing claim under Income Protection or Business Expenses insurance. These fees will apply, irrespective of the outcome.

    With full understanding of a fee based service, would this be your preferred model?

    If not, would you consider using such a model under any circumstances?”

    My guess is few would answer ‘yes’ to either question.

    I needed to see my (high earning) dermatologist this morning. She is also a long term client. We were discussing what the industry is going through and I asked her how she would feel about paying fees in exchange for a premium discount. “I wouldn’t. I hate insurance and certainly wouldn’t want to pay anything on top of the premiums, no matter what they were. I like things the way they are and don’t care what you get out of it because you’ve always been there to help.”

    I also started a small claim for her husband who recently broke his shoulder skiing. When I told her it was all part of the service and there was no cost attached to our managing the claim she said, ‘and that’s why I like the current system’.

    This is not an attack on MetLife. Like all the insurers, they want to believe that 100 years + of ‘people are sold on the need for insurance, they don’t just buy it’ has somehow changed and the internet will supply endless queues of people begging to be allowed to buy insurance direct.

    For some reason those that manufacture the product don’t understand that in our world, even after someone has been convinced they need insurance, and their procrastination to act has been overcome, we’ve then got to get them through underwriting.

    I can just imagine the fee based client conversation, “look, we’ve got this far… You’ve already paid us a non-refundable $2,500 for the meetings, research, advice, and compliance, but based on the doctor’s reports they now want an additional back questionnaire completed and some follow-up blood tests. Could you please pay us another $400 + GST so we can start this process? You do understand that if there is a hold up, you’ll need to pay us more and if something unforeseen comes up in a report or the bloods, your application may be declined and everything paid to date was for nothing other than aggravation. The good news is that if this does happen, it won’t cost more than another $220 for us to cover off on the compliance to shut down the file.”

    I talk to clients all day and every day. Younger clients won’t pay fees because, at best, it will take a number of years before their savings offset the upfront fees and if any service is required they are behind again. And the big clients invariably need more work and will balk at paying $5,000 + with no guarantee of a result. Also the average adviser can’t find enough of these on which to base a business model.

    Insurance has operated around the world under a commission model for a good reason: it works. The UK tried and failed. Why does anyone believe we will be different?

    Sadly though even if they stopped tinkering today, the current rewards for putting new business in place are insufficient to meet costs, meaning there is little incentive to bother. And, ‘but look at where you’ll be in 7 years’ doesn’t hack it if you can’t feed the family and pay the mortgage in the meantime.

  5. Dear Lord !!! do they ever give up? Producing unrealistIc reports despite all the info they have received from those at the “coal face” and the undeniable reduction in new business sales due to the outrageous demands of LIF and FASEA. JUST LOOK HOW FAR THE INDUSTRY HAS FALLEN. Yes not grown fallen.!
    Hes a little “snippet” from the pages of my crystal ball!!?? How long before the Insurers say you have to produce a certain amount of new business to maintain an agreement with us { a sort of third line forcing if you will}. Its getting very tight at the top and the ability to pay claims is without doubt becoming a big issue due to the old business destroyer, Cash flow!
    Maybe when we are all out of a career or job we can blame Global Warming ? must be that? could not be short minded big winded personal gratifying politicians and insurance companies Could it ?
    Its this year for change or never if we are to survive as an industry.

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