Fees for Risk Advice Not Realistic – Poll

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What proportion of your clients do you estimate would be prepared to pay a fee for your life insurance advice?

Advisers have been generally united in shooting down the notion that Australian consumers may be open to the idea of paying fees for life insurance advice.

Our poll results to date and the comments we’ve received since launching the poll last week combine to effectively reject the finding or suggestion in recent research released by MetLife, which implied consumers were ready to consider different payment options for life insurance advice (see: Advisers Should Consider Multiple Remuneration Structures…).

The general mood of the meeting is that – for risk-focussed or risk-only advice propositions – 2020 reality does not accord with the research findings. One adviser appeared to summarise the opinion of many of his peers in reflecting on five new inquiries he has received since the commencement of the year about starting an insurance portfolio:

…we explained what was involved and that they would need to pay a fee of $1,100 up front for us to provide them any advice.

The adviser said all five prospective clients declined the offer “…and informed us that they were NOT prepared to pay any type of fee on top of the insurance premium.”

Another adviser’s comment noted that “...Showing someone what they have to pay in dollars is a whole different thing to simply asking for a fee with no numbers attached.

Elsewhere, this comment sums up how the entire life insurance advice market has been traditionally structured, but which is now being severely tested:

In my practice, I have always promoted that the commissions received covers my advice and assistance at claims times. It’s a pooled service, like the basics of insurance itself. Everyone pays for claims assistance, but not everyone needs it. When you do, I’ll be there and you won’t be charged anything over and above the premiums that you have paid.

Where to from here? In terms of the debate around whether consumers would pay a fee for risk advice – or would even be open to the idea – we think current advisers have made their view abundantly clear. However, our poll remains open for another week if you’ve yet to make your voice heard…



6 COMMENTS

  1. While working through a Kaplan online training course yesterday (‘Life Insurance, Channel Disruptions – Challenges and Opportunities) I even heard John Trowbridge (who helped decimate our industry with his findings and recommendations leading up to when the LIF Reforms were constructed) say “….we also know that fee for service doesn’t really work for life insurance, and so I think its really important that the industry finds a way to persuade the community that commissions should continue.”.

    This is while sitting next to Brett Clark and Andrew Linfoot of Munich Re at some FSC event. This staggered me as even he now realises the important role commission plays in life insurance.

    I really don’t know what other signals or evidence the government, ASIC and life insurance companies need to realise that commissions are NOT a dirty word (as portrayed by the media) and that they serve a very important purpose in THIS INDUSTRY with both new business written and ongoing servicing of clients.

    Everyone (especially ASIC who have chosen quite selectively to only look at one side of advisers’ business ledgers) need to also consider the enormous expenses and time constraints we now have that’s severely reducing the financial viability for us to remain in business.

    Slashing our commission rates on top of ridiculous BID compliance obligations, longer policy responsibility periods and over the top education requirements for advisers with years upon years of experience is just too much now and make it no longer viable for me and thousands of other advisers to remain in this industry, serving our clients. Its just wrong on so many levels.

  2. The insurance companies have been in cost cutting mode and so far their actions have backfired.

    The LIF changes meant a small to medium long-term reduction in commissions for advisers but optically the reduction looked much bigger. This led to a steep drop in new customers being signed up. I doubt the higher profits through lower commissions are making up for that drop.

    Now they are all ‘accepting’, i.e. supporting the gutting of new income protection policies, making the difference between industry fund income protection and high quality income protection much smaller. What do you expect if you start selling a ‘new, improved’ but much worse product?

    Isn’t it the unprofitable group cover that is hurting everyone’s bottom line?

  3. just get Australians to go online to get a “Product” with NO personal advice. I’m not sure what the benefits are other than destroying an industry.

  4. The last paragraph sums it up, “we think current advisers have made their view abundantly clear.” Does anyone know if the life companies read RiskInfo? Is that message getting through?
    A problem with MetLife’s survey has been highlighted by the comment, “Showing someone what they have to pay in dollars is a whole different thing to simply asking for a fee with no numbers attached.” I made a similar comment last week. Will someone from MetlIfe please respond.

  5. Elsewhere in this publication an article by Kristen Turnbull of CoreData titled “Fees v Commissions” was published. It didn’t enable comments so please forgive me for posting here instead. But there was an outrageously naïve/inaccurate assertion made in it, which needs to be called out.

    Kristen seems to grudgingly accept the reality that most consumers would prefer not to pay explicit fees for insurance advice, even if it saves them money in the long run. But she goes on to suggest that forcing them to do so anyway would increase “trust”.

    Kristen, there is no compelling evidence to suggest that forcibly removing commissions as an option to pay for insurance advice, will improve trust. That is just an erosion of consumer choice.

    The main influence on consumer trust is actually the media. The poor behaviour by a minority of advisers and companies exposed at the RC and elsewhere gave the media a basis for some factual negative reporting. But that minority behaviour has been distorted and exaggerated out of all proportion by the media into a virulent, dishonest, hate campaign against the whole industry. Media distortion has leapt way ahead of the facts, to become the primary source of mistrust in financial services. It is also the primary reason that consumers are avoiding advice and products that would make them far better off.

    The poor behaviour by a minority of financial industry participants is being addressed by imposing one of the most stringent and stifling regulatory environments in the world. This applies to all industry participants, including the majority who never did anything wrong. But that will do little to restore trust when the media persists with misinformation and distortion designed to provoke outrage, and hence “reader engagement”.

    The real solution to the trust issues pushing consumers away from good advice and products, is to call out the dishonesty and deception perpetrated by sections of the media. It is to publicise the truth, and focus on “factfulness”. It would be nice if CoreData was a little more supportive in that regard.

    • Well written and couldn’t agree more. The media are NEVER interested in an actual story where our advice has a positive impact on a clients life.

      It’s a pity because there are so many more positive stories to write about about but I guess they’re paid to focus on the scratches on a windscreen instead of looking past that and seeing the bigger picture. That’s the indictment of their industry!

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