Sydney adviser, Guy Mankey, documents in this article the frustration he feels after a 40-year career as specialist risk adviser and business owner.
Guy, who has managed almost $50 million in client claims in just the last ten years, shared these thoughts with Riskinfo in responding to comments made by industry icon, Russell Collins, which we recently reported (click here).
In considering what it now takes to serve his clients’ best interests while also meeting the current regulatory and compliance requirements, Guy offers an honest assessment of the state of his practice as he outlines the key reasons why he is questioning whether he wants to continue writing new life insurance business…
After a career of doing this job pretty well and being quite successful, I have moved from thinking I would keep going with my business until old age caught up with me to now looking to avoid writing new business for three primary reasons:
Issue 1 – The compliance burden
I spend more time justifying my actions to compliance experts than I do writing the business
The compliance burden is absurd and the majority of it is of no benefit to anyone except those in the compliance industry. I spend more time justifying my actions to compliance experts than I do writing the business. A recent case in which I cancelled and replaced the same life policy with the same company and same sum assured – but negotiated an $8,000 ongoing premium saving – was failed in my audit because I ‘…failed to prove I had acted in the client’s best interest’. And the SoA for this case was 35+ pages long!
I also got into trouble for not going through the client’s other possible areas of need, such as TPD, trauma and IP. The fact that he was too old to buy any of them and totally uninsurable following his bypass two years before did not dent the auditor’s enthusiasm to inform me of my failure and the dire consequences of my actions! A client can go out and spend $100,000 on a new car or boat they can’t afford, but I need a file the size of a phone book, topped off with a 50-page SoA, to arrange enough life cover to pay out their mortgage.
Issue 2 – Remuneration and expenses
At 60 percent [Life Insurance Framework remuneration reforms] I’d struggle to break even most years. Last year, my business employed two dedicated new business staff costing around $180,000 in wages and infrastructure. That meant I had to complete $300,000 of new business just to cover their costs for the year. For me to add $100,000 for myself, I needed to up that to $467,000 in completed new business.
With underwriting fails and a few unforeseen lapses (thanks Covid), I’d need to lodge apps for around $520,000 in new premium income. I let the staff go, downsized my premises, and now do everything relating to new business by myself. So, two people are now unemployed – and with new business down by 70 percent, I’m taking home the same money and enjoying life more. Yes, I’m not building renewals but until I know they are guaranteed in the future, why would I bother?
Issue 3 – Qualifications and integrity
I’ve grown tired of the constant need to ‘educate’ myself in irrelevant subjects. I will take any course that helps me better understand insurance and how I can serve my clients’ insurance needs better. I pay to travel to the USA once or twice a year to access practical MDRT and peer knowledge that helps me serve clients and run my business that is impossible to find in Oz.
Learning and education needs to be relevant…
However, I have no desire to get a degree in subjects that have nothing to do with the work I’m doing, and I have no interest in investing hundreds of hours ‘learning’, when the sole purpose of this is to tick a compliance box. Learning and education needs to be relevant.
And as for sitting an exam to prove I understand ethical behaviour? If I have not acted ethically over the last four decades, I reckon someone might have complained by now. And if I’m a ‘shonk’, passing an exam won’t stop my behaviour.
Russell, the once great business in which you could make a difference is rapidly disappearing and the current band aid solutions won’t fix it any time soon. Until ‘risk advice’ is considered distinctly from ‘financial planning advice’ as a separate skill with separate educational requirements, the industry will continue to shrink and, more than anyone, it’s the hard-working Australians who simply want to protect their own and their loved ones’ financial futures who will lose out. Progress…
Will professional life insurance advice disappear?
Guy Mankey is a specialist risk adviser and business owner – Pax Financial Group – based in Sydney.
Almost identical to my own circumstance and experience Guy. Reluctant to write new business, employing less and making more, probably for as long as I’ll need to anyway. I’ll be fine but, half a dozen less jobs and a lot less cover in place than there would have been otherwise.
I so feel for you Guy and commiserate on your current situation.
All of this started back around 2005 and I sold my successful practice in 2006.
Although I really loved and enjoyed what I was doing in helping secure the lives and families and futures of clients, my own sanity was worth far more than the impetuous ‘auditors’ who by any other name could be grammar nazis!
Auditors being employees, and most employees, don’t understand what it takes to run a business, pay all the overheads including wages, holidays, leave loadings, super, rent/mortgage/leases/ legal fees, and then on top of that, the (compulsory) education, auditing and compliance.
It is hard work to find new clients whose business completes without too much hassle and then retains the business in place so that the commission isn’t clawed back and all the work that had been done is down the drain.
And yet, insurance advisers are pilloried as being unethical and not to be trusted and have have politicians and consumer groups condemn them.
But at the end of the day, it is only because of what an insurance advisor has done, gone above and beyond, that claims are paid.
Trust me Guy, the relief when you walk away is immense. You can literally feel the weight lifted from your shoulders.
Take the money and enjoy life! There’s not enough of it left!
Guy that is it in a nutshell. I would be happy even at my advanced age to take time to obtain any bits of paper that are relevant to my provision of risk advice. But we all know there are NONE! No university offers specific insurance modules !Many years ago the ALA/AFA had a Diploma of Life Insurance. I am glad I did not complete the Diploma because, on its track record to date, FASEA would have failed to recognize its value.
We need another licencing regime for life risk specialists, and for that matter, stockbrokers.
One of the issues we have is that we have a regulator that is working hard on licencees, behind the scenes, to insist that an adviser, ANY ADVISER, must provide “holistic” advice. If they succeed, despite the fact that the Corps Act provides for advisers to limit the scope of their advice and their advice specialties, risk advice specialists like you and I are GONE !!
And with the demise of life risk specialists will go a number of insurers, and all Australian sourced GROUP super risk. The added burden on the tax payer is inestimable.
But hey, who cares. The insurers are as usual walking both sides of the street, targeting their comments to the audience.On one hand they tell Frydenberg there must be some commission on risk after 2021- thats reassuring.. On the other hand insurer CEOs privately admit 66/22 is not working.
Every participant in this industry, suitably plied with truth serum. will admit that commission must go to 88/22 with a ONE YEAR CLAWBACK if advisers are to stay. But those same insurer CEOs,perhaps threatened by the FSC, will not state that position TOO LOUDLY, because despite the fact genuine New Business is down 45%, and their Number One Funds are under stress, those CEOs think they can run the current situation for just a little longer..
And the really stupid thing is we all know if a high proportion of risk specialists depart this industry in a hurry, after failing to obtain a good price from an honorable purchaser, 25% of the IN-FORCE business will FALL OFF from lack of attention. There will be no adviser to explain the need to retain cover. That will really strain those Number One Funds
Finally, I find your story of compliance audits appalling. Why would you bother! That one can be sheeted home to ASIC and its failure to give specific guidance to AFSLs on what is good compliance.That lets lawyers step into the vacuum to justify their fees by over prescribing compliance. And if the licencee has featured in recent media reports then they are, shall we say, very nervous when it comes to compliance, and prefer to overachieve..
Your story is the sort of story the House of Reps Economics Committee would like to hear. economics.reps@aph.gov.au
Great points. Insurance is very difficult to do well but there is no course that teaches anything more than the basics. That includes what is taught in the Graduate Diploma / Master of Financial Planning. Insurance seems to be more like a craft or surgery – much of your learning can only be achieved by doing.
The reason for the gun-shyness of the auditors is ASIC’s look back process and the standard applied during their audit. CBA and NAB each paid more than a million dollars per adviser in remediation costs because of these audits and such costs would break pretty much any other business. Hence the reason auditors behave in this absolutely absurd and often just weird way.
However, to be good at risk advice you do need to understand superannuation laws, the tradeoff between insurance and investment and quite a few other details.
Guy tells it as it is and he is 100% correct.
My question still remains unanswered by the AFA and FPA who thankfully are fighting the good fight for financial advisers.
Why can’t our Associations negotiate with the Bureaucracy to allow advisers who specialize in say Risk Only Insurance be accredited for this specialty ONLY? As Guy says why do we need to study subjects that we will never give advice on?
With every bereaucratic change going back to Wallis, Code of practice, then FSR in 2004, followed by FoFA, and more recently LIF, and now Fasea , new educational requirements have been thrust on advisers.
Now, how much more for goodness is sake is there to learn about life insurance?
Our bureaucrats need to understand that there are only three hazards in life and our clients need to answer three very short questions. What happens if you die too soon? What happens if you live too long? and three What happens of you suffer a disability or a major trauma along the way? That’s it!
So ,Why do we need a new degree do to continue doing what we have always done?
In 2004 those doing only risk insurances got qualifications for that, and that qualification is something that should be Grand Fathered into the future.
Like Guy says many risk advisers have stopped writing new risk business as the compliance and regulation is killing us and the industry.
It’s tragic to read over 7000 advisers have left this great industry with these new educational requirements.
In my humble opinion and sad belief is, this is only the tip of the iceberg!
Brilliant article Guy.
I have known Guy for many years and he is a great risk specialist.
What Guy is experiencing and has eloquently told us all, is what all experienced advisers are feeling and it is a disgrace that this type of situation could have been allowed to reach this point.
The Government has been hoodwinked by self interest lobby groups, which has led to the explosion of red tape, unworkable restrictions of trade and an army of ASIC and private auditors, who have continually shown their total ignorance when it comes to how risk advice and retail Insurance works.
Then we have APRA who with their 10 point plan, will continue with the same vein of destruction for Australians to attain advice and proper Life and Disability coverage.
The lack of knowledge and concern from the Federal Government and opposition is beyond belief, though I suppose from their perspective, they have spent years and hundreds of millions of dollars investigating the issues and even though ASIC admitted too late, that their initial assessment of churn, was based on a false premise, which led to the fiasco we face today, Ministers are prepared to wait for the ASIC 2022 review, which of course will be too late to save the retail advise Industry and the inevitable collapse of a One hundred and fifty year old model that survived world wars, depressions, economic and environmental disasters, though could not survive the lies and mis-truths perpetrated by groups who can create mayhem with impunity.
There is a very simple way to bring this economic Armageddon back from the brink and that is for the Government to listen to the real experts who actually are at the coal face and who have the solution.
It is not even about stopping further losses of risk advisers, it needs to be about bringing in incentives to rebuild and recruit tens of thousands of risk advisers and allow those who have left, to rejoin, which will solve the issue of under-insurance and bring some sanity into the debate, including the insane premium hikes that are self fulfilling in increasing lapses.
This article simply highlights the disparity in skill sets required to be a standout risk adviser. They don’t necessarily include the legislated education levels being demanded of all advisers.
I’ve been planning for 23 years and do not claim to be a risk specialist, yet in Guy’s Masterclass today I learned invaluable tips to minimise the risk of possible future litigation. Practical ‘stuff’ that will help us better serve client needs and that compliance people simply have no idea of.
Our industry needs more of this type of ‘education’ so we’re better equipped to provide risk advice. The formal education piece, which I have, is really only to keep the bureaucrats happy. Experience shows it’s more often an advisers interpersonal skills, experience and understanding of clients needs that provides desired outcomes rather than our education.
I could not have said it any better myself.
I am a Risk Specialist as well and have been for more than 30 years and for exactly the same reasons wont be writing any new business, nor do I see any justification to have to do a degree for things I will never advise on.
No industry other than ours has had to do this… it’s a whole load of **** !
Question: What are the pros and cons of changing the tile of “Risk Adviser” to “Personal Insurance Broker” (to create the distinction from a General Insurance Broker) who provides risk assistance rather than risk advice; similar to how a Mortgage Broker provides credit assistance rather than credit advice (EVEN THOUGH Mortgage Brokers take the client’s personal circumstances and their loan/credit needs and objectives into account)?
Could replacing the word “Adviser” with “Broker” (someone who researches the best solution and suggests the best features to include from a range of options, pretty much what a Risk Adviser does today) help create the needed distinction from Financial Planners, and perhaps more importantly reduce potential litigation (and bring down Professional Indemnity insurance premiums)?
A Personal Insurance Broker will still need to be competent in how insurance premiums and payouts are impacted by tax and superannuation (eg tax implication of income protection premiums and payouts, CGT implications if policies are owned by PTY LTDs, TPD inside super sub-60 payout, life inside super payout to non-SIS dependents, etc).
Today Financial Advisers can also be Mortgage Brokers. So in the proposed world, these same Financial Advisers can be Mortgage Brokers as well as Personal Insurance Brokers.
To address how FOFA, LIF and FARSE got started (because a small number of bad apples did the wrong thing by their clients to further their own interests), if a Personal Insurance Broker puts a client in an inappropriate cover or churns them from better cover to worse cover, the client can seek compensation after or even before a claim event (where a client cannot go back to their better policy that they were churned from) and potentially the regulator can take the shoddy Insurance Broker to task so as to ensure the industry is ‘clean’ and healthy.
The greedy insurance companies (via the FSC) pushed for LIF (60 upfront /20 trail with a two year clawback) because they naively thought that by paying advisers less, they’d be able to keep more.
These highly paid fools (insurance CEOs and executives) mustn’t have paid attention during economics class when supply and demand was being taught and were too stubborn to listen to the multiple voices of experience.
FSC helped the banks sell their insurance businesses at a premium (because the expense line for commissions was reduced but top line for revenues hadn’t been adjusted downwards because the effects were too soon to be seen when they were sold) and exited the industry.
ASIC in the meantime still collected their ironclad salaries and lucrative bonuses for doing “an awesome job” while the industry they had oversight of was crumbling beneath and the public’s best interest was not being safeguarded. Because ASIC was asleep at the wheel, Hayne (a career lawyer with no clue about financial advice or mortgage broking) got the wool pulled over his eyes by the big banks so whilst it was a Royal Commission into Banking Misconduct, strayed outside his remit to recommend banning of Life Insurance commissions and Mortgage Broking commissions predicated on the Netherlands Model where in Holland new home buyers are required by law to take out personal insurance in order to get a home loan.
The botched jobs that are LIF, the Royal Commission and FASEA have caused many good and experienced Risk Advisers who have been doing the right thing for decades to throw their hands up in frustration and walk away from the insurance advice industry. This has further exacerbated the issue by reducing the insurers’ distribution channel and this has caused APRA to jump in with their harebrained ideas without any meaningful consultation (and I suspect at the beckoning of the insurers remaining in the industry) to come up with stupid proposals, that the insurers can say “It’s not what we want, it what APRA is forcing on us and everyone” (much like what they said after LIF).
The parallels that this sad story has to the introduction of cane toads in Australia is scary.
The long term implications are scarier still.
The issues noted are well known to all in the industry and have been voiced many times in this forum and other industry magazines. While these forums provide a good opportunity for discussion & support, it is preaching to the converted. And its a rapidly decreasing congregation.
Jeremy Wright has been a proponent of getting on the front foot & has recently offered to make representations to government. I fully support his actions & for my part have a meeting with my local member, Jason Falinski (Standing Committee on Economics) in September. As a member of the SCE Jason, and Chair Tim Wilson, have been questioning the activities of both ASIC & FASEA, & appear to have concerns about their performance & behaviours. Suggesting they are willing to listen.
While individual representations will help what would be the impact of a group of industry veterans (Jeremy, Godfrey, Russell, Guy, Don?) making an approach to the SCE and explaining the issues from the advisers perspective? With the state of the industry there would appear to be nothing to lose.
A thought, why don’t the riskys who don’t want to deal with Compliance burden and educational requirements move to general advice?
Moving to general advice 5 years ago was the greatest decision I ever made. I can write with multiple insurers, the banks, industry funds and the big players have been doing this for years.
General advice is not going anywhere anytime soon.
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