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.