Advisers have sent a clear message on what they think is needed to successfully operate a risk specialist advice business.
As we go to press, nine in ten of those taking our latest poll (89%) agree that an 80/20 hybrid commission model for life insurance advice can form the basis for a sustainable risk-focussed advice business, whereas the current 60/20 model cannot.
This is a strong outcome, which seems to make commercial sense. It reflects the fact that prior to the introduction of the Life Insurance Framework reforms, the 80/20 hybrid commission model was a standard commercial offer made by all insurers and was a model which was increasing in its popularity. However, insurers never offered a 60/20 model because the numbers didn’t add up for advisers from a commercial perspective (nor do the numbers add up for some advisers at 80/20).
While …the high upfront commission era will not return, debate remains about the future of risk commissions
While it seems to be universally accepted that the high upfront commission era will not return, debate remains about the future of risk commissions.
One factor we didn’t address last week was the issue of the two-year clawback period currently mandated under the Life Insurance Framework reforms, which sits alongside the current 60/20 cap. One possible alternative future remuneration scenario involves the proposition that under an 80/20 hybrid model, any replacement business would attract level commission only, but this restriction would be accompanied by a reduction in the current two-year clawback period to one year.
This is just one example of a number of potential future commission-based remuneration models for life insurance advice. However, we appreciate many advisers would not support this alternative scenario outlined above and we’re also mindful that any such debate is entirely theoretical, given the current LIF commission cap and clawback restrictions that now apply.
In any case, we will welcome your thoughts about the future for specialist risk advice businesses as our poll remains open for another week…