CoreData’s Andrew Inwood has cautioned those in power to heed the lessons learnt by other jurisdictions when it comes to retaining a viable risk advice sector.
In a presentation at the recent 2021 AFA Evolve Hybrid Conference, Inwood was asked how he sees the future of risk practices.
Within the context of his presentation which reflected on global trends around the economic impact of change and the drivers of growth in the financial services sector, Inwood was unequivocal in his support for the retention of risk advice services.
He told the remote audience of hundreds that risk advice practices have been much derided in the last couple of years and that he believes “…there are people in positions of power who see risk sales as a rant.”
In supporting the retention of a viable risk advice model for consumers, however, Inwood argued that the cost associated with risk rests only in a few places: “It either sits on the State – which means the Government’s responsible for it, or it sits on the family, which means the extended family is responsible for it, or its sits on the private sector.”
…in every country in the world which has had great success, the risk has been moved from the family to the private sector
Applying a global perspective which supports the retention of risk advice in the private sector – that is, a model in which insurers hold the risk and risk advice businesses form part of the distribution solution, Inwood remarked “…in every country in the world which has had great success, the risk has been moved from the family to the private sector.”
Moving the risk
In moving the risk from the family (ie self-insured consumer risk) to insurers (ie consumers taking out insurance policies), Inwood said this transfer “…allows real growth and the people who are smart enough to run these countries know that.”
Of those in power, he said “They know that by grouping risk, aggregating risk and moving it to the private sector, it’s going to allow the country to be more successful.”
In a warning to present and future governments, Inwood reflected that “Around the world, people have tried to take the risk off the private sector, which means taking away the way in which people have been remunerated for it – and they’ve had to put it back on because they’ve woken up and found that the risk has moved to the family.”
…a combination of either self insurance or reliance on the State …is not a formula that has proven to work elsewhere
Inwood is sending a cautionary message that – at least from an economic perspective – that a combination of either self insurance or reliance on the State for support in times of personal crisis is not a formula that has been proven to have worked elsewhere, such as in the United Kingdom, whose financial services sector is similar to that of Australia’s but which, according to Inwood, is in a more advanced position in terms of the (Retail Distribution Review) regulatory reform which took effect in the UK at the end of 2012.
Calling on the industry to unite, Inwood said the sector needs to find a way for the risk industry to “…find a voice” and articulate the value it produces for businesses, individuals and families, while finding a way for advisers to be “honestly rewarded” for the value they deliver: “And that’s something which has to change. We have to find our voice on that and make sure that we drive it forward,” concluded Inwood.