- Disagree (44%)
- Agree (34%)
- Not sure (22%)
Our latest poll is based on a warning this week that unless advisers can remove 20-25% of the current cost base in their business, their advice will not be profitable.
This statement was made by MLC Life Insurance in highlighting the key recommendations it is making to the Treasury’s Quality of Advice Review (see: Keep Commissions and Allow Scaled Advice…), which seek to achieve an outcome that will deliver greater access to financial advice for Australians.
The insurer’s position stems from benchmark research it conducted with Plan For Life, which concluded that advisers who rely only on life insurance commissions will make a loss under the Life Insurance Framework remuneration reforms (see: Cost of Delivering Life Insurance Advice – Advisers Must Act).
This prediction, released in late 2019, appears to reflect current industry reality, in which many hundreds and possibly thousands of specialist risk advisers have either exited the sector or moved away from delivering life insurance advice.
…not quite as much time and space has been devoted to what appears to be a universally-held view that the cost of advice must be reduced
While significant public debate has raged around whether risk commissions should be retained, and if so, at what levels, perhaps not quite as much time and space has been devoted to what appears to be a universally-held view that the cost of advice must be reduced – and where the challenge rests in how to achieve this outcome.
So, instead of asking whether increasing upfront hybrid commissions by 20% would mean the difference when it comes to risk advice business sustainability, the focus in this poll is at the other end of the conversation – that is, whether cutting the cost of doing business by about the same quantum will make a similar difference for advice businesses – especially those whose revenue is mostly or entirely derived from commissions.
But would this measure be sufficient of itself? That is, if nothing else changed, including the 60/20 commission caps, would a 20-25% reduction in the advice business cost base be enough to turn the tide and return an advice business to profitability? Or do other changes need to occur – in tandem with a 20-25% cost reduction – to make advice businesses, especially risk only or risk focussed practices, profitable and sustainable into the future?
It’s over to you to add the next chapter in this conversation and we’ll report back next week…
The fact that we are still debating the merits of commission on Life Insurance advice, is a sad indictment on the whole process.
It has been proven for years that Australians want commissions as their preferred way to pay for risk advice.
As to a 25% reduction in costs to bring specialist risk Advisers back into the fold, we need to look at what was and is now.
Commissions were higher and there was less time, cost and risk to provide advice.
Now we earn less, our costs have risen dramatically, the time to comply with documentation that NO CLIENTS read or understand, has gone through the roof and with all the talk of making it more affordable and accessible, it is still a long way off and based on the complexity of all the Regulations, if certain sections are removed, where does that leave the Adviser and Advice Practice with regards to THEIR RISK exposure.
As most people who know our Business and what we are working on, the solution is to provide an end to end solution that reduces the time, cost and risk for Advisers, so they can exponentially grow their risk books and rebuild our fractured Life Insurance Industry back to profitability.
A part solution, is no solution.
You’ll get into trouble Jeremy – you’re talking common sense again 🙂
I think the life companies don’t know what to do right now – how to get out of this worsening nightmare as their wishes came true. They’ve relieved themselves of 2 things: 1) having to pay high commissions to advisers, their fave wish and 2) new business coming in the front door, NOT something they wished for OR planned upon.
I maintain that if there’s ANY chance whatsoever to resurrect the industry and attract newbies into it we need to enact 100/20 commissions (nothing less will do it), go back to max 1 year write-backs AND consult advisers directly and effectively to ensure COMPLIANCE/RED TAPE burden is cut immediately by 75% minimum. That last part should be as easy as the first two IF life coy CEOs, elites and politicians are prepared to listen and act.
One would think the CEOs would have ample motivation to get behind all these points, given their new businesses divisions are crumbling and in flames – are these people in hyperbaric chambers and cut off form the real world or what?! What on earth are these CEOs getting paid the big bucks for if not to increase sales and ensure their companies survives?!
It still perplexes me how the govt should have ANY influence how a client chooses to pay their adviser for risk advice – it is all fully disclosed now and the life companies have contracts with AFSLs/advisers based on corporations law. Why haven’t the lawyers put the govt/regulators in their place about this by now?!
At the risk of sounding defeatist I hold little hope for any of the above actually happening but I am 100% sure that IF, through some miracle – if ANYONE with positive influence is reading this, it could all be done then the industry would have a strong chance of survival. Thanks for not shooting the messenger . . .
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