Long-time industry contributor, Peter Stathis, stands up in support of the value of advised life insurance in this honest and challenging reflection on the state of the retail life insurance advice sector – and in doing so, sends some pointed messages to some of his peers…
Michelle Levy’s review into the Quality of Advice correctly acknowledges that the unrelenting and often painful reforms financial advisers have endured since the implementation of the FoFA mandates have given consumers the professionalism they deserve. Nonetheless, this has come at great cost to our numbers and to clients in the fees they now pay for professional advice. Principal among the issues we face is the future of advised life Insurance, which I can only describe as being on “life support.” I’ll come to that later.
Coming back to Levy’s recent comments, this would be the first time in my memory that a government commissioned review process has recognised that as professionals, financial advisers can be entrusted to serving clients – not just in a fiduciary capacity – but going one step further in acknowledging that we are capable of judging what constitutes good advice. We can only now hope that the final outcome will help to improve the way advice is delivered.
I will try to now speak for the many professionals who are getting on with the task of giving excellent advice. This is in sharp contrast to the “anonymous noisy minority” who persist with filling comments sections in some publications with unhelpful “gutter talk” about the reasons for life insurance being where it is.
So, what is it that ticks me off?
It’s the anonymous noisy minority among us who persistently charge like bulls at our member representative bodies. Their recent barbs to the FPA’s QAR response, took aim at one FPA recommendation that life insurers make more fee collection options available on retail insurance. Things may have changed post TAL acquiring them, but as I recall, BT’s retail life policies offered a wide array of fee collection options which, despite their availability, were rarely if ever selected over standard commission both before and after the LIF changes. So, I certainly agree that introducing more adviser payment options – while welcome – will do little to improve the difficult days being experienced in advised retail life insurance right now.
What purpose is served in telling our own about our problems…
What purpose is served in telling our own about our problems, persistently blasting criticism and vitriol aimed at representative associations with claims these organisations are out of touch and do nothing?
I’ve heard you and I’ve had enough of the regular statements that the AFA and FPA did nothing to get a better LIF outcome for financial advisers. This is incorrect and unfair. I closely followed member (Trowbridge) updates coming from both organisations post ASIC’s Report 413 (which certainly was not based on random data) and the reality is, neither of the professional member bodies was given much room to move, such was the regulators (and government’s) resolve at the time.
Comments that insurers distribution costs have decreased following the implementation of the LIF reforms also need to be called out as incorrect. The fact is that post LIF cumulative commissions paid to advisers exceed what insurers historically paid (pre-LIF) by the fifth anniversary after policy inception. While I accept the LIF reforms played their part in contributing to the current malaise, they are just one element feeding the growing chorus of financial advisers telling me that advising and implementing life advice is a poor commercial use of their time.
Critical to the success of this rebuild will be the need for a new approach to sustainable pricing…
Right now, advised life Insurance has its own unique set of complex issues and as I see things, we are not far from the point at which all participants will need to draw breath and start afresh in rebuilding this once great advice channel. Critical to the success of this rebuild will be the need for a new approach to sustainable pricing that insulates existing policy holders from the premium “shocks” we’ve all experienced during the past five years, but importantly which keeps our cover affordable for the duration of its need.
As for you noisy few, you can definitely make a difference. Become visible, turn your drive and energy away from your own peers and towards the “joint consumer groups” who along with the ISA persist with their unfounded ideological calls for a complete ban of life insurance commissions. As you can see from AFA CEO Phil Anderson’s comments in this article, they are our adversaries.
Consumer Groups and ISA Continue Demands to Ban Commissions
As for me, I’m ready to roll up my sleeves to become part of the solution. Anyone who wants to contribute constructively is welcome to reach out as I certainly don’t have all the answers.
Peter Stathis is National Insurance Specialist at Insignia Financial. (The views expressed are Peter’s own and not that of his employer.)
Well said Pete, this is a great industry that provides to consumers in their time of need. Yes there has been significant disruption over the years but with the strong positive lead that people like you and Phil provide, this industry will become strong again.
That’s nice. Time for right of reply. What is it that ticks me off?
The arrogance of life insurance, financial advice and its place in society.
You claim that financial advisers have a “fiduciary capacity” – there is a whole doctrine of fiduciary duties in the common law which could easily have been adopted to financial advice except the powers that be decided to go another route and explicitly define what the duty is. Why would anyone do this but to lower the bar? But somehow the industry wants to continuously compare itself to doctors and lawyers and advocate that it is a profession.
Then there is whining about professional standards and having minimum education requirements. When the law changes, lawyers need to learn new skills. When medicine advances, medical practitioners need to upskill. But when financial advisers are tasked with learning the difference between right and wrong after going through a Royal Commission they scream bloody murder. Yet they want to compare themselves to these industries.
Then there is the conflicted remuneration discussion. If advisers knew how to use a calculator they would realise that they are better off under the new structure in the long run. The only reason why they care about the upfront commission is churn, pure and simple. Advisers should concentrate on making bespoke butter instead of insurance but all you hear are complaints about the upfront commissions being too low. Notice how the comments spike on this website anytime someone mentions commissions? How are upfront commissions good for the client? If financial advisers really added value then surely there wouldn’t need to be a discussion on commissions, you could simply charge for the service? But there is a mistaken belief that you cannot do this all because of one survey. Ye of little faith, it must be awful live your life being shackled to what you read.
Then there is the claims situation. Advisers and APRA are quick to point out that financial advice has a higher claims acceptance rate than other forms of life insurance. Whoop-diddly, the products have been driven by research houses for years to have more generous terms in order to have a higher rating to make recommending products easier for financial advisers. Yet somehow you cannot comment on the court case against OnePath on this website. Did you know that actuaries review claims performance and celebrate “lower than accepted claims performance”? Who cares about the industry if you don’t get what you paid for? You have moderately educated people evaluating claims in life insurance companies deciding the fate of the unfortunate who then find a reason to not pay a claim because they didn’t mention something that happened a long time ago. Perhaps they forgot? But the claims handler has a get out clause, a bonus to earn and a “lower than expected claims” target to achieve.
I could go on. There is a reason why the industry is on “life support”: it’s because the noisy minority have a point.
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