Charging Fees for Risk-Only Advice – Your Verdict

When delivering risk-only advice, it’s ok to charge an advice fee to supplement any commission income.
  • Agree (78%)
  • Disagree (18%)
  • Not sure (4%)

Charging fees for risk-only advice to supplement any commission income is perfectly ok with the majority of the financial advice community, according to the results of our latest poll.

Our poll question was based on findings that reveal a growing cohort of advisers charge their clients a fee when delivering stand-alone life insurance advice (see: $1,689 ‘Risky’ Advice Fee).

The results found that three quarters (75%) of those taking part in the poll agree that it is ok, while one in five (20%) disagree with the premise.

As we reported earlier 44% of advisers participating in Elixir Consulting’s nation-wide practice management survey now levy a fee on top of their commission income when providing risk-only advice.

There also appeared to be a general acceptance of this finding when it was shared with advisers attending our Riskinfocus 24 events held in recent weeks.

…other individual risk-focussed advisers as well as risk-focussed licensee firms prefer to maintain their commission-only revenue model…

But comments and feedback provided during other sessions at Riskinfocus 24 confirm other individual risk-focussed advisers as well as risk-focussed licensee firms prefer to maintain their commission-only revenue model.

As we noted earlier, the need to supplement existing life insurance commissions mandated under the LIF reforms is driven in part by the nature of the adviser and the advice business.

Established advisers and advice businesses have been able to settle into the current 60/20 hybrid commission mandate due to the strength and size of their renewal income portfolio.

However, many are not in as strong a financial position, such as newer industry entrants as well as more established businesses which continue to struggle with profitability as a result of the significant increase to the cost of delivering advice.

Our poll will be open for another week and we welcome your views…


  1. As a risk only adviser, I’ve been charging advice fees since LIF dropped down to 60/20. But the question is how much. I know from my calculations that the reality is I need to be charging a minimum of $1500 plus GST for each client, plus commission, just to be breaking even.

    And each year my AFSL fee will increase, the PI premiums will increase, the ASIC levy will increase and now the CLSR (?) Is to be imposed on risk- only advisers even though they don’t recommend investment products.

    I accept the principal that the advice fee should be about the adviser’s intellectual property and the upfront commission covers the cost of implementation, but that theory falls apart when one considers the continuing increasing demands on advisers seeking to get new business on the books.

    Today I believe that that my advice fee should be closer to $2000 just to stay in the business, because the amount of work that is involved in implementation itself, driven by the outrageous inefficiencies currently on exhibition in various new business departments, and allied with underwriting that keeps looking to head to the bottom of the pit, will send most risk only advisers broke without the backup of a large renewal book. In other words there has to be a little cross subsidisation, with part of the upfront advice fee subsidising the demands of policy implementation.

    But the amount of any advice fee is always a judgement call – will my client be prepared to pay this fee and understand the value that my advice provides or am I prepared to walk away from this particular new business?. That’s the eternal conundrum, or as FASEA would argue, the moral dilemma

    I know there are a few of my colleagues who take no commission and charge enormous fees in lieu.

    The problem with the ALL-FEES, no commission model, is that it’s very difficult to illustrate to the client the true and accurate value in monetary terms of an immediate 25% reduction in overall Premium costs, particularly in our current environment where insurers engage in massive upfront discounts, to be followed two – three years later by a kick in the wallet. The actuaries now call this practice “DURATION BASED PRICING”.

    Advisers should be asking themselves WHY is it that no insurer has come out with a spreadsheet that can illustrate the short and long term value of a client seeking a 25% premium reduction upfront, and an ongoing discount on premiums, should the adviser NOT TAKE ANY COMMISSION. It can’t be that hard for an actuary. But, to produce such a spreadsheet insurers would have to publicly admit what we all know – duration based pricing is currently rampant, but not publicly announced, and apparently not yet noticed by ASIC.

    The answer has to be that insurers do not prefer a significant NIL COMMISION practice by advisers, because it allows advisers to wipe their hands of all the admin work that goes on with MAINTAINING policies, which, as we know, those insurers have long sought to pass on to the adviser.

    The absence of the availability of such a spreadsheet would indicate to me that the CALI insurers seem to believe the maxim that if an adviser has no “skin in the game”, and therefore is no longer burdened with the threat of a two-year responsibility periods and threats to ongoing renewal commissions , then the admin work to keep the business on the books falls entirely on the insurer. That might mean more staff! There goes the CEO bonus.

    The idea that insurers would be greatly exposed to consumer reaction to yet another piece of premium gouging, with no adviser acting to preserve the business, would be anathema to our current shareholder-value driven CEOs, who are currently engaging in REDUCING staff overheads. Has anyone noticed there are less people working in new business and those that are appear to be undertrained backpackers with no knowledge of new business procedure and the subtleties of insurance products.

    The spiral continues!

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