Speaking to ifa, Mr Trapnell said life risk and holistic financial planning advice are two “very different disciplines” and that the Financial Services Reform Act (FSR) created an “interesting conundrum”.
“One requires a very strong knowledge base in facts and figures whereas one requires a very strong knowledge base in emotions,” he said.
“When [the FSR] came into play, effectively life insurance and financial planning were brought under the same set of rules.
“I would dearly love to see a separation back to where we were prior to the FSR, effectively where we had registered life insurance brokers and licensed financial advisers.”
Before the FSR was introduced, a licensee could hold two authorities, as Synchron did, Mr Trapnell said.
“But that means that the product set and the education set and the skill set that is specific to a financial planner would be applied to that planner, and the product set and skill set and knowledge set applied to a risk adviser would be applied to that adviser,” he said.
“They are very much like oil and water; they are two very different disciplines.
The risk market makes up approximately 80 per cent of Synchron’s business, Mr Trapnell said
As a planner who does both, but who agrees that skill sets are not always as strong in both disciplines, I’d suggest that it’s incumbent on advisers to specialise if they wish, but nevertheless it’s an important requirement for any adviser to advise clients about what risks need covering within any financial plan. I’d agree that some advisers will be better at managing the underwriting side than others. Practices will need to decide whether they take on that role or refer to another specialist who can manage it for their client. That specialist would then need to comply with the referee’s terms in relation to fees for service, etc. Some will, some won’t. Those who are prepared to do so could build a niche business opportunity for themselves.
Don’s comments are valid only within a regulatory sense, but if you are in the business of providing financial advice (as opposed to regulatory advice) then the distinction is meaningless.
When formulating a strategy through one means or another we each consider the clients’s income and capital needs and obligations. Insurance advice basically addresses any shortfall clients have in meeting these obligations given certain risk scenarios.
Isn’t risk and investment advice simply addressing the clients financial needs holistically?
I agree with Don in that the sales techniques and skills are different – but this is a training discussion not a regulatory one. required is very different
Don….your comments refer scaled advice. Holistic advice covers all aspects including insurance. One without the other is not in the interests of the client. As for skillset as quoted….any dealer group would be foolish to have an A R without such skills. Get with the program and move into the real world…ensure your staff are qualified and forget about the short cuts and old days. FSR has issues but the end result will make for a better outcome.
Lets not misrepresent the message here – Risk insurance is a specialist field, as is Financial Planning AND Accounting. They are delivered by different adviser skill sets. Emotional and Financial skills – could not be more poles apart. Risk specialists have no issue with working closely with Financial Planners and Accountants – we don’t profess to “be an expert in all facets of planning”. There is a place for all specialists to work together to ensure clients best interests are at the forefront. And on this basis – Don has made a valid point indeed.
(PS Mark your point is very valid also, and should be discussed whilst reviewing insurance in super – however that’s not a reason to discount the argument in my view.. one area is not more important than the other, they are BOTH of paramount importance)
Regulating the advice process to provide confidence, best advice in a timely manner has to be a good thing. But sometimes it is bad and there are consequences that the regulators didn’t foresee. Whilst not wanting to comment adversely or otherwise on the comments made by Don, I want to mention this true circumstance. Saw a client whose planning material was boxed in preparation for a move. Self employed professional, spouse as administrator, daughter as receptionist, sons in private schooling. Five weeks later, discussed his $1000 in SMSF, and $2m life cover, no IP, TPD or Trauma. 36 hours after discussion he had an aneurism. Old days, policies would have been written up then and there, he would not have lost his home, his business and career, his spouse. TWA would have worked, but what is practicality of doing this for every client?
Bernie & Mark, there is validity to your comments as well as Dons… if I can explain
Brad Fox’ comments last week followed up by Don Trapnells comments this week highlight that there appears to be certainty around one thing we all need to be certain of – our insurance protection. Whether it be the onerous amount of red tape or the relentless dripping tap of directly marketed cover saturating our airwaves… there is valid concern that the future could see SME’s who operate in this space struggle to survive while the public will be left with insufficient, inferior cover which will be a legal bonanza for the lawyers when the claims disputes begin. Its a macro issue – not one which only affects our individual businesses. [b]We need clearer public protections and more freedom for advice to be delivered in a compliant but simpler manner.[/b]
I disagree. The amount of risk business funded from Superannuation these days is astronomical. 1 in 2 risk clients we see will mention cash flow as a major issue in being able to afford cover. When risk advisers start discussing super funded insurance, it is that adviser’s responsibility to discuss the effect this would have on their super balance. The adviser must have the correct skill set to discuss retirement and superannuation strategies to ensure insurance premiums don’t eat up a client’s retirement fund.
I’m sorry Don but I could not disagree more strongly. I believe that risk is fundamental to proper holistic advice. If you believe that the “very different disciplines” you refer to is risk sales reflecting the old “lifey” approach god forbid that we ever go back to those days. Risk is so fundamental to financial planning that I can’t see how anyone who knew our profession would argue against it.
I agree with Don’s sentiments.
Delivery of risk should be possible without so much red tape.
Especially when we have the paradox of directly marketed cover – how many ads are they running on TV now??? It is clearly a disadvantage to FP SME’s.
Interesting discussion. Agree with the thinking behind Don’s argument, it seems that Risk was caught up in FSR by accident, and now risk advisers have reams of red tape to comply with – while in the parallel world of direct insurance – you can have cover in place after a 10 minute phone call – bottom line in my view – all market particpants should be governed by the same rules – othewise the regs are discriminatory. It would make sense to reduce the red tape for advisers so that they can get on with the job of getting more Aussies adequately covered.
As a Financial adviser for many years with a genesis in risk i find the statement total ludicrous. Don may be thinking Investment Planning as opposed to Financial Planning perhaps? Financial Planning is indeed holistic – if looking after the client holistically is too hard just get out. lets not get back to “backing the hearse” product flogging.
yes, yes , yes, great comments Don.So true and so needed.
completely different style of business and completely different advice needed-hence should be different licences. Remember the GFC when every planner/accountant started writing risk all of a sudden?