The life insurance changes, however, need to be considered in the wider context of the regulation applied to financial advice over recent years. As a package of reforms, FOFA with opt-in, fee disclosure statements and the best interest duty, life insurance reforms, and Professional Standards Reforms are an enormous public statement that financial advice has changed for the better. Parallel to these changes, technology is evolving at a fast rate, with the potential to be both friend and foe to financial advisers as people change their buying and consumption patterns.
Successfully navigating change is never easy, but it is essential to maintaining relevance with those that matter to you or your business. We can think of this in terms of personal relationships with spouses, or even children as they pass through teenage and young adult years. Staying relevant to them comes from continually evolving your relationship. The same is true between successful businesses and their clients – to stay relevant, the business must continue to evolve to the changing preferences of the clients. Michael McQueen’s book Winning the Battle for Relevance is a great starting point to consider this topic deeper.
There are a number of questions to consider by advisers as they prepare for the first transition phase of LIF – the move to a maximum commission payment of 88 per cent upfront and 22 per cent ongoing, and the commencement of the two-year retention framework. For risk specialist advisers that have not already moved their business model to hybrid commissions in recent years, this is a daunting task.
What do you do with each client that makes you relevant to them? How do you add value? How do you demonstrate that value to clients? Are you confident in the value you provide? Have you built an advice and business model that is focussed on these things? How have you tested that your answers to these questions are the same answers that your clients would give?
Managing change is a process that takes planning and insight. The great news for advisers facing these changes is that many of your peers have made these changes already and the collegiate, sharing culture of AFA members means that those that have already trod this path to hybrid commissions, and often charging an initial advice fee as well, are willing to share their knowledge and experiences with those just setting out to change. There are some highly effective and experienced business and advice coaches in the market place as well to help your navigate the ‘noise’.
Speaking of noise, there has been some nonsense claims of late seeking to blame claims outcomes from industry funds on life insurance commissions. None of us should be distracted by this noise – instead stay focused on the noble cause that underpins advised life insurance, which is bringing financial dignity at a time of need.
I am confident that Australia’s life insurance advisers have the talent and skills their clients value and will pay for. Russell Collins OAM, a life insurance doyen for more than 40 years, in a recording for the AFA Life Insurance Roadshow in August 2015 said the biggest obstacle to an adviser successfully charging a fee alongside a hybrid commission was the adviser’s own mindset, not the client’s.
It is time now to question thinking that is anchored to the past and plan for this change – to build a business proposition for your clients that is based on demonstrating the value you add as an expert and charging accordingly.
Advised life insurance has so many advantages over direct and group insurance – there is no comparison. Add to that the expertise of a good adviser and it is a compelling proposition – one that is worth paying for.
Brad Fox is the chief executive of the AFA
Any adviser still paying membership to the AFA is a complete fool as there money is being used to fund the blacktie dinners held weekly, and nothing to do with adviser support, Cancel your membership and use the money to help fund the extra education costs we will need …
A vote of No Confidence in the Board of the AFA should be tabled at there next board meeting. All advisers should be emailing the AFA board.
Sorry reality check…I forgot.!!
David. In fairness to Brad if you look at his previous post on the 11th hour he was too busy handing out awards at a black tie dinner to insurance companies. What a joke! I could not agree more with you. The AFA have completely sold out their members.
Brad, even at the 11th hour of the Senate Economics Committee submission cut off I was hoping in some small way that the AFA submission would go some way in repairing the damage you caused to members 12 months ago when you cowered down to Josh Frydenberg and the FSC with the LIF. However,, all your submission was able to give me was “encouragement, support and business tools”(section 2.53)…Are you for real. I really needed leadership from my Association at this critical point but know what you have done…by agreeing a second time to the LIF the AFA have fallen in behind Kelly O’Dwyer and the FSC. Where does that leave advisers who are desperate for an association “By Adviser for Adviser”…
Brad? Brad? are you there Brad?
Brad, your members were completely let down by the AFA and both advisers and clients will suffer. The only winners are the banks and insurance companies.
This was done on your watch
The first cost saving advisers should look at to try and survive in the future is to cancel their AFA membership. It has proven to be worthless.
Brad, you
and your committee have not, and are still not listening to your members. We
all feel you have allowed the execs of the life companies and banks via the FSC
to frame incorrect arguments blaming advisers unfairly for problems life
insurance companies have created.
The AFA have
driven advisers under a bus. Not once have we read about the amazing work risk
advisers and there staff have done, for millions of Australians for over 100
years. Brad, how does reducing adviser remuneration and extending
responsibility periods benefit consumer outcomes.
Do yourself
a favour, and click on to the LICG (Life Insurance Customer Group) and you will
see evidence that over 2,300 people who work in the risk space, agree with
these sentiments.
Special
thanks to Zurich and Clearview, who registered genuine support for what
thousands of small business do in the risk advice space, in the most recent LIF
submission. Do you understand that the LIF in its current format will ruin
hundreds of small businesses, increase the under insurance issue, increase the burden
on our social security system, increase the cost of advice. The only winners are
the product manufacturers, yes the banks and insurance companies, who surprisingly
have framed an argument, via the FSC to benefit only them.
These same companies are now looking at exiting
the insurance market, as they struggle to convince their boards that this
industry is suitable for their business models. Eg. NAB selling MLC,
Macquarie selling to Metlife, Suncorp disbanding Guardian. We know of other
major institutions that are looking at suitable buyers. These are the same
companies that had senior executives on the FSC board driving change and yet
have exited the market.
Brad, as a
financial member of the AFA we were looking to you for leadership, you and your
committee have not delivered.
Brad..”Speaking of noise, there has been some nonsense claims of late seeking
to blame claims outcomes from industry funds on life insurance
commissions. None of us should be distracted by this noise – instead
stay focused on the noble cause that underpins advised life insurance,
which is bringing financial dignity at a time of need.”
How about you and the FPA put some of those sponsorship dollars towards some noise of your own? Instead of wasting money awarding those responsible for this debacle you could at least ensure an appropriate response goes out to the public!