Advice business risk books see demand uptick
Financial planning practices with a risk specialisation have enjoyed a three-fold increase in demand since the global financial crisis (GFC) due to a stabilisation in revenue.
Centurion Market Makers' chief executive, Chris Wrightson, said buyers have realised that revenue is more stable when buying a risk portfolio, rather than an investment portfolio, and is unaffected by the upcoming Future of Financial Advice (FOFA) reforms.
"There is a lot more interest. Now three to four out of 10 enquiries from buyers state a preference for risk books," Mr Wrightson said.
"On the assumption that pricing doesn't alter significantly, demand will probably stay. I think it'll plateau - I don't think there will be continued growing demand from here - but the increased interest in enquiry is going to remain for the next few years because it's not affected by FOFA and the revenue streams are not affected by the ups and downs of the revenue fields."
Wrightson explained that the growth in demand for risk books is also due to commission and related volume arrangements in individual life contracts falling outside the FOFA regime.
"Fortunately, given the level of underinsurance in Australia," Mr Wrightson said, "the regulator has recognised the incentive structures for insurance need to remain to encourage those providing advice to address this need for their clients, while delivering some certainty of income for practices."
Advisers' seizing the opportunity to deliver related financial services to the risk client base is also driving demand, he added.
"We have facilitated transactions where the risk adviser is introduced to a specialist mortgage writer, and this has proved financially beneficial to both parties, while deepening the client relationship," he said.
A mortgage often entails a review of clients' insurances, and often those with insurance are in the 25 to 45 age bracket and at a point when they are thinking of taking on or adding to a mortgage.
"Either way, there is a natural synergy between mortgage writers and risk advisers, and a clearly identifiable client need for either a mortgage or a risk insurance review. So it makes commercial sense for risk specialists to partner with mortgage brokers."
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