Having told delegates to the AFA conference that product providers should take greater responsibility for the findings of the ASIC risk report, Asteron executive general manager Jordan Hawke says the insurer is now taking action.
“Like every good story there are some villains; and this story is no different,” Mr Hawke told ifa, following an Asteron adviser roadshow in Sydney last week.
“We identified 134 advisers that won’t feature in future chapters of our book.
“They had been substantially eroding our portfolios by moving significant amounts of business away from us so we have ended the relationship.”
Asteron Life has contacted the 134 advisers – all but one of which came from outside the Suncorp advice network – as well as their licensees to inform them of the decision, as well as writing to clients to “remind them of the value of their current insurance”.
However, while the action focused primarily on advisers that moved money away from Asteron, Mr Hawke said the entire life insurance and advice industries have a responsibility to fix the churning problem.
“Our villain is currently someone else’s hero,” Mr Hawke said.
“The industry needs to stand up against this and say enough’s enough. We have obviously been a beneficiary of this as well – I’m not being a purist and saying we’re innocent – but the ASIC surveillance report shows it is time to end this so that the consumer regains that trust.”
Self promotion and fact can, and are happily aligned in this case Ajakka. Why so cynical? Not everyone promoting a service needs to hide the facts in the fine print and pretend it’s a client choice.
An FSG, re commission, is what may be possible under an AFSL. The general terms if you will. The real stuff happens when you engage all clients SPECIFICALLY on a fee basis, in a terms of engagement committing to be 100% commission free. Subsequent services confirm these facts and everybody’s happy.
Anything else would be illegal and a bit s*** for business.
Ah! the inconsistency with the face of self promotion vs fact. The FSG appears the bearer of truth when the fluff and bluster is set to one side. When all the facts are on the table it is the client who should and does decide.
The argument that you can’t separate the product and the advice because of affordability is a joke. Commissions are part of the cost. End of story. The more clear that is to the client, the better informed the decision to purchase.
Fee only risk can be a very profitable business, and when clients are given the numbers, they seem to agree it’s worth paying for unconflicted advice.
Perhaps, Craig Yates, your profit margins are a little bloated or you have some expensive inefficiencies in your business? At a time when competition is about to heat up, this may be costly.
Craig & Ajakka, it is pointless responding to people like Glen. He is just trying to stir us up. If you do the maths, $165 per hour does not add up. Glen is either earning less than the average wage, taking short-cuts or working for an employer which is subsidising the cost (eg. Industry Fund). Either way, his comments have no relevance to the vast majority of professional financial planners.
Hi Glen,
If you are an experienced risk adviser (and I expect you are with an average risk premium of $10,000), it is difficult to believe you have never spent more than 6 hours ($990) of your time meeting the client, analysing their needs, researching options, having staff produce SOA’s, follow ups on medical requirements, revision of premium loadings, negotiations with alternative Underwriters to ensure the best possible outcome for the client, meeting with the client’s Accountant etc.
Great systems are good and efficiency is paramount, but I am sure there are many advisers reading this that are not convinced if you were to place a $25,000,$35,000 or $50,000 premium case it will take you no longer than 6 hours and you would not charge any more than $990.
Would you also confirm if you charge the client a fee for your time if you cannot achieve an insurance outcome for them and if you charge a fee to manage a clients claim.I also assume you charge an annual review fee?
There’s the answer. $165 per hour !!! That dosnt keep the lights on or keep Mrs A as she likes to be kept. It may in an office above a Kabab shop in the burbs. Client cross subsidisation is still alive and well perhaps. He He!!
Hi Craig,
I have never had to spend 10 hours implementing an Insurance policy for a client – if you do maybe you should have a look at the systems you use.
For pure Risk only deals I charge $165/hour and have never charged more than $990 in total.
Even if the client pays slightly more in the first year, which is rare, the ongoing savings are dramatic.
So using your figures the $3,000 premium becomes $2,100 and with my highest fee the total 1st year cost is $3,090 or 3% more than the standard. Year two, and subsequent, they save 30%.
By the way my average client has total insurance premiums of over $10,000 per annum.
So to answer your question – YES I AM SERIOUS!!
Better still…they don’t get cover and you present your client with a $2,000 bill. Yippy!! that sounds like a plan!!! An often used but incorrect assumption for people outside the industry is that all who apply receive insurance. Short fat smokers with blood like treacle need not apply.
Glen ?:
You have reduced the cost of the insurance premium by 30%…hero!
You provide them with an invoice for your fee.(Lets not worry how it is paid or the time frame…they are still paying for it)
Glen,what is your hourly rate?
Is it $100,$200,$300 or more ?
Lets say it is $200 and you have spent 10 hrs advising the client and implementing the insurance.
On this hourly rate,it is $2000 in fees.
Lets say the full commission annual insurance premium is $3000.
The “nil commission” annual premium you say would be 30% less at $2100.
So,the client is over the moon, and they have paid $2100 for the insurance policy $4100.This represents an increase in cost in the first year to the client of 37% in excess of what the client would have paid had they just paid for the insurance and you had received upfront commission of (110%)ie $3300,(an increase in your remuneration of and $2000 for your advice, a total of 65%).
R U SERIOUS ?
To Paul Tynan:
Would you please clearly explain 2 things:
1.If you spend 15 hours with clients in the process of assessing the need and attempting to place insurance cover and the client is not offered cover by any provider, do you charge the client for 15 hours of your time?
Are these clients happy to pay you for your time with no resulting cover in place?
2.Would you provide a clear example including calculations as to how a nil commission insurance product with a reduced premium, plus your normal hourly rate for advice and implementation benefits the client in terms of cost as opposed to implementing a full commission product with no hourly rate or advice fee charged.
Cost of insurance is widely considered a deterrent to people taking insurance cover.
I think it would be great if we could clearly see how this works, so we can consider all alternatives and to decide which model exclusively benefits the client.
Remember, Asteron has just said no to the WORST churners, not every adviser who has had a policy lapse or cancel. This has nothing to do with appropriate reviews.
If level commissions were the only option I would think the behaviour would stop. Well done Asteron, but take the lead and move to level or hybrid comms only
So Asteron, how many of these advisers were welcomed when they promised to bring business into Asteron. Now they have returned the favour, and moved to their next favourite insurer. No definition of churning offered. Is it a lapse when a death benefit is paid in the responsibility period.
Were Asteron ( or Guardian ) one of those insurers who in the past offered incentives, including Take Over terms. How easy does Asteron facilitate up-grading a new contract series?
As to the Fee Chargers, what’s your hourly fee for an IP claim, or fixing a bounced deduction etc Whilst I admire the altruism of offering time payments on fees, my bank manger has no such flexibility. Is there a refund if the application fails?
Grahame & Paul I also have known and respected you both for a long time, all these comments are very interesting, sadly Asteron’s comments have just added fuel to the fire. Yes you are correct Grahame I am still at the coal face and Yes clients still want to save money , and yes Paul with some clients they are fine paying fee for service, but not in all cases. It is a proven statistic that clients with an Adviser are better placed. Maybe a level commission/fee is the only way to go , it is an interesting debate. I am aware of an Adviser in Melbourne that churns business to a Life office and gets very preferential treatment by Underwriting dept , vast majority of his applications are accepted standard even when they are sub standard. Yes I know this couldn’t happen !!!! But sadly it does , this guy should not be able to do this , but he does, so he has a big incentive to churn business and he does .
Be very careful what we wish for here ladies and gents…. Another layer of the ‘onion’ that is free choice and best interest has just been peeled away.
While I agree in principle, in my 20 years at the coal face, I have found that consumers are continually looking for – and wanting as part of service – to have their insurance portfolio reviewed every 3 to 5 years. This is also generally part of a quality advisers ‘value proposition’ at the commencement of a relationship.
How can any insurance provider (or fund manager) expect only ‘one way traffic’ when it is likely that policies – and therefore clients – may not have been serviced for years.
I think advisers need to learn how to charge a Fee4advice for their work and manipulate the ‘archaic’ payment terms and perhaps look at rewarding advisers for servicing and maintaining.
Sorry, but just set a dangerous precedent here…. Carrot always works better than stick.
Well done Asteron and let us see who else falls in behind, and more importantly, those that don’t, or won’t!!
We have the future of our industry, as we currently know it, at stake… it has been the case for years .
Unfortunately, many Advisers just don’t get the importance of sustainability in their quest for survival or greed. This is about the “serial” offenders, not those who make the right decision which may involve replacement for sll of the right and obvious reasons.
Get them out and take their living away before they permanently cruel it for all those who do make the effort , sometimes despite the pain, to do the right thing.
100% in favour, no excuses, you have been warned!
So they now expect us to recommend Asteron products knowing that we may be “blacklisted” in future, with the accompanying tarnishing of our reputation in the eyes of our clients, despite our actions being totally creditable? Good luck with that one!
Where does this leave the client ad the adviser that moves the cover into a clients SMSF is this also classed as churning , I believe that the churning label applies to everything and their are genuine cases where it does not.Sadly the Insurance companies keep no record of clients lapsing , replacement etc . So everything comes under the one umbrella. I believe the figures a somewhat skewed. If companies want to stop churning then cease commissions and make all Insurances Fee for service.
Asteron Life, will you be reporting these 134 advisers to the regulator?
You can’t stop at simply ‘blacklisting’ them, assuming you have evidence of their collective wrongdoing.
You do have that evidence don’t you?
Or maybe you’re just cynically removing advisers who may be providing valid risk advice, albeit advice that might hurt your book?
No, that can’t be it.
As I am getting to be a cynical old person of dubious parenthood, I cant help think this is a lot about Asteron’s business performance. Were these advisers who churned business out of Asteron or churned business into Asteron? My experience says they are rogues when they rip business away from life companies and stars when they churn it into your life company. How is the industry dealing with this conundrum? Jordy when you sack advisers who churn business into Asteron I will be a believer.
Did Asteron Life also ban advisers that were moving large amounts of business from other insurers to them? or is “churning” only a bad thing when it involves them losing business?
If they want to be taken seriously they need to be prepared to act on both advisers who churn away and to them.
How many advisers did they end relationships with who were found to be moving significant amounts of business [b]TO[/b] the Suncorp-owned insurer (potentially from other insurers)?
Amazing behavior – we must take a stand.
Some might very well be churning – but could some of it be because the adviser has found a far better product than the one the client has. No longer can advisers sit ideally by and leave the client in the product they set up for them some time ago. This might be why they have been changed, the clients old suncorp adviser has done nothing for the client for some time except collected their commission, and the client has gone elsewhere and the new adviser in reviewing the clients needs has found that the current policy no longer suits the clients current needs and so has changed their insurance policies. This is how the world is moving for advisers under FOFA and the increasing adviser liability for best interest duty etc. Further if all insurers take this action then the only advisers each insurer will have will be their own and back we go to the world of a tied insurance agent – very interesting.
Please! this is vertical integration at its worst : pusnishing advisers for not using your product while pretending to be taking a strong ethical stance. My stomach is “churning”
So are they going to change the disparity between renewal and new business commission? Stop creating an incentive to churn. Or is this just a blatant attempt to grab some extra income by withholding commission from agents who have ceased to see your product as a viable option.
Genuine anti-churning behaviour will only occur when commission structures cease to encourage it.
These advisers may have been acting in their clients’ best interest by moving them to lower cost policies.
So as an adviser you are in a catch 22 situation. Either not carry out your obligations under the best interest duty OR be labelled a churner.
As mentioned on this forum many times by others. Dealerships know who the churners are and this is a good move. The insurers can stop the churn that gives the rest of us a bad name instantly. This might be the start of it.