Advisers undercharging for insurance
While advisers are increasingly embracing a fee-for-service model for risk, many are charging too little for this service, a financial services business consultant has said.
According to Elixir Consulting managing director Sue Viskovic, research by her firm shows advisers who do not accept commissions on risk charge clients an average of $2,039.
“We know that is still probably on the low end,” she said.
“We've done a lot of work with advisers and analysed their businesses and analysed what it takes to get policies in place and we're usually finding the minimum usually sits up closer to the $2,500 [mark].”
She suggested advisers charging below this minimum fee may be failing to make a profit.
“It's either those advisers are particularly efficient or they haven't undertaken the process and they don't know that it costs a lot more than that,” she said.
“There are actually 22 per cent of participants who charged between $500 and $1,500 and in my professional experience, they are probably losing money on those clients.”
Nonetheless, Ms Viskovic suggested the proportion of advisers charging a fee for risk, rather than accepting commissions, was growing.
“Even if we're talking about purely risk-only advice, there were 10 per cent of respondents that charged a fee only, and they either refunded or they write the policies with no commission,” she said.
“You might think 10 per cent is not a lot of people but that's a really significant increase from previous years.”
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