The MetLife Adviser-Client Relationship Report 2019, now in its second year, has surveyed consumers and small businesses with up to 20 employees who have bought life insurance through an adviser, as well as consumers who are likely to see an adviser about life insurance in the next two years.
The research has indicated that one-third of consumers and one-half of SMEs are considering switching advisers, or no longer using their adviser in the next 12 months, with high fees and commissions being the top cited reason for dissatisfaction for 25 per cent of consumers and 33 per cent of SMEs.
Around 23 per cent of consumers said they can’t afford it, another 23 per cent said they don’t need it anymore, 21 per cent noted poor value for money and 23 per cent referred to poor communication or lack of contact.
For SMEs, the reasons enterprises are dismissing their adviser include trust issues (25 per cent), association with a major bank (23 per cent), poor value for money (21 per cent), can’t afford it (19 per cent) and poor advice (17 per cent).
MetLife Australia chief Richard Nunn called the statistic of advisers potentially being dropped “concerning”, saying it highlighted a need for advisers to demonstrate the ongoing value of their service.
“Advisers can’t take their clients for granted,” Mr Nunn said.
“With such a high proportion of consumers and SMEs looking for change, advisers must constantly be looking ways to build trust and develop genuine relationships with clients.
“Those advisers who take the time to have deep and ongoing conversations with their clients about their individual needs, and demonstrate the benefits of personalised and tailored advice, will likely gain a competitive advantage.”
The top attributes when seeking an adviser were voted as being honest and trustworthy (85 per cent), transparent around fees and commissions (78 per cent) and being experienced (75 per cent).
Life insurance commissions not necessarily a deal breaker
MetLife Australia has recommended advisers consider implementing a range of payment options to suit the individual needs of clients.
The majority of consumers (78 per cent) were found to prefer payment for future advice as an upfront fee if it meant lower insurance premiums over the lifetime of the policy.
These consumers who expressed a preference for an upfront fee were willing to pay an average of $1,700, a lower figure than the average cost to product comprehensive insurance advice.
Three in 10 consumers said they were willing to pay 1-5 per cent extra in premiums to offset no upfront fee.
But while the government has considered the removal of life insurance commissions, the research pointed to a lack of awareness around commissions that advisers earn, with slightly more than half (55 per cent) of consumers unaware of the amount of the cut their adviser receives.
When asked if expelling commissions would change their willingness to see an adviser, nearly half (47 per cent) said no and only 19 per cent said it would increase their willingness. Around a quarter (26 per cent) said it would decrease the likelihood of them seeing an adviser.
Nearly three-quarters (72 per cent) thought removing commissions would result in more people being underinsured, due to a perception of higher up-front fees leading to people choosing lower levels of cover.
For consumers potentially seeing an adviser about life insurance, 25 per cent indicated cost was a barrier, up from 18 per cent in 2018.
But for most consumers, 75 per cent first figured out what cover they needed before looking at whether they could afford it.
Matt Lippiatt, head of adviser experience at MetLife, said while the study has shown customers are looking for alternative payment options, many don’t have an issue with the traditional commission-for-advice model.
“There’s a growing number of consumers who are interested in fees as an alternative payment structure for risk advice, which means it’s important for advisers and product manufacturers to offer consumers multiple options when it comes to paying for financial advice,” Mr Lippiatt said.
“Consumers don’t have a problem paying for their insurance advice by way of commission taken from the product, but there is an opportunity for greater education around how they work.
“Advisers who are embracing highly transparent charging models and have systems in place to continuously educate clients about the value they provide seem well placed to thrive in this environment.”
When asked what types of advice they would be willing to pay a fee for, the top drivers cited were investments (54 per cent), saving for retirement (50 per cent) and getting life insurance (46 per cent).
For SMEs, the top reason for seeing an adviser was seeking out life insurance (59 per cent).
[quote=Scoped out]How is it a breach of best interest by quoting the client a fee that just covers the cost of providing the advice?[/quote][quote=Scoped out]How is it a breach of best interest by quoting the client a fee that just covers the cost of providing the advice?[/quote]
I have already said why?.. But I’ll rephrase if it helps.
I never said you can’t quote a fee for your advice that’s fine. Ie $10k for holistic advice. It is very easy as we all know to justify the cost of this.
HOWEVER if a client comes asking for advice around SUPER, INSURANCE & GOAL SETTING. And you say ok each piece of that advice is $2k, total $6k and they say no no no scope out the insurance advice, don’t want to pay for that. This is a no no. Because it was in the ORIGINAL scope of advice and the client can’t be advised on the other areas. Because Super holds insurance cover. Your goal setting needs will need protection from unforseen circumstances. It’s like when old risk writers used to just provide cover based the needs analysis without taking into account cash-flow / affordability. We all knoa now this should always be done and as I mentioned they’re turning advice into holistic only because they interpret it as how do you provide advice without understanding their full financial situation anyway.
I appreciate the blow back I received from this and I understand other people will have different interpretations, understand though you need to look at all of these changes in totality not just compartmentalise each one to make you feel good about decisions and actions you make.
Hi Anon
respectfully, your understanding of “scope of advice” is partially correct, which means it’s operationally incorrect.
You need to understand the two moving parts which are “Subject Matter” and then “Scope of Advice”. You are right to say that there are legal restrictions on how much you can scope out, but the law permits you to frame or reframe the Subject Matter with your client. Please read RG 175.281
Hope this helps.
? This is LITERALLY what I’m saying…
Yes you can scope down and change the subject but then you apply it to your best interest duty and then you can’t…
Once again, how can you go ahead with a limited scope if you KNOW the client has insurances in super and it will put them in a worse position?… It is honestly surprising that you’ve used this RG as your point.
I’m dropping 7 clients in 10.
Doing so I will have a more profitable business, I have less stress and more meaningful relationships
Maybe we should look at this from an advisers perspective, these 1 in 3 clients that are looking to swap advisers are probably the unprofitable clients that advisers have told they would need t pay a fee for their services and they have elected not to pay it. We have been back at work a week and we have already had 5 inquiries about starting a new insurance portfolio as they were all new clients explained to them that would be required to pay an upfront fee before we would provide any advice, all five declined the offer and informed us that the wer not prepared to pay an extra fee on top of the insurance premium. This is the REAL world
Hi Mark, as that upfront fee discussion before or after the initial (complementary?) appointment ? I only ask because “if” there is sufficient premium to justify a commission which will cover the compliance cost, we wont send them away.
I have always “speculated” my time in initial appointments and I have found that in the main i was ahead.
I guess there is always the matter of what you don’t know and can only find out after having a conversation. …just a thought
All these clients jumping ship are in for a rude shock. They will discover they have joined the ranks of the “untouchables” – the clients advisers simply cannot afford to service, due to ridiculous levels of red tape & FASEA requirements. Within 5 years time the consumer lobby will be whinging about the inability to afford advice, not realising they were the cause of the problem in the first instance.
unfortunately, no one will be around to remind them they were the cause of it all.
Hopefully the hopeless FPA and AFA won’t be around either and sooner rather than later.
With all the red tape that advisers have to go through, the continuous change in how rules are being interpreted and the spiralling costs, advisers are more concerned in keeping auditors and ASIC happy and have no time to look after their clients (even if they want to) and it is clients who are the ones paying their bills. Most advisers run small businesses and do not have the resources available to large institutions. However the red tape is the same – large institutions have walked as the financial advice business is not profitable. How are small businesses expected to succeed unless something changes and red tape is reduced.? What a sad state of affairs!
How much bull$#@% can you fit into one survey?
Mr Nunn should know better than to try to blame advisers.
He also knows that insurance is sold not bought.
Fees work when something is bought, commissions work when something is sold.
Any insurance executive who has been more than two minutes in the industry knows that. But no one is brave enough to make the case publicly because they have been shamed into thinking that anything sold is evil.
According to Kelly O’Dwyer and her bestie Sally Loane from the FSC, the LIF was to provide
“enhanced consumer outcomes”.
Well, since then premium costs have skyrocketed to unaffordable levels, experienced advisers are leaving, insurers inflows of new business are declining rapidly, the direct insurance market has been a dismal failure from a consumer perspective and Income Protection is very soon likely to be only a shadow of it’s former self.
Well done to all who thought that stripping the commissions out of Risk Insurance to such a reduced level in order to avoid policy churn, pay the adviser less and bolster insurer’s profits for shareholders.
You have made a major f*#k up and no one is better off at all.
When is Kelly O’Dwyer going to get her cushy new “bank executive” job at one of the big 4 banks with the $800k salary + bonus + share options? She was/is a disgrace!
Hubby might fit her in at UBS
It’s pretty simple really. The commission model has been working for both clients and customers as a way of paying for insurance,advice and ongoing access to their adviser. An alternative model based on advisers charging fees separately is a wish not a proven business model. The response from both advisers and customers is pretty clear. The result will clearly be less people insured, higher premiums for those that are insured as a consequence, greater costs to be borne by government to effectively insure those without insurance and a loss of viable small business opportunities and jobs.
Look at the closure of all the retail stores as a consequence of direct selling by Amazon etc This is the consequence we will see. The rah rah around professionalism is a massive furphy. Did any of the survey respondents say that they wanted an adviser that was more professional ? What they did request surprise surprise was trustworthiness,transparency and experience.
A large portion of consumers also often ask questions and statements such as
” If I have more than one Life Insurance policy, will I only be able to claim on one of them” ??.
” I don’t need Income Protection Insurance as I am covered by Worker’s Compensation or WorkCare ”
” If I have a Heart Attack, I will be able to claim on my disablement insurance under my super fund “.
” I don’t know how much, what type of insurance or how much my insurance costs under my super fund “.
” If I have a disablement claim paid from my super fund, I will still have my Life Insurance cover in place”.
” Disablement Insurance is the same as Trauma Insurance” ?
” If one of our business partners die, we will be able to borrow the funds to pay out their estate” .
” What do you mean we will be in business with the deceased partner’s spouses’ new partner ” ?
and on and on and on………
Every experienced Risk Adviser knows these and many, more questions and the general consumer’s lack of knowledge around this space is often at a concerning level.
One of the major issues is that people object to paying for things that don’t appear to provide a benefit in return.
When a client needs to make a claim and that claim process is efficient, timely and delivers meaningful and valuable benefits at the time when it is most needed, the value of the advice and the cost of the insurance is well and truly justified.
The perception of cost is often not the reality when it is clearly identified and explained.
For those consumers who believe that by doing it themselves they will reduce their cost and avoid working with an adviser…good luck….you may get it right and you also may get it very, very wrong.
When the claim process comes around and the pre-existing condition clause is wheeled out, or the definition of Trauma is inferior or the Any Occupation definition of TPD won’t provide a benefit or the exclusion clause was never adequately explained and understood….be prepared for a reflection as to why you should have sought quality and experienced advice in the first place.
Reading between the lines here, it looks to me like MetLife, along with comments I have seen from other life insurance companies lately, are positioning themselves and gathering evidence to make a case for retaining commissions. If commissions go for life insurance, it will kill the market and the FASEA induced exodus will become a stampede. Those of us who plan to battle on will probably dump life insurance advice or relegate it to general advice and factual information. ie. [i]’I recommend you consider life insurance and income protection, here is a fact sheet, some tips and a list of providers’.[/i][i][/i] We all know how that will play out, and I suspect these life insurance companies have reached the same conclusion. It’s ironic that only a few years ago they shafted us with LIF and now they will be begging the Government to keep commissions in place.
I agree Ben but can see two problems.
1. They are all panicking over losing commissions but wan’t to keep the LIF rates as they are with the 2 year clawback so they might as well not bother as its unprofitable to write new business anyway so the same stampede will happen.
2. When ASIC do the 2021 review I think they are going to find lapse rates significantly higher and company changes owing to the FSC members increasing rates for existing customers and reducing premiums for new business. The FSC members are not going to blame themselves for this so we could be heading over a cliff anyway.
All in all the LIF has been a disaster and the FSC (AKA insurers) are to blame.
same thing happened in the uk, life insurance commissions back on. stupids were in charge, same as here
Plenty of stupids running this country for sure
These comments scare me… You CANNOT SCOPE OUT ADVICE because YOU SAY SO. If a client asks you to provide advice on something you have to do it or NONE of it OR find someone who you can directly refer that will… Yes I agree the exodus will be there and under insurance will be there, however the government have cleverly added in these can’t scope out advice clauses for EXACTLY this reason. Then throw in our best interest duty and code of ethics you really think you can operate in an I don’t want to provide that advice world?
Simple just quote them the $4,500 upfront fee for the insurance advice that it actually costs to provide this service and they will then tell you themselves that they want it scoped out of their advice! Problem solved.
Congratulations, you’ve just breached your best interest duty and the code of ethics.
100%, you cannot scope out of advice just because you feel like it. inappropriate scoping is a dereliction of your duty to the client.
i have been saying this for a while now. if you really understood the enormity of the obligations -and consequences for failing them – then you would be getting ready to exit stat.
the 4k advisers who have left are the smartest ones. many will follow once they have had a first breach of the ethics code.
for most advisers this will be routine.
option 1 : meet the client, i cannot advise, go elsewhere.
option 2: I can advise, the cost is $10k plus initial and $10k ongoing. client: sorry i can’t afford.
both: goodbye, nice to meet you
general public: what a mess
advisers : what a mess
government: this is all aok asic and fasea have it all under control, we just gave asic plenty of cash via new funding line
asic: fasea what’s the penalty for breach of the code of ethics, this will work a treat
fasea: ummm. yeah, 3 x penalty units for this and 2x penalty units for this, that’s great
asic and fasea and government: this is great and working, virtually no complaints
clients: i can’t get any advice, no one wants to give it to me
adviser: masters qualified ready to go, i can’t give any advice without breaching one of the provisions of the legislation or COE
afca; all the clients are complaining no one is willing to give them advice, that’s not in our remit, refer complain to ASIC
ASIC: i think we need to engage the advisers and the industry and bring in new simplified legislation
asic advice to government : this isn’t working as intended, it did in theory
5 years lost. thousands of consumers worse off, great result
told you so.
asic: fasea what’s the penalty for breach of the code of ethics, this will work a treat
fasea: ummm. yeah, 3 x penalty units for this and 2x penalty units for this, that’s great
asic: but there’s no one left to penalise and fill our coffers anymore????
Not true. That is a fair and reasonable costing for the work involved in providing FULL risk analysis, research, like for like comparisons, replacement tables, recommendations, SOA, 3 meetings with client(s), underwriting back and forth which can takes months, and final placement of cover while coordinating to cancel all previous cover that was replaced. Anon, you sound like more of a compliance person than an adviser?
I am an adviser, I have merely read my obligations. Yes you’re correct if you can prove the costs are fair an reasonable that’s fine. Not my point at all. However if a client comes to you and says hey I want advice on insurance, budgeting & superannuation and you decide to scope price insurance at $XX and they say no to it. How do you reasonably scope that advice out and provide advice in other areas? Superannuation holds insurance cover. You can’t then just ignore this, and you can’t then just provide limited advice because it was the clients original scope of advice. The government wants there to be ONLY holistic advice provided because any other advice is considered not appropriate.
I promise you, if you’re treating your obligations in this way, they will pull you down. In their eyes it’s tantamount to a doctor not providing a surgery they see can help a patient or a doctor prescribing something for an illness the patient has said they think they have and then ignoring the big rash forming on their body because they “didn’t pay for it”
yeah, and how are you fulfilling part b of standards 11 & 12. what just posting anonymously on this forum. that doesn’t cut it. you need to contact asic and report the breach or potential breach and co-operate with them to ensure the public is protected from this cowboy anonymously posting.
self reporting is fine. do it.
BREACH ! BREACH! BREACH! BREACH! YOU BREACHED
How is it a breach of best interest by quoting the client a fee that just covers the cost of providing the advice?
Are you the same person who thinks annual service agreements breach Standard 1 because they could be perceived as an attempt to circumvent Opt-In? I know you say you’re an adviser but you sound like an officious compliance bureaucrat. Perhaps your understanding of the law has been overly influenced by such people?
Do yourself a favour and undertake some independent study of relevant laws, including their history and broader context. You might be surprised how much it differs from the idiocy promulgated by compliance bureaucrats.
… Whoever said it breaches Opt-In is clearly incorrect. So no that wasn’t me, HOWEVER it doesn’t stop your annual Fee Disclosure which is designed to show what they paid for the year and also any services that weren’t met so the client is then entitled to a refund.
In relation to your second paragraph, I don’t even know where to start with that. If you can’t provide an example of why it’s wrong or an example of how you’re right then what were you hoping to achieve?
If you’re undervaluing the magnitude of these obligations that’s ok, good luck to you. However even with my anonymity here, I believe that if I even help one person to understand HOW this should be looked at then I’m doing a good thing. Please though, if you’re comfortable that your obligations don’t extend this far then go about your business. I know which fence I would rather sit on when a I get a knock on the door.
Only a compliance bureaucrat would think an FDS is still required with annual service agreements.
Lol a complainer beauraucrat?… Have you taken any time to ready the corporations act… every single industry in Australia has these same rules… If you don’t get provided a service you are entitled to a refund. The FDS is designed as protection for you and the client. Far out these comments scare me, you’re all meant to be masters of finance…
I’ll just leave this here as well for you..
https://www.afr.com/companies/financial-services/understanding-regulator-s-thinking-on-compulsory-powers-20200123-p53u11
Absolute waffle. Commissions are a sales incentive however where the difference in commission amounts in minimal then this incentive is largely removed. As usual, there is this misguided perception that we can “educate” clients so as to justify charging a fee. All that will happen is the insurance market will become more of a direct market in the same way as general insurances has done. This will result in worse outcomes for consumers as is being evidenced now with bushfire victims discovering that they are underinsured.
“23% of consumers say they can’t afford it” – All the FSC member insurance companies have been increasing premiums since the LIF at unprecedented rates and multiple times.
“23% say they don’t need it” – See above when they get hit with 30-50% increases over 2 years.
“21% noted poor value for money” – See above AGAIN.
And as for charging models – just another slanted, targeted and biased survey to try and cling onto the LIF rates which ARE NOT WORKING FOR EITHER ADVISERS OR CUSTOMERS.
Can’t see anything in the survey blaming the FSC, Metlife or other FSC members for poor outcomes and they are to blame more than anyone.
Yes, I’m sure it’s a result of advisers taking their clients for granted. Nothing to do with being mis-informed by the media et al. “prepared to pay $1,700 upfront”. Hilarious. I’m certain that would cover the cost of the SoA and all other associated work.
$1,700 does not cover the work needed anymore. I personally would spend between 10/15 hours, information gathering, having meetings etc, file notes, personal research. Throw in administration time for staff and also para planning costs I’d say close to 25 / 30 hours would go into the job in total. Increased minimum wages, increasing superannuation for employees. Tell me how $1,700 covers this cost?
I don’t agree, maybe if you’re a one man band and are doing really basic SOA’s then yes, but with the increased compliance we deal with and the associated costs of para – planning staff etc, this is going to be a real issue. if commissions are set @ 66% (or level at 33%) we will have a preset minimum premium for a “prospe3ct” to become a client, it gets easier if there is some investment / superannuation advice component to the process. we are targeting a risk only client with premiums in excess of $5,000 PA as an upfront .
the problem I have is that Government and regulator knew that the evidence they gathered to force LIF upon us was a fit up and that there was no serious churning issue (ASIC finally admitted that last year) so an expensive exercise in political posturing has cost thousands of jobs, sent advisers packing and pushed premiums up dramatically well done !