In a statement released to the market on Wednesday, ClearView said underlying net profit after tax in its financial advice arm had risen by 127 per cent to $2.3 million during the 12 months to June.
Net financial planning fees received by ClearView had also risen 6 per cent to $18.1 million over the financial year, the group said.
A total of 212 advisers were now licensed across both the ClearView Financial Advice and Matrix Planning Solutions dealer groups, while a further 52 advisers were using the group’s B2B offering, LaVista Licensee Solutions.
“In 1H2020, the dealer groups implemented a new remuneration and fee model, designed to create a fairer, more sustainable revenue base,” ClearView said.
“The successful implementation of the new pricing model resulted in a $1.5 million increase in membership fees, including a contribution of $0.4 million from LaVista.”
The group flagged it had also outlaid $2.1 million in remediation costs over the 12 months to June as part of an adviser file review.
In its life insurance business, while the group had expanded the number of APLs its products were available on and increased in-force premiums by 7 per cent during the financial year, poor claims experience saw underlying net profits plummet by 53 per cent to $10.4 million.
ClearView said it had made “material changes to claims assumptions” as of 30 June, as well as changing premium rates in April.
The group also noted a “significant improvement” in lapse rates in the second half of the financial year, and said it expected its investment in technology and innovation within the insurance space to “support medium to [long-term] growth”.
Always great to see how these vertically integrated businesses are faring.
Some points of note for me:
– Looks like a 62% increase in net claims, with a 21% increase in reinsurance expense.
– 20% reduction in commission/other variable expenses.
– 52% drop in profit on the insurance book.
The FP fees is an interesting one – and I’ll stand corrected here – but from what I can tell, dividing the $18.1m across the 212 advisers is an average fee of $85,377 per adviser (slightly lower if you strip out La Vista).
Given that total Financial Advice revenue was $116m, an $18.1m profit suggests a 15.5% take to the licensee?
Puts a different spin on the line quoted above and found in the section about Financial Advice fees: “…representing a fairer, more sustainable revenue base.”
If anybody thinks $85,377 per adviser is fair for anybody except the licensee, then something is severely broken. Even half that much indicates a broken system.
How this mighty tariff isn’t being targeted as part of the push to make advice more affordable is beyond me.
Lets not forgot the $2.1m increase in remediation cost. Nice spin but don’t buy it.