Research from Adviser Ratings has shown that the pure risk segment has dropped by 67 per cent in less than a year, while the volume of ‘high-risk’ advisers has halved.
“There are now 225 advisers handling a quarter of all in force in Australia — averaging $4 million per adviser,” Adviser Ratings said.
Meanwhile, the firm found that with under 16,000 advisers currently operating in Australia, 77 per cent are now writing little to no risk, compared with 60 per cent last year.
“While some advisers who wrote a high volume of risk have exited the industry, others have told us they’ve retreated from it due to remuneration changes, complexity or compliance issues,” Adviser Ratings said.
Advisers expect the Quality of Advice Review (QAR) to further exacerbate this problem. Namely, in her proposal, reviewer Michelle Levy said while level or capped commissions would remain, advisers would need to seek written, informed consent from clients if receiving them.
“If an adviser will receive a benefit for the sale of a life risk insurance product they recommend to their client, they should have an obligation to tell the client about the benefit and the client should have the opportunity to consent (or not) to the provision of that benefit,” Ms Levy said.
Since her recommendations came to light, advisers have posed many questions in relation to what additional obligations would apply in relation to disclosure, consent and ongoing services.
As such, last month, the CEO of the Financial Planning Association encouraged Ms Levy’s final report to “make clear that where these obligations are already complied with in relation to personal advice by a relevant provider, no additional obligations are required to be met”.
” If an adviser will receive a benefit for the SALE of a life risk insurance product they recommend to their client “……..
Ms Levy said ”
Hang On Ms Levy………isn’t it the case where advisers don’t SELL anything any more??……or that is what weve been told for the last decade that the word SALE is no longer acceptable and that we are professional advisers who assess their clients needs and put forward appropriate recommendations.
This is no longer sales, but advice.
So, tell me this:
The identification of the commission amount is noted within the SOA following many hours of work already completed.
The adviser cannot disclose this amount earlier because they haven’t completed their analysis and recommendations at the information gathering stage and therefore do not know what the premium amount will be until the final recommendations are made.
So, the client gets to the presentation stage of the SOA and agrees with the recommendations but refuses to pay the commission amount noted.
So, the adviser then tells the client they can provide payment by way of a fee which will be the same amount as the commission amount, plus, they will also have to pay the insurance premium withe the commission amount stripped out, reducing the insurance premium by approx 30%.
The client will now have to pay significantly more for the advice and the insurance product combined.
Can you please explain Ms Levy, how do you really want this whole thing to work ??…….or don’t you know ??
So that is the end of me writing insurance product recommendations. We will provide, type and amount and in what structure but no product advice.
Risk Insurance is dead. The removal of commissions was a shocking slap in the face. Bad legislation and compliance obligations, was the actual death blow and a solid kick in the head. FASEA and “riskies” refusing to do exams or have minimum standards was the final nail in the coffin. Don’t know any advisers offering it at all any longer.
LIF has been a raging success, said no one ever! What a mess the industry is in. What would be the state of the industry without the government intervening, I wonder??
The Risk SOA already discloses this information. So not only do we take on the risk of a two-year clawback period, reduced commissions and a copious amount of compliance documents and disclosures but now also have to possibly deal with additional compliance step- if approved I am leaving all risk advice once and for all. Congratulations on placing the final nail in financial advisory coffin.