Speaking at the FAAA Congress in Perth on Tuesday, general manager of policy, advocacy and standards Phil Anderson said it is vital that advice firms have a plan for providing risk advice to their clients.
“There was recent report released by CALI had said there are now 185 risk specialists, which is a very, very small number left in the country, and other suggestions that there’s around 600 advisers that are responsible for at least half of the risk business that is done,” Andserson explained.
“That’s really concerning. If those numbers are so small, advisers need to ensure that they either have a risk adviser in the practice or they have a referral model to get someone else who can provide the risk advice.
“This is a growing area of risk that clients, if they have a financial adviser, they incur an insurance event when they don’t have cover, and they argue that their adviser should have given them cover. Well, that’s something that’s a risk that needs to be managed.”
In CALI’s The State of Australia’s Safety Net report, the insurer body found that just under half of working Australians are looking for “personalised information to help them decide on life insurance coverage and suitable products”.
Around one-third (30 per cent) of working Australians who have insurance are seeking comprehensive financial advice, while 24 per cent just want basic information, the research found.
“Working Australians who do not currently have life insurance are more interested in basic information (37 per cent),” CALI added.
“Currently, there are less than 600 financial advisers who focus on life insurance in their business, with just 185 pure risk advisers currently operating in Australia. This limited supply of advisers underscores the urgent need for reform to make it easier for advisers to support their clients, and to allow product issuers to provide limited advice to their customers.”
According to Anderson, there have been a range of factors that have disincentivised financial advisers from practicing in the risk space.
“I think the LIF reforms and the changes that came as a result of that has been a really big contributing factor,” he said.
“I think product complexity has been a big factor. I think that when they when APRA made the changes to the income protection products, and everyone had to release new products, understanding those products and the changes was really difficult.”
This also extends into the realm of life insurance premiums, with Anderson noting that the FAAA has been a “strong advocate against” the practice of upfront premium discounting.
“We’ve also seen large premium increases. So, advisers working with risk clients are spending so much more of their time trying to hold on to their existing clients and work with them as they confront very large premium increases,” he added.
“It’s become a bit of a vicious cycle that premium increases lead to clients choosing to reduce their cover or cease their cover, and then there’s just not enough new clients coming in, and that means premiums are going up as well.
“So, it’s a really important advocacy space for us. We need to stay focused on the risk market and make sure that clients have access to risk solutions.”
From my perspective, I would like to see us change the focus of this discussion.
I can’t see ASIC or any Government of the day throwing their hands in the air and saying – we were wrong, we f**ked up with the LIF changes, given that only between 600 and 15,500 Australians would benefit directly from this mea culpa.
What is more likely (and what I would like to see) is a change to the operating environment where it was profitable to provide advice under the current regime. Difficult but possible…..Not holding my breath but living in hope.
seems to be a lot of complaints to go back into paying a larger fee as compensation – can’t see that happening although it is fair to acknowledge that fees to cover claim handling etc is a very big challenge.
Observation is that Cali sit on the sidelines simply doing research to confirm the bleeding obvious and very little else.
Observation : all risk advisers and all planners can make use of digital advice technology that enables the client to assess their own needs with no cost to the adviser… but then passes the Soa over to the adviser to check and implement as the case may be. Obviously the product selection bit is critical which is what digital doesn’t do.
Otivo and GPS ? – How many advisers are bothering with this ? almost none and likewise, none of the insurers seem blessed with the vision to use the same technology to help advisers either. Extraordinary.
It funny how the rest of the world, with its outrageous commissions and lack of best interest duties, safe harbour steps, alternate strategies considered, better position statements and all that related hoopla, seem to be running sustainable insurance industries with good outcomes for clients…
Also, when you fix this Phil you can then inform Government and Canberra that FASEA and banning of Grandfathered revenue was also a bad idea supported by the FPA/AFA in conjunction with FSC with then Minister O’Dywer and it should be rescinded. Can’t give you credit for the CSLR disaster that lays exclusively with your mates at the FSC…
Well said ‘Not Interested’ and Peter Johnston, we all remember Asteron’s assertions that it was all the advisers fault and ‘churning [twisting actually churning a mortgage broking banking term]’ was rampant and destroying the industry.
LIF promised lower rates and better coverage for clients and less commission meant more profit for all the insurance companies, where avarice steered their actions, and they were happy to go along with the reduce commissions movement! How’s that going for you?
Phil needs to understand the concept of ‘Advice Scope’ ………….. it’s all the rage with Compliance Managers.
Remember the Better Brakes advertising from back in the day Phil ………….’We don’t fix engines …… we just fix brakes’.
We don’t do Risk ………….. just superannuation or investment ………… what ever the case may be.
The Thai’s have a wonderful saying Som nam naa, which depending on delivery means a couple of things as you well imagine, but usually ”Serves you right’ ……….. how appropriate when you see and hear now from the very people at insurance companies and associations who devised. promoted and or enabled the catastrophe.
So we have to put clients into unsustainable products in case they decide to sue us down the line for not putting them into said unsustainable products, even though lapse rates are through the roof and no one knows when the next big premium increases are coming.
All righty then
Then get complaints for crazy premiums impacting retirement . We can’t win here
Speaking at the FAAA Congress in Perth on Tuesday, general manager of policy, advocacy and standards Phil Anderson said it is vital that advice firms have a plan for providing risk advice to their clients.
Why should I Phil?
Phil I lost all interest in writing new risk business when a massive pay cut was forced upon advisers with the con known as LIF.
Unless that changes back to similar terms pre LIF I like many of my colleagues will remain out of the risk insurance space no matter what you might tell us to do.
Perhaps a far better idea to see an increase in new risk business would be for you
and your FAAA colleagues to continually advocate for a return to pre LIF brokerage and claw back terms on behalf of your members.
No matter how much you ask Phil nothing will change until incentives return. The solution is so simple it’s just getting the bureaucrats
to act that is the problem…
Perhaps Phil should have thought of these issues 10 years ago when [as AFA head of policy] the AFA/FPA and FSC backed Minister O’DYWER to legislate the LIF outcome….such hypocrisy and audacity, it just beggars’ belief.