Acknowledging the widespread views on risk advice, financial adviser and director of Skye Wealth, Phil Thompson, argued that while holistic or generalist advisers are highly likely to struggle to provide risk advice, specialist advisers should not suffer the same issue.
“I understand it seems to be unprofitable, but I think it’s a great part of the industry that more advisers should consider specialising in. I think if you dabble in it, you shouldn’t be doing it at all. You should refer out to a specialist,” Thompson told ifa.
“If you specialise in it, it’s not unprofitable.”
He explained that one of the primary challenges for generalist advisers, when they do engage in risk advice, is navigating the complexities of the system without the benefit of experience that specialist advisers have.
“The reason why it’s unpopular and seems to be unprofitable is because, if you’re not doing it all the time, when you see a medical disclosure, we see and we know pretty well that it’s going to be an exclusion, so we’ll tell our clients on fund that it’s going to be an exclusion,” Thompson said.
“We don’t let the insurance company make the assessment, put the exclusion on, and then come back to the client, and that’s where most advisers kind of get frustrated with insurance. It’s harder than it’s ever been.
“But in our business, because that’s all we do, we can identify, ‘Hey, this is what needs to improve. We need to tell the clients upfront what the likely terms are before they go ahead with an application.’ So, all of those things, we can be very quick and make these improvements and adjustments, because we’re doing 100 applications a month.”
In addition to this, because Skye Wealth only provides risk advice, Thompson said they are able to “hyper focus” on ensuring their processes, and the business as a whole, are as efficient as possible.
“When it’s insurance, we know our clients start the same and they end in the same place, assuming they go ahead with it all. So, the company that we work with, from an insurance point of view, makes very little impact on our process. The sum insured makes almost no impact on our process,” he said.
He further explained that because his business specialises in younger clients, the average age of which is around 34, and the large majority of the advice profession prioritises pre-retirees and retirees, his business is well placed to service the relatively underserved client pool.
“We’ve been very fortunate that, as a lot of advisers are leaving that space, there’s a lot of clients who need insurance advice,” Thompson said.
The future of Skye
According to Skye’s 2023–24 financial year results, the business completed just shy of $3 million in total new business premiums, helped 765 new clients get risk insurance, and saw more than $1.4 million in total claims lump-sum benefits, with a policy lapse rate of around 2 per cent.
Showing his confidence in both his business and the risk industry, Thompson explained that he is currently working towards the ambitious goal of being the top licensee for new premiums written in Australia for FY26–27, exceeding $10 million in new business premiums, serving a projected total of 3,500 to 4,000 clients.
In order to achieve this, Thompson is now looking to expand his team considerably, with plans to bring on 10 new advisers or associates and 20 new support staff over the next 12 months.
While he recognised that comprehensive financial advice can be seen as a “luxury item” because of the cost, Thompson suggested that while insurance and risk advice still come with their costs, it is crucial for protecting the financial future of everyday Australians.
“Insurance is something we all need. It’s super important to reduce the risk of any downside impact on our wealth goals. So, everyone needs it. Everyone needs to make that purchasing decision and make it a really thoughtful purchasing decision, because it can be really important when you need it,” he said.
“That’s really what we serve, and it does mean that our business has to be a volume business. If we brought on 10 clients a year, we’re going broke very quickly.
“So, it does mean we need to attract a large amount of clients into our business, and we are just hyper focused on building out our processes and making sure that every process is really efficient and effective and helps our clients get insured in a reasonable time frame.”
Good on Phil for identifying an area in the market that had a gap. That is a lot of new clients receiving cover and it sounds like Phil is doing things differently to the Norm. Good on him for having a go.
I do however think the lapse rate is probably not a true reflection yet. If the business is only relatively new (in comparison to larger licensees and businesses that have been operating for 20 plus years, the lapse rate to me is a little redundant. If most of the policies have only been set up in the past few years, I would expect a low lapse rate. I would be concerned if it is higher.
I would love to delve into this practice more to understand some of the below
– Salary and bonus structures of these advisers.
– Is Phil the AR being used for all applications written or do each of these advisers have their own AR?
– Cost to serve broken down
– How do they manage inforce clients? Is there a process for this? Do they manage these clients and how? As a smaller business, I am intrigued how Phil and his team manage to review clients each year when that many clients are coming in each year.
All great to see in this industry regardless!
That’s allot of “risk” (with so many staff) to be taking on for an average Directors wage.
6mil of revenue, less 10% GST, less business running costs, less allot of salaries, PAYG, FBT, Bonuses and super. I’m sure there’s an easier way to make an average wage, in fact I bet there’s many one man bands out there earning more than this guy. Sorry, not sorry.
Obviously building an asset for sale, but after all that time, effort, sleepless nights etc be worth it and will anyone want to buy it?
I sleep like a baby every night. Thanks for your concern though haha
Interesting article… this is all about having a systematic business model. Risk insurance advice is incidental. Most advisers know how to manage client expectations and we all know the axiomatic challenge of dealing with underwriting and obtaining cover. Still, not convinced that reducing commission has been of benefit… to the insurers. Next time, insurers, think consequences when trying to squeeze the life out of us advisers.
Of course it’s going to be profitable when the incentive at play is to load people up with tonnes of cover to pad out commissions.
After 38 years’ “selling” risk insurance, I’m still waiting for a grieving widow to say that she received too much claim payment.
So the Director or a risk specialist thinks you should refer risk to a specialist…..right! Of course risk advice is profitable, if it’s not then you’re doing something wrong!
So is it fee for advice or commissions-based?
I believe they do both, a fee for the initial advice plus commissions.
Life Insurance Advice Specialists are better placed to implement financial protection strategies COMPETENTLY
aren’t all advisers supposed to be competent?