Highly successful risk specialist adviser, consultant and author, Chris Unwin, says the time has arrived for advisers to address the potential for a fee-based remuneration model for life insurance advice…
Since arriving in Australia from the UK in 1989, the world of risk advice seems to have operated in 10-year panic cycles! In the mid-1990s, compulsory commission disclosure was introduced for life insurance business. Many insurance advisers threw their hands in the air and moaned “I don’t want to have to tell my clients how much I earn!”, and I used to tell them “Well don’t then!” They would respond “But I have to tell them how much I earn – it’s the law now”, and I would say “No – you don’t have to tell them how much you earn. Tell them how little you earn!” If advisers considered they were being overpaid for the value they represented to their clients, then I would recommend that they left the business. Personally, I have always thought that I have been considerably underpaid for the value that I represent to my clients in the risk advice space.
Then in 2004, FSR came in, and this was the culmination of 10 years’ worth of focus on education, technical knowledge and compliance (probably not before time, granted) for anyone who joined the industry during that 10 year period. In addition, FSR added a legal obligation to the ever-present professional obligation to do the right thing by the client in the personal protection space. The result was that, even though most advisers had good intentions around satisfying their clients’ insurance needs, they had no methodology (certainly no client friendly methodology) for doing this. That is why I started my consultancy in the same month that FSR came in!
In the ten years since FSR was introduced, the life industry has had to focus largely on new regulations, increased compliance requirements, more documentation and having to do by law what the large majority of advisers were doing already as a matter of course. Now, to put the icing on the regulatory cake, we have the ASIC Report of October last year, the Trowbridge Report and the new Life Insurance Framework, with the resulting changes in commission structures, which I believe signal the eventual removal of commission based remuneration in favour of a fee based remuneration for risk advice. It’s just a matter of time.
the end is probably near for those that are simply completing transactions and flogging insurance products
The sad thing is that these recent changes have prompted quite a large number of people in the risk advice space to preach a ‘doom and gloom’ future for risk advice, especially for specialist risk advisers. My view is that it presents the biggest opportunity this century for QUALITY risk advisers, but I have to agree that the end is probably near for those that are simply completing transactions and flogging insurance products. If you had to differentiate between the two camps with only one word, that word would have to be “VALUE”.
Client engagement skills have been on the back burner for far too long in the life industry, and those advisers and licensees who don’t bring them back into focus quickly will find it harder and harder to differentiate themselves from the online, phone and robo-advice alternatives.
Advisers need to increase their capability dramatically to develop and nurture more meaningful and lasting client relationships. We need to act immediately to fine tune our client engagement skills, create and deliver greater value in our advice process and learn how to communicate that value more effectively. The time has come for both advisers and licensees to invest in securing their future by helping those at the coal face adopt a more client friendly engagement process that creates, in turn, a more positive perception on the part of the client, thereby opening the door for a fee based remuneration model.
Chris Unwin is a financial adviser of 37 years standing and has been a specialist risk adviser for the last 22 years. His training and consulting business has operated for 12 years and it specialises in helping advisers across the full spectrum of experience with their client engagement skills, both in the risk advice specific space as well as in the more generic soft skills space.
Chris is running full day Risk Workshops around the country in November that focus on Creating, Communicating & Differentiating Your Value Proposition. Check the riskinfo Calendar for dates and you can also contact Chris for more details.