LIF –What is Your Truth?
What is the truth about the impact of the Life Insurance Framework provisions on adviser remuneration?
One answer is that there are as many truths as there are advice business models. That is, the changes contained within the Framework will have a different impact on each advice practice because every business is unique. And the same adjustments that an advice practice may make in response to the impact of reduced commissions and extended clawbacks will have a different outcome for other businesses for the same reason.
Until the transitional hybrid commission and clawback provisions have been plugged into their business model projections, advisers won’t be able to accurately determine the extent of their impact.
The argument that everything will be ok in the end because renewal commissions will effectively double over time for those practices using the current upfront commission model (favoured by most risk advice businesses), has been countered by many advisers who have declared that interim cash flow issues will render their business incapable of maintaining their viability through the transition period to when the additional renewal income stream starts to make a difference.
There are other advice business models, however, who have projected they will be able to survive through this interim period and emerge stronger under the new provisions. It doesn’t mean they like the idea, but they are saying they think they can make it work.
At the licensee level, I can’t help but pivot to the thoughts of two of Australia’s leading independently-owned risk focussed dealer groups, who say they have done the numbers and believe the current LIF provisions can ‘work’ for them. Again, this doesn’t mean they like or support the provisions, but from a purely business perspective, they say it can work.
One of those licensees is Synchron. In this edition of riskinfo Magazine, we have revisited Synchron’s business, five years down the track from our first profile of the country’s largest non-aligned risk focused dealer group.
Synchron’s LIF number crunching delivers an outcome that they believe is not ‘disastrous’ for risk-focussed advisers. And these numbers were crunched prior to the paring back of clawbacks from three years to two.
As I said at the beginning of this commentary, however, there are as many truths about the impact of the Life Insurance Framework provisions as there are advice business models. When you step away from the sometimes deep emotion associated with the LIF debate, which is a very difficult thing to do for many advisers, and focus just on the numbers, what is the truth for your business?
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