Who Will Shape the New Reality?
One of the privileges of being a journalist is being paid to look at past events to understand those in the present. As each year closes, consideration is given to what kind of year has just passed and what impact it will have on the life insurance sector in the years to come. It would be fair to say 2016 has been a mixed bag for advisers with change creating resistance, uncertainty and opportunity – often at the same time.
The on-off-on status of the Corporations Amendment (Life Insurance Remuneration Arrangements) Bill 2016 did little to settle nerves but did generate two opposing views around the future of financial advice, commissions and the consumer benefits intended by the legislation.
The first of these views is that under the Life Insurance Framework (LIF) reforms, the current model of commission-driven advice will be damaged, resulting in reduced income for advisers and driving up the cost of life insurance and related advice. LIF is therefore a threat to advisers and consumers and should be resisted and rejected.
The other view is that LIF is a fait accompli and advisers can work around it, adjusting their businesses via new models and approaches. Under this view retail advised life insurance will continue well into the future, providing the same protections for which it is renowned.
Which view is correct may depend on the business model you use and your willingness to stick with it or to look at alternatives between now and 1 January 2018.
The German physicist Albert Einstein is reported to have said “We can’t solve problems by using the same kind of thinking we used when we created them”. This is a sentiment with which many advisers will agree, but they would also contend they did not create the problems that Government is trying to solve!
Yet, the reality of LIF is that change will need to take place and advisers and licensees are being left to their own devices as to how they will accomplish that shift.
There is a danger here, that if the advice sector extrapolates forward using only today’s solutions, the future will always look grim. If we plan to do what we have always done, then we cannot expect a better outcome when things around us change. And change is a constant. All advisers know this – products, processes and laws change – and the advice sector has survived by changing with it.
2016 will be the year the life insurance sector – both advisers and life insurers – were reminded that change is ever present. While it may not be wanted or welcomed, holding onto the past in the firm belief that this reality is the best reality is not an option.
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