Synchronous director Don Trapnell told ifa that the risk for new business of the dealer group in the 2020 calendar year had fallen from 23 million USD to 19 million USD, as educational standards and restrictive remuneration levels had contributed to the continued withdrawal of risk specialists from the consulting sector.
“We have a problem with fewer and fewer life insurance advisors staying in the industry,” Trapnell said.
“At the moment our politicians and regulators have said we have a problem with consulting costs in this country and the panacea that is being offered is scaled consulting. Perhaps the panacea that should be offered is a look back at the LIF scenario and a look at the compensation model of life insurance advisors.
“If we want to reduce the cost of advising consumers, we need to be able to create a workable business model for the adviser.”
Mr Trapnell said ASIC, when reviewing LIF commission settings, needs to consider comparable overseas markets, where risk advisory commissions have been set at a much higher level and default rates have remained similar to Australia.
“There are two markets in the world like Australia – the UK and New Zealand have similar sales structures and products to Australia,” he said.
“The UK commissions are between 200 percent and 110 percent and the New Zealand commissions are between 180 and 120 percent. Australia’s are 60 percent. So if LIF’s premise is that high commissions lead to bad sales practices, one would expect the failure rate of New Zealand and the UK to be twice the failure rate of Australia.
“The national cancellation rate in New Zealand is 14 percent and the national cancellation rate in the UK is 13 percent. Australia is the same, so the basis for LIF was based on a lie.”
Mr Trapnell said the separation between what consumers were willing to pay for life insurance advice and what the advisors had to charge has kept the Australian middle class from getting insurance.
“Consultants move away from all cases under $ 3,000 to $ 5,000 – – You just can’t afford to give the advice, while before it didn’t matter how big the advice was because the averages were taking care of themselves, ”he said.
“Our regulator and minister explain that advisors need to start charging, but the split is that consumers are happy to pay between $ 0 and $ 300 for advice that costs between $ 3,000 and $ 5,000 to provide. So the divide is too strong and the answer is to convert the compensation into something that is workable for the advisor and for the consumer.
“We have a problem”: The dealer group’s risk revenue drops by USD 4 million
Last updated: April 19, 2021 Published: April 19, 2021