A risk-adviser sentiment survey conducted by Zurich has found increasing levels of optimism and readiness to adapt to industry reforms, although elements of its findings have been disputed.
The Zurich Risk Adviser Sentiment Index reported an upward swing in sentiment among financial advisers active in the Australian life-risk market, which it surveyed in December 2012.
Zurich says this was driven largely by improved adviser sentiment towards the current regulatory environment and increased optimism about the long-term viability of their practice.
The movement in the index is consistent with further findings from the same survey that approximately one third of advisers are “extremely” or “very” positive about their readiness for Future of Financial Advice implementation on July 1, while only 15 per cent indicated any negative sentiment.
However, FoFA’s impact on risk advisers is negligible compared with the broader industry. For many, the actions of the Financial Services Council (FSC) on standard remuneration terms and clawbacks may be more relevant if they see the light of day this year.
Questioning the findings
While Synchron director, Don Trapnell, a longstanding and vocal critic of the FSC’s vision for a new life-insurance framework, does not directly dispute the survey’s findings, he questions the broader implications.
“The Zurich survey seems to have included a reasonable sample of risk advisers but I would argue that while many are happy with their businesses, they are pessimistic about long-term sustainability in the current environment,” he told Professional Planner Online.
Conducted by Beaton Research and Consulting, the survey questioned more than 200 advisers actively writing life-risk insurance. Respondents were asked to indicate their sentiment across five key areas.
Trapnell added that while the “flight to risk” had undoubtedly created opportunities for new entrants to the insurance market, advisers could have their business models threatened by any policy that imposes a uniform remuneration model with uniform responsibility periods on them.
His comments are a reference to the FSC’s proposed clawback process in relation to upfront commissions, which would result in 100 per cent of the commission being paid back to the insurance company by the adviser if a policy lapses in the first year.
Defending the research, Philip Kewin, general manager of retail for Zurich’s life and investments business, said the index findings reflect a number of factors at play.
“These results show adviser sentiment to be at highest level since we started the survey, despite challenging economic conditions,” he said.
“I think we are seeing evidence that the FoFA readiness programs initiated by dealer groups and licensees are hitting the mark.”
Shoots of recovery
He added that the mindset of advisers has shifted from one of “how do I comply with this?” to “how can I use this as an opportunity to improve my business?”
“We are probably also starting to see the shoots of recovery in investment markets and this is helping make advisers feel more positive overall.”
Guardian Advice executive manager, Simon Harris, said the survey results were consistent with his own experience, adding that some of the optimism could be attributed to elections being held later this year. He added that while FoFA fatigue had been an issue in 2012, the reforms’ implementation was creating momentum across the business.
Regarding the FSC’s proposed changes to the insurance framework, Harris believes that has “gone quiet” for the moment, but he expects the debate to flair up again in the latter half of the year ahead of a speculated implementation date in early 2014.
When asked how long the positive trend in the index was likely to continue, Kewin noted that local economic conditions could have a bigger short-term impact on advisers than other factors such as regulatory changes or the looming federal election.
“Ironically, while the tide seems to be turning overseas, locally we are getting mixed signals about consumer spending and so there’s no doubt that the resilience for which advisers are famed will be put to the test,” he said.
“But this isn’t new news, so for them to be feeling upbeat against this backdrop shows they are up for the challenge.”
