The Trowbridge report’s recommended abolition of upfront life insurance commissions is unfeasible for risk-focused financial planners, according to the principal of a suburban Melbourne practice.

“The big risk in this is that the people who are most vulnerable will not get advice,” says Alex Braun, founder and principal adviser, Halstead Financial Services.

“There’s going to be a deliberate avoidance [to see these people] among advisers…[and] further pressure on underinsurance around the country, and of course the taxpayer will pay.”

Swapping shoes for risk advice

Based in Caulfield, east of Melbourne, Halstead focuses on providing risk advice to a broad range of client types. Braun started the practice – which is an authorised representative of the Suncorp-owned Guardian Advice, around 32 years ago, after selling a shoe retailing business he operated alongside his wife, Susanne.

Halstead is a similarly family-driven operation, with Braun senior employing his daughter Sandra and son David as authorised representatives. Another sibling, Andrew, is an external medical specialist – a vocation Braun says is “helpful when we compare medical definitions in trauma insurance policies”.

Braun believes fee-for-service remuneration models and life insurance advice are fundamentally mismatched. He points to the high weighting of work by the adviser in the lead-up and during implementation, and also in the event of an insurance claim by the client.

In order to make the sale, Braun says he would generally have to see the client at least three times to cover off the fact-find and general conversation, client research and to draft then explain a statement of advice (SoA).

“We don’t charge for an SoA, or for claims. This is what’s forgotten [in fee-for-service models]. We do a lot of work for nothing in the initial stages, and then we also do a hell of a lot of work on claims management,” Braun says.

What keeps you awake?

Braun gives a one word response to this question: litigation. He explains his practice currently has a Financial Ombudsman Service (FOS) claim against it, though says this is not a cause for concern.

The FOS claim has arisen from a small insurance book of business Halstead purchased in 2012, with the client dispute dating back to 2011, before Halstead had any involvement.

Braun says his concerns about litigation are not related to any personal experiences from Halstead, but instead stem from his commitment to solid compliance processes. Despite conducting all due diligence to ensure his clients are a viable candidate for any life policy, he says he always assumes a worst-case scenario to ensure all bases are covered.

“My first priority is to make sure that I do everything within my professional power to make sure that if this guy has a claim, this policy will serve him. And I shouldn’t have to go and see them in 10 years’ time [if there is a claim lodged] and say ‘I’m sorry…but the policy will not be paid,” Braun says.

“What happens if, indeed, there is a problem? I want to make sure it’s not my fault. I don’t want to be sued.”

Is insurance industry advocacy working?

Braun reveals he is a long-term member of the Association of Financial Advisers (AFA), which joined forces with the Financial Services Council in forming the Life Insurance and Advice Working Group that oversaw the Trowbridge report.

“I’m just curious as to why they got involved in initiating it.” he says.

“I’m a very longstanding, passionate member of the AFA, but perhaps they should have taken note of the old legal adage, that a barrister should only ask questions when he or she knows what the answer is going to be.

“Obviously the AFA realises that there are lots of things that can be improved. They want to protect the interests of their members, but at the same time they also want to make sure consumers get a fair run for their money.”

Glenn Freeman is a senior journalist for Professional Planner. He has around three years’ experience in financial services journalism, having also covered broader areas of business including M&A activity and energy. His journalistic experience includes five years spent abroad, where he was editor of an oil and gas title in the United Arab Emirates along with other in-house and freelance projects, which included stints in motorcycle and automotive journalism.
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