It was recently reported that of more than 300 risk advice businesses surveyed, most said they may be forced to shut up shop “partially or completely”, resulting in more than 700 job losses, if the recommendations of the Trowbridge Report on retail life insurance advice are adopted.
Business closures and job losses are really just a simple and inevitable result of the kind of structural adjustments that businesses and industries periodically need to make. We see it in all sorts of places, all the time, as our economy adapts to changing competitive pressures and consumer demands. There’s no reason why the advice industry should be immune.
I know a little of which I speak. The media business in Australia – in fact around the world – has undergone massive, fundamental dislocation in the past 10 years. Friends and colleagues have been put out of work, and some of them remain out of work, in journalism at least.
Many of them found other things to do, some going on to great success. Some didn’t, and for them I have a huge amount of sympathy. But I can’t alter the fact that the world changed, and the industry I work in had to change with it. Ten years ago these words would have been printed on paper and delivered to your front door in the early hours of the morning; today you could be reading this on a class of electronic device that didn’t even exist 10 years ago and which will probably be redundant itself before long. That has had – and will continue to have – profound implications for how the media business works.
Technology tore the heart and soul out of an industry that I love; and I have seen people I know suffering as a result. But in the bigger picture, the access to information that people enjoy today, and the many new and emerging ways it is delivered to them, has so many potential benefits that it was not only fanciful to think that the march of technology could be stopped to save some jobs in journalism, it was also incredibly arrogant.
It’s a fact of life that industries and occupations evolve and change over time. Some people win, some people lose. Some people figure out a way to make ends meet.
Seismic shift
The provision of advice in Australia has undergone a seismic shift of its own. The “old” way of doing it – and the old way of being paid for doing it – just isn’t acceptable any more. The world has changed, and the advice business has to adapt. It happened first in investments and superannuation; and it’s happening now in life insurance. The survey noted above is a typical and understandable response to early-stage industry change.
When the Future of Financial Advice (FoFA) reforms were first mooted, there were at least two lines of argument from the industry that bear a remarkable resemblance to what we’re hearing today.
First, if you’ve never worked as a financial planner/risk adviser (delete as appropriate) then a) you do not know what you’re talking about, and b) you have no right to participate in a public debate. And second, there will be massive job losses, the industry will be wrecked, and supporters of the reforms will have blood on their hands.
The only real detail I’ve heard about a reduction in adviser numbers comes from the Association of Financial Advisers (AFA), which says about 2300 advisers have dropped out of the industry over the past five years – about 460 advisers each year. This number was included in the AFA’s submission to the Life Insurance and Advice Working Group (LIAWG).
But it’s not possible to say with certainty from that raw number alone how many advisers were actually put out of business specifically by the reforms; how many simply weren’t that committed to the advice business in the place and quit when it became a bit too difficult; how many might have brought forward retirement plans by a few years to cash in before the rules changed; and how many would have left through natural attrition by now anyway.
More recently, the AFA declared that sorting out the grandfathering provisions of FoFA late last year meant that “smaller licensees will be able to grow their adviser numbers, new licensees will be able to launch and larger licensees will need to continue to compete to retain their existing advisers”. And the AFA president is reported to have said in February this year that the loss of 2300 advisers shows that “cultural change is well advanced and forces of behavioural expectations are effective”.
Competition might be OK
Sounds like competition might be OK in that area of the advice space after all; that some sort of culling of adviser numbers could be seen as healthy, if only to improve the culture of those remaining; and that claims of the advice industry’s imminent demise may have been exaggerated.
The noise currently emanating from the risk advice sector is understandable – when people see their livelihoods threatened, they react. Yes, there will be pain. Yes, there will be business closures and job losses, and the individuals worst affected requite understanding and support as the transition to new careers.
And yes, the sector will get through it and bounce back – arguably stronger than ever before, less conflicted than ever before, better able to command the trust and respect of the public than before – see the latest Roy Moran Research – and therefore positioned to meet Australia’s growing insurance needs better than ever before.
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