The Financial Services Council’s Life Insurance Conference held before Easter has brought the ‘incentive elephant’ back into the room.
On the day, former member of the Australian Prudential Regulatory Authority John Trowbridge highlighted the structural problems of incentive-based practices within the insurance industry.
For many, his comments have re-ignited anxiety in the belief that ‘Mum and Dad’ Australians will be worse off if all commissions were removed from all financial products.
While Trowbridge’s comments have sparked furious debate, his strong words are backed by Certainty Advisers, who are also calling for structural change to the industry.
The Certainty Advice Group surveyed their nationwide pool of financial advisers, with the following reactions:
· “I feel for those advisers who still regard their business success as dependent upon commissions. Good advisers realise that their clients are not buying products but relationships with providers of products. Many advisers still aren’t confident enough to uncouple their products and their pricing” – Certainty Adviser Troy MacMillan, TWD, Perth.
· “Driving this reaction is the perception by many advisers that their clients won’t see value in their advice. They then conclude that their clients won’t pay their fees for insurance, claims, underwriting or other needed advice” – Certainty Adviser Terry Powell, PF Private Wealth, Geelong.
· “Too many insurance agents and investment advisers fail to understand the opportunities available to them using engagement models based upon value.” – Certainty Adviser and Principal Scott Farmer, Bravium, Canberra.
· “We have worked hard to remove any real or perceived conflicts regarding how we recommend and price our advice. Our clients not only accept it, we know they find our approach refreshing” – Scott Girdlestone, Director of Wealth Advisory, William Buck Sydney.
Founder of Certainty Advice Group Jim Stackpool observes that the Trowbridge’s ‘incentive elephant’ is not unique to the insurance industry. “What’s different about financial services industries is the speed of converging changes caused by technology, regulatory reform and consumers demanding more value for money,” he says.
“Mr Trowbridge’s comments should be taken as one of the many opportunities for advisers as to how advice will be delivered in the future.
“It’s the confidence and sense of security that great advisers have always provided their advice clients. Shifting their remuneration models to better reflect the value they add is becoming more and more a necessity.”
