The preparation of a statement of advice by a life/risk adviser can cost anywhere between $550 and $1,500 take anywhere between five and 10 hours, according to the Australian Securities and Investments Commission (ASIC).
Answering questions on notice from the Parliamentary Joint Committee on Corporations and Financial Services, ASIC said that based on information it had received from advisers, “a simple life insurance statement of advice for an average family could take anywhere between five to 10 hours to prepare.
“This estimate takes into account the time required for the first meeting with the clients, research, data entry, applications, administration and the presentation of the advice to the clients once the statement of advice is prepared,” ASIC said, noting that the estimate was “a very general one, as there are many variables that may affect the time need to prepare advice”.
It said some examples of those variables included whether or not the clients had existing products, medical issues that might require specialist underwriting or unusual high risk occupations that may need to be individually rated.
“Most life insurance advice is remunerated by commissions paid to the adviser (or the licensee) by the insurer. In REP413, we found that over 80 per cent of remuneration was by upfront commissions, with an upfront commission of 100 per cent to 130 per cent of the new business premium and an ongoing commission of around 10 per cent of renewal premiums,” the regulator said.
“Where advisers use a fee for service model, for the simple life insurance statement of advice discussed above, information we have from industry indicates a range of charges for the preparation of the advice, from $550 to $1,500, largely dependent on whether or not a para planner was engaged to assist with the preparation.”
“In some instances the adviser would charge a fee if the client did not proceed with the advice, and waive the fee and receive commission if the life insurance was purchased. Some advisers use a mixture of fees and commission for remuneration (a hybrid model).”
ASIC said the amount an adviser earned per hour, was “affected by many variables that would need to be considered such as software leasing costs, office expenses, insurance, tax and other overheads etc., and these would vary from adviser to adviser”.