Defining the differences in life
For the life of me, pardon the pun, I can’t understand why the powers-that-be appear hellbent on insisting that life insurance advisers study the same curriculum and sit for the same exams as financial planners.
Life insurance advisers do not create holistic financial plans. They do not advise on savings and investments. They do not prepare wealth accumulation strategies, pre-retirement strategies, transition-to-retirement strategies, living-in-retirement strategies or aged care strategies.
Life insurance advisers analyse the financial risks facing their clients should tragedy strike and find appropriate products to protect them against those risks. They also monitor and review their client’s situation to make sure that the protection put in place continues to meet their client’s changing needs. It is as simple and as difficult as that.
What are the consequences of forcing life insurance advisers to meet the same education standards as financial planners? The first is the most obvious. Most Australian life insurance advisers are currently of a mature age. They have been risk advisers for a very long time and have a wealth of experience. They also have considerable skills and great product knowledge. Most don’t have formal university qualifications.
Let’s consider for a moment who these advisers are, as people. Who amongst them, given their age, would or even could devote another three or more years to studying for a degree? Despite perhaps wanting to work into their later years, despite the Government wanting them to work past traditional retirement age, so that they don’t burden the social security system, these people will be forced out of the industry.
A rough estimate predicts 50 per cent of life insurance advisers will exit. Our estimates suggest 30 per cent of Synchron advisers will exit. All because the alternative is to study a curriculum and earn a degree that is largely irrelevant to the work they do.
But there is another consequence. After finishing school, how many 18-year-olds wake up and say, “Hey, I think I will go to university and study a financial planning degree so that I can work as a life insurance adviser!?”
I admit I haven’t conducted a survey, but I would hazard a guess that it’s somewhere between few and none. In the current environment, I think the industry has a hard time exciting young people to consider a career in financial planning and an even harder time exciting them to become a life insurance adviser. How much harder will it be when in order to specialise in life insurance, you have to study to become a financial planner?
Most young people are encouraged into a life insurance job after seeing an older family member or friend make a career out of it or have progressed from (as I did) working with a life insurer. But if, having not been able to meet the new education requirements, these advisers have exited stage left, there will be no-one around to provide this evidence.
What all this boils down to is that if existing life advisers are exiting out and no new advisers are entering in, consumers will be left with two choices – to buy products direct, without advice (and we’ve all seen the consequences of that from the Royal Commission) or to accept the level of insurance available to them via their superannuation funds, if they have them, again without advice. Insurance in superannuation might not be enough and might not include the kinds of products to meet their needs.
I have been criticised for my views on life adviser education and no doubt this article will provoke the same kind of criticism again. I have been accused of being a dinosaur, of having my head in the sand, of not wanting to move with the times. I am actually a firm believer in education, providing it is relevant and appropriate. I will never see the point of education for the sake of education. I will never see the point of subjecting advisers to an education regime that does not equip them to work with real clients who want life insurance advice and only life insurance advice.
The only sensible solution to the financial services education debate is to separate financial planning from risk advice. They are two distinct disciplines. It can happen and in the interests of consumers, advisers, the industry and Australia, I believe it must happen.
Don Trapnell is a director of Synchron.
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