The provision of risk insurance is one of the key areas where, unless backed by considerable resources, financial planners have to decide whether to take it on in-house, utilise the offerings of major manufacturers or enter into alliance arrangements with specialist risk advisers.
It is only when financial planning organisations can boast size and real financial muscle that the risk advising function can safely be taken on in-house.
A case in point is the recently-establishedCentrestonewhich, although focused on financial planning, also boasts strong risk advisory capacity.
At the time of launching Centrestone, its chairman, Malcolm Turnbull, said that while Centrestone’s business would focus primarily on financial planners, the acquisition of quality risk advisers such as P&A was also an important part of the strategy.
“We will be perhaps the first firm to have attracted both the best financial planners and the best risk advisers,” he claimed last year.
Nearly 18 months down the track, Centrestone’s joint chief executive, Michael Pillemer says the arrangement is working well and adding real value for clients.
“It is our view that where accountants can’t be expected to deliver everything, we don’t believe advisers can provide everything across the balance sheet,” he says.
Pillemer says a part of the secret to Centrestone’s success in marrying the risk advisory and financial advisory elements has been the level of confidence each side has in the other.
“It works extremely well because we’ve made sure there’s confidence in terms of referring clients,” he says.
ING Australiahead of risk insurance Helen Troup comes at the issue from a different perspective, arguing that tools exist to assist financial planners in fulfilling their obligations and that risk insurance is often “the glue that holds any financial plan on a solid foundation”.
Troup clearly sees the benefits of financial planners fully understanding and availing themselves of her company’s offerings.
Earlier this year, Troup claimed that the Financial Services Reform Act’s ‘Know Your Client’ rule had put risk insurance firmly on the financial planning agenda.
“Financial advisers have two options: do the bare minimum to comply with risk insurance compliance standards, or seize the opportunity to create a more complete service,” she said.
She claimed that in circumstances where advisers were finding it harder to get clients through the door, an opportunity existed to add value “with an established range of products that dovetail so appropriately with the financial planning process”.
By comparison, the principal of Laing Advisory Services, Sue Laing, has been an advocate of strategic alliances between financial planners and risk advisers.
Laing recently cited the example of specialist risk business, Australian Financial Risk Management (AFRM) which deals exclusively with clients of four accounting and three financial planning practices and has what she describes as “a strategic alliance formula that not only works, but more importantly, has secured its long-term business growth”.
One of the key findings in Laing’s analysis was that the relationships needed to be formally structured utilising the services of lawyers and with the terms of dissolution and other key provisions clearly spelled out.
Equally, her analysis suggests that the commission and profit-sharing arrangements need to be transparent.
The bottom line, however, is that all sides of the alliance equation have benefited with strong referrals and plenty of ongoing business.
