Life/risk changes short-term pain, long-term gain

Advisers could expect to be paid more total commission than is currently the case under the new life risk reforms but should brace themselves for short-term pain, according to Asteron Life.

The firm's executive manager, Mark Vilo, said while emotions had run high among advisers, the proposed remuneration changes, which come into effect from 1 January 2016, could boost their business.

But he warned there would be short-term challenges as they transitioned away from higher upfront commissions and adapted to new clawback conditions.

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"Advisers who see life risk as a long-term business proposition will benefit from reform, which can increase the value of their book over time," Vilo said.

"However, there will be a few leaner years from a cash flow perspective as they adjust to new conditions."

His comments were based on the launch of a remuneration modeller by Asteron Life, which estimates the effect of the remuneration changes.

Vilo said the modelling showed advisers would be paid more total commission than they currently received.

"We have every reason to feel optimistic about our industry's future," he said.

The modelling tool asks questions about an adviser's new business, in-force premiums, number of clients, remuneration types, and lapse rates. It then forecasts revenues and lets advisers measure the effect of different clawback scenarios.

The comments were in line with those made by the Association of Financial Advisers (AFA) last month, which said life/risk advisers who had moved to the new hybrid remuneration models saw better recurring cash flows and business valuations.

Investment Trends research showed many advisers had already started moving to the new remuneration model, with many diversifying into holistic advice to cushion themselves from the impact of the chnages.

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How condescending. An insurer whose CEO was apparently one of two prominent figureheads seeking NILL commission for risk has the gall to tell us there might just be some short term cash flow issues for risk advisers. Quell surprise !!

Mr Vilo should be quivering his boots. Not only are established risk writers looking to leave if sanity does not prevail, the flow of NEW ADVISERS , some of whom may seek to look to buy the books off departing advisers ( which helps keep Asterons book in force ) will dry up

A few weeks ago I shared a table with some young advisers who finally were shown the full impact of commission cuts and Clawback , and were appalled and horrified. One who is "employed " as the risk writer for a planning business suddenly realised that if her 60% FYC (post 2017) was distributed to her on her current split she was better off at home with children, or working in retail.

The sheer stupidity of insurers who advocate FYC cuts to get a short term cost decrease, but fail to see the long term impacts on their business, frankly boggles me. The days of insurer executives who could see past the next career change and look, as they should, to their business in 10-20 years are apparently long gone, replaced by folks with a bank mentality where next years bonus is the only thing that matters

God help us and our clients best interests

Mark, I thought the issue here was about poor quality of advice? Advisers don't need a 'modelling tool', they need insurers as business partners who demonstrate mutual respect for the benefits we each bring to the consumer. We provide the strategy and advice - and give your product an opportunity in the market place. Would you please explain Asteron's position on exactly how the LIF 'reforms' will benefit the consumer. What is the direct correlation between reduced commission and increased clawback terms and improved quality of advice?

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