Ongoing need to educate clients on value of advice

There is an ongoing need for financial advisers to demonstrate their value by educating clients on the benefits of the service, according to a report.

MetLife’s latest report on the value of life insurance found there was still confusion around the value of expert financial advice.

The report found 40% of consumers thought life insurance bought through an adviser was more expensive than a policy they could buy directly online or through a superannuation fund, and one-third of consumers believed the product was better quality.

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“This is especially critical given three-in-10 consumers and five-in-10 small to medium enterprises reported they were considering either changing their current adviser, or ceasing to use one completely, citing high premiums, lack of affordability, no ongoing need for insurance or a lack of communication as their top reasons,” the report said.

“Understanding of life insurance also remains low among consumers and SMEs.

“The research found consumers and SMEs were willing to pay an average upfront fee of $1,700 for insurance advice. This is below the average cost to deliver quality financial advice, suggesting there is a critical need to retain commission-for-advice to support affordability and accessibility for Australians.”

It said to counteract this downward trend in the perceived value of financial advice and life insurance, advisers could educate their clients on what they did and how they added value.

“Building trust is also key, so that clients equate the value of the advice with the value they receive from the financial products purchased,” the report said.

The report noted that reducing commissions would push up the direct cost of advice to consumers which would reduce access to quality advice. This would in turn could lead to:

  • Relying on off-the-shelf insurance products;
  • Consumers with lower economics means would lose access to advice;
  • Most customers would not pay upfront for advice if the product was subject to an underwiring process and that could lead them to being denied access to the product;
  • Consumers on claim would lose support of their adviser during a difficult time;
  • Underinsurance rates might increase; and
  • Financial adviser businesses might become unsustainable.

“While different payment models apply around the world, no country that has a strong, voluntary, stand-alone life insurance system has banned commissions. The removal of commissions on life insurance in Australia would be a global first,” the report said.

“For all these reasons, MetLife firmly believes that consumers should have a choice of how to pay for life insurance advice; either fee-for-service or via commission.”




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Too many consumers believe that the products recommended by advisers are just direct retail products with a commission on top. Insurers need to differentiate their advised products by prominently labelling them as "wholesale" or "specialist". This would help emphasise the fact that consumers are getting preferred access to a superior product.

Prepared to pay as much as $1700?? I surprised by this, most clients think they could do it themselves on the internet and be blissfully ignorant of some the complexities of the differences in contracts. I can't believe an average client would be willing to pay this much, despite it being below cost.

Under Hayne2, we will now only deal with the one third. The other two thirds will remain uninsured or left to the legal vultures. Sympathy factor - zero. Not my problem any more

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