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Australia: another study shows people are better off with advice

According to anew report issued by Russell Investments in Australia states that financial advisers add at least 4.4% or more every year to clients - and a total of about $560,000 better off overall. Rather than see this as another shot-fired in the 'active' versus 'passive' debate, I prefer to focus on the behavioural aspects that financial advisers bring to the relationship - that applies to risk management, to insurance, to home loans advice, and debt repayment, and holistic financial advice. Readers will know that I am made keen on technical aspects of our industry: policy comparison especially, but also financial performance, price, underwriting, and digital advice. All these matter, but the central territory for advice is helping clients change. 

The study worked with a number of advisers from US, Canada and Australia for the past 20 years and identified five key areas of financial advice in the report: annual rebalancing, preventing behavioural mistakes, planning and additional wealth management services and tax-smart investing. Click here to read more. 


FSC News - July

Submissions for the FSC Awards are now open, the categories include:

  • Emerging Leader Award
  • LIT of the Year Award
  • Team of the Year Award
  • Improving Consumer Outcomes Award
  • Governance Award
  • Innovation and Wellbeing Award
  • Chairman's Award for Service to the Industry

Click here to nominate someone. 

The FSC Regulation Committee have responded to the Insurance Contracts Law Review options paper, their detailed response outlined the follow themes:

  • the consolidation and modernisation of Life Insurance legislation.
  • the modernisation of the duties regarding the disclosure of information to insurers.
  • initiatives, including for example through FSC Code Standards 2 and 4, to encourage communication with customers that is clear, effective and timely.
  • the continuation of an unfair contract terms regime, and note that it would now operate in conjunction with the principles-based conduct duties proposed in the Conduct of Financial Institutions options paper.
  • adequate transitional arrangements.

The FSC ran a session with members this month to review input from the various workshops held on the FSC Code standards over the last quarter. At the session they announced the following people as members of their independent Code of Conduct Disciplinary Committee:

  • Geoff Clews: Barrister and Chair of the Disciplinary Committee
  • Alesia Gartrell: Senior Corporate Counsel at Chorus
  • Hon Paul Heath QC: Barrister and former Judge of the High Court of New Zealand
  • Professor Rob Merkin: Professor of Law at the University of Exeter in the UK and Honorary Life President of the International Association of Insurance Law.
  • Victoria Werohia: Head of Risk and Assurance at ACC
  • Linley Wood: Trustee and Director of a number of not for profit organisations.

Women in Insurance Awards Finalists

The Awards are being held at the Hilton Hotel in Auckland next week as part of the Women in Insurance Summit 2019. Congratulations to those below who have been named the finalists:

The nominees for the inaugural Women in Insurance Awards are:

Broker of the Year

  • Faith Owens - Bridge Insurance Services
  • Jaime James - Super City Insurance
  • Leecia Burford - Leecia Burford Financial Services
  • Fiona Keenan - My Insurance Lady

Employer of the Year

  • AIA/Sovereign
  • Suncorp New Zealand
  • Zurich

Insurance Professional of the Year

  • Sharron Botica - AIA/Sovereign
  • Petra Lucioli - Delta Insurance
  • Camilla Gribble - IkonIK
  • Nicki Mackay - FMG
  • Gillian Jacobsen - Crawford & Company
  • Rene Hattingh - Marsh

Rising Star – Broker

  • Christianne Peacock - Crombie Lockwood
  • Anna Parker - Crombie Lockwood
  • Charlotte Langridge - Runacres Insurance
  • Steph Wyatt – One50 Group

Rising Star – Insurer

  • Chantal Tawhai – Allianz Partners
  • Lily Wong – Zurich
  • Maddie Sherlock – AIA/Sovereign
  • Phillippa Joll – FMG
  • Sam McDonnell – FMG
  • Courtney Hendriks – AIG

Marketing and Comms Executive of the Year

  • Nicole Kampschreur – IAG
  • Bindy Edgen – JRNY
  • Catherine Bateman – Asteron Life
  • Debbie Lowe – Crombie Lockwood

Adviser Business Valuation changes and challenges seminar

With on going changes to the insurance sector, you may be wondering what the changes mean for your adviser business. OR simply, you could be wondering what the worth of your client base is. Alternatively, you may be faced with inquiries from external stakeholders, whether it’s the bank, an accountant or potential investors who are struggling to understand the value of your business or your renewal income.

If this is the case, this exclusive event designed to educate advisers about valuations is for you. With Kurt Owen, Senior Accountant & Consultant at BASE, we are running a free valuation seminar on 7 August 2019, in Ellerslie.  We will talk about:

  • Exploring the factors that make a valuation necessary
  • The ways an adviser may use a credible valuation
  • The relevance of valuations in relation to current issues
  • The effect of recent agency and commission changes on valuations
  • The marketplace for adviser businesses - and some of the experience of advisers in buying and selling

To find out more, please contact Jerusalem at Jerusalem.Hibru@chatswood.co.nz

AIA new offer updates

Advisers with AIA agency agreements will already have received many details - a commendable level of detail - from AIA in advance of the launch of their new AIA Living offer. I will only summarise it here for news purposes: 

From 5 August this will be AIA's Living range: 

Life Insurance

  • AIA Living Life Cover
  • AIA Living Family Protection
  • AIA Living Accidental Death

Trauma Insurance

  • AIA Living Critical Conditions
  • AIA Living Progressive Care

TPD Insurance

  • AIA Living Total Permanent Disablement

Income Protection Insurance

  • AIA Living Income Protection
  • AIA Living Mortgage and Income Protection
  • AIA Living Business Continuity
  • AIA Living Rural Continuity
  • AIA Living Business Income Support
  • AIA Start-Up Income Protection

Health Insurance

  • AIA Private Health
  • AIA Private Health Plus 

Accidental Injury Insurance

  • AIA Living Accidental Injury Cover

That omits certain less-used products, such as the 'essential' version of IP and Trauma, and the specialists and tests add on (when not part of medical).

The multiple benefit discount is significant: 

Our new tiered Multi-Benefit Discount will apply to AIA Living risk products (excluding health) based on the number of products held by the customer:

  • 10% for two products;
  • 12.5% for three products; and
  • 15% for four products.

The Multi-Benefit Discount applies within product category levels: Life, Income Protection, Trauma, and TPD. i.e A customer who purchases Life Cover, Loss of Earnings, and Mortgage and Income Protection will receive a 10% discount on the basis that Loss of Earnings and Mortgage and Income Protection fall within “Income Protection” product category.

To qualify for the Multi-Benefit Discount, customers are required to hold a minimum $100,000 Life Cover plus a minimum $75,000 Trauma, $75,000 TPD, or $2,000 (monthly benefit) Income Protection.

This is added to any Vitality discount, which could be 10%. It will be interesting to do comparisons with both discounted and un-discounted premiums.

Commissions have also been updated. I won't repeat the entire schedule here, but I will be updating the commission comparison in the next week, (available to institutional subscribers) if you are keen to see the impact. One thing worth highlighting from that change is the removal of any links to persistency and production levels. Asteron Life has recently made a similar change, and I expect that all commission systems will no longer have these links in the future. AIA's comment is below: 

We have taken the view that volume and persistency related commission bonuses drive unnecessary complexity and risk distracting attention away from the important work that Advisers perform for their clients.

Product enhancement pass-backs are also being extended across the range - to older AIA contracts: 

We are also pleased to advise that we have extended the AIA pass-back benefit to include all risk policies (Life, Trauma, Income Protection, and TPD) issued from 1 June 2001. Previously, the pass-back benefit applied to policies issued since 1 January 2003.

That comes at a cost for some holders of older trauma policies, who will have a series of premium increases to bring their premiums into line with more recent contracts. 

Replacement business rules and details about how to do quotes were also included. 


Values-based decision-making

In preparing for a recent discussion about the costs of regulation, and how to make choices about the right approach to compliance for advisers, I had a complicated slide about costs and benefits. The slide was fine, it tackled the problem of making a choice to licence on your own, or to join different financial advice provider. It did so taking very orthodox approach: a review of functions, costs, and benefits. It is not the only way to look at the choice - and arguably, not the best one. 

Seth’s Blog recently published a blog post titled “What are you drawn to?”. In the post, he details the different things that act as drives in people’s lives. The contrast in people’s motivators works to show our uniqueness. Seth concludes by saying that understanding our drivers is the key component in helping us achieve the outcomes we seek. Click here to read more.

So what does that have to do with a decision to seek a licence? Take a look at your mindset, your desires, and your values, and perhaps the choice will be clearer. If you approach the future with a sense of optimism, you are more likely to be an organised and willing to comply with the new regime. Have a clear view of your desires helps lot too. Do you want independence or safety? Do you want freedom or certainty? What is your personal tolerance for risk? Lastly, looking at your values can make things even clearer. Values tend to change less frequently than desires and when they are in alignment, we experience comfort and clarity. When they are not in alignment, we experience a lot of worry and discomfort. 

Pricing updates on Quotemonster

Last week we made the following changes on Quotemonster:

  • We have changed the Excesses quoted for Health Specialists and Tests to make them more consistent across Providers.
    We now use the following Excesses when quoting Specialists and Tests:

  • Pinnacle Life prices have been updated (these can be viewed on the Head To Head Report)

Southern Cross Commission Changes

Several advisers have phoned or written to express dismay at the changes to service commissions by Southern Cross. The primary concern has been for the ability to provide effective service to customers under the new model. Secondary concerns have been the impact on adviser business valuations, which would appear to be significant. As it happens, I will be running a valuation seminar on the seventh of August, I shall cover the issues of service commission changes and agency agreement terms in more detail at that session.