Having been open to the prospect of charging fees for risk advice in tandem with risk commissions – and having invested serious time, resources and effort into attempting to implement this model, Dwyer remains unconvinced that this proposition is a realistic, viable business model.
This conversation relates to risk specialist or risk-focussed advice businesses. It does not extend to business models where the adviser’s offer includes a financial planning proposition in which the cost of delivering life insurance advice can be absorbed or subsidised within the broader service package.
Dwyer was motivated to have his voice heard following the recent debate in Riskinfo sparked by our report on the release of the fifth edition of Elixir Consulting’s Adviser Pricing Models Research Report series (see: Fees for Risk Advice an Emerging Reality).
Significant debate followed the publication of this story, while the outcome of a poll we conducted which sought the views of Riskinfo readers appears to support the conclusion that the majority of advisers agree with Dwyer (see: Most Advisers Reject Fees for Risk Advice).
In speaking with Riskinfo, Dwyer was at pains to point out that his efforts in exploring the possibility of fees for risk advice reflected a ‘real-life’ rather than a theoretical experience.
He says that as an adviser whose passion is providing life insurance advice services, he has always been open to both sides of the ‘commissions versus fees’ debate and to trialing an advice proposition built around a combination of advice fees and commissions.
Dwyer’s blunt message, however, based on his own experience, is that this model does not work.
While he had already been moving to a hybrid commission model prior to the implementation of the Life Insurance Framework reforms, Dwyer says he seriously explored the business proposition where fees for risk advice acted as a supplement to the 80/20 hybrid commission model, followed subsequently by the 70/20 and eventually 60/20 mandates.
In exploring this model, he included different fee options in his clients’ Statements of Advice, which offered fees-only, a combination of fees and commission and commission-only options. In this trial phase, Dwyer says 100 percent of his clients and/or prospective clients rejected any pricing option which included fees.
He says the demographic range of his clients in this trial process extended from high-end ‘full advice’ clients who were also charged advice fees on superannuation and investment advice to ‘mums and dads’ clients whose annual life insurance premiums were $2k or less. He also noted that his under 35 YO clients overwhelmingly rejected any fee option, including the combined fees/commission model.
In 2017 Dwyer says he began modifying his client conversations around fees and commissions to include smaller fee levels in the region of $200 – $300. While he says he was beginning to experience some engagement at that level, the advent of the Covid-19 pandemic has seen this willingness from clients to pay even a small fee evaporate.
At present, Dwyer says his advice business only remains viable because of the smaller proportion of his client base who receive a more holistic, comprehensive advice service including super consolidation services, cashflow and pre-retirement advice.
His point, though, is that he would prefer to focus almost entirely on life insurance advice because this is where his passion lies and this is the area where he believes he can make the biggest difference in the lives of his clients. He doesn’t want to extend the scope of his advice proposition just to ensure his advice practice remains viable. But he believes he has no choice.
Dwyer says he has left no stone unturned in his willingness to find a solution for his business which at least incorporates some form of fees for risk advice to accompany his commission income. This includes engaging business and financial coaches, seeking feedback from licensees and advice peers and subscribing to research and other publications which address this issue.
“In the end, listen to your clients,” says Dwyer, who have delivered him a resounding ‘no’ to any form of meaningful fees for his advice, whether stand-alone or in combination with commissions when appropriate.
While he appreciates the argument from business coaches about how to enhance the value he delivers to his clients, “…if the clients don’t see it, well, that’s where it’s at.”
Referring to other examples reported in industry media, including in Riskinfo, which have pointed to the successful implementation of a combined fees and commission model for a risk-focussed business proposition, Dwyer says “No-one can really show me the true, hard stats that say ‘this is how you do it’.”
He adds, “If they can do that, then I’m still onboard and I’m happy either way.”
Bombora Advice case study
Lending weight in support of Dwyer’s position is Bombora CEO and Founder, Wayne Handley. Referencing another ‘real life’ case study, Handley highlighted Bombora’s experience in dealing with one of Victoria’s largest and most successful regional accounting firms. He told Riskinfo the firm had reached an impasse in their business in which their financial planners – following referral of the client to them by the accountant – had introduced fees for providing life insurance advice.
Handley characterised this initiative as ‘spectacularly unsuccessful’ – an initiative which led to ever-increasing reluctance from the firm’s accountants to refer their clients to the planners where the client was required to pay a fee for the ensuing life insurance advice.
Bombora was called in by the firm to take over that portfolio for reviews, claims services and ongoing advice, the outcome of which Handley described as ‘spectacularly successful’. He says Bombora advisers provided advice to 50+ of the accounting firm’s clients in the first six months of the arrangement, which experienced a three-point ‘Win/Win/Win’ outcome, namely:
The client is now in a far better position because they’ve been able to access life insurance advice
The accountants and financial planners have met their best interest obligations
The risk exposure to the financial planning part of the accounting business has been significantly mitigated
Handley reinforced the point that charging any form of fee for life insurance advice – in the cold hard light of day – does not work and will not support a viable advice business because, in reality, clients are rejecting the notion of paying fees for life insurance advice.
In affirming that Dwyer and Bombora were in the business of saving lives and saving livelihoods, Handley said their future rests in focussing on ways of engaging more consumers in life insurance discussions: “…not charging more, but seeing more people.”
Handley continued, “We want more clients receiving more life insurance advice in Australia and we know the current [commission-based] model works.”
Meanwhile, the agenda for Dwyer is to find the hard data – the ‘proof’ that demonstrates it really is possible to operate a successful risk-only advice business on a model that combines fees and commissions. His preference is to not deviate from the specialist model.
Handley’s final message was also clear: “In the end, it’s about client choice. And at the moment, our clients are choosing 100 percent – one way.”