Key findings from the Investment Trends 2015 Planner Risk Report:

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  • Implementation of Trowbridge recommendations would push more planners towards holistic advice

  • Planners remain very willing to leave underperforming insurers

  • A significant number of planners are actively looking for new insurer relationships

  • Users give XPLAN the highest overall satisfaction ratings for risk software

King Loong Cho

King Loong Cho

In its seventh year, the June 2015 Planner Risk Report is an in-depth study of Australian financial planners’ usage of insurance. The study is based on a survey of 852 financial planners concluded in June 2015, and highlights a number of key trends in the insurance market:

Implementation of Trowbridge recommendations would push more planners towards holistic advice

Three quarters of financial planners believe the proposed Trowbridge recommendations will be implemented to some extent, according to the findings from this year’s survey conducted shortly after the release of the Trowbridge Report. Four out of five planners expect to make changes to their businesses model if the Trowbridge recommendations were to be implemented.

“The Trowbridge recommendations have the potential to be a disruptor if implemented in full, with financial planners expecting standalone insurance advice to become less profitable,” said King Loong Choi, Senior Analyst at Investment Trends. “But, as they have proven with FoFA, Australian financial planners are very good at adapting to change, and many anticipate to evolve their business models accordingly.”

“Our research shows more planners anticipate they would move to a holistic advice model and use superannuation and insurance advice to help recoup some of the lost revenue. Those who already provide risk advice as part of their comprehensive advice, meanwhile, feel they may need to charge more for this advice.”

While upfront commissions are a key component of financial planners’ revenue from insurance advice, comparisons to our 2014 results show planners have already begun the gradual shift from upfront commissions to hybrid commissions and fee for service for insurance advice.

“Planners are typically already going through the process of phasing out upfront commissions and replacing it with hybrid commissions and fee for service,” said Choi. “The implementation of capped upfront commissions, as per the Trowbridge recommendations, would see this process speed up, and challenge those not already doing so.”

Planners remain very willing to leave underperforming insurers

The level of insurer switching remains substantial with 35% of planners saying they stopped using at least one insurer in the last 12 months. However, planners are adding insurers at a faster pace, with the typical planner now using 3.9 insurers each, up from 3.7 in 2014.

There is a strong link between insurer satisfaction and switching behaviour, and insurers looking to retain their relationships need to ensure they are responsive to financial planners’ needs and keep them satisfied.

“Insurer relationships remain in a state of flux,” said Choi. “While planners are stopping use of insurers that aren’t exceptional, they are still expanding the number of insurers they use.”

“There are great opportunities for insurers to benefit from this switching, but insurers also need to be careful to not lose out from this either.”

A significant number of planners are actively looking for new insurer relationships

The level of insurer switching is likely to continue over the next 12 months, with one in five planners saying they are in the market for a new insurer relationship.

“What financial planners expect from insurers evolve each year with insurers setting the bar higher and higher each time they improve their offering,” said Choi. “For example, the focus on improving underwriting by some insurers over the last year has made it an essential component of success in acquisition of new relationships.”

AIA, BT Life and TAL posted strong gains in terms of primary market share in 2015. The top four insurance providers by number of primary planner relationships are now:

  1. OnePath
  2. AIA Australia
  3. BT Life
  4. TAL

Users give XPLAN the highest overall satisfaction ratings for risk software

Risk software is a key part of financial planners’ businesses, with 89% using them to assist with their insurance recommendations.

59% of planners use XPLAN’s risk modules as their most-used risk software. This is followed by COIN (20%) and Midwinter (6%).

The top three risk software providers by planner satisfaction are:

  1. IRESS – XPLAN
  2. Midwinter
  3. COIN

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