1-in-3 clients considering dumping their adviser

The MetLife Adviser-Client Relationship Report 2019, now in its second year, has surveyed consumers and small businesses with up to 20 employees who have bought life insurance through an adviser, as well as consumers who are likely to see an adviser about life insurance in the next two years.

The research has indicated that one-third of consumers and one-half of SMEs are considering switching advisers, or no longer using their adviser in the next 12 months, with high fees and commissions being the top cited reason for dissatisfaction for 25 per cent of consumers and 33 per cent of SMEs.

Around 23 per cent of consumers said they can’t afford it, another 23 per cent said they don’t need it anymore, 21 per cent noted poor value for money and 23 per cent referred to poor communication or lack of contact.

For SMEs, the reasons enterprises are dismissing their adviser include trust issues (25 per cent), association with a major bank (23 per cent), poor value for money (21 per cent), can’t afford it (19 per cent) and poor advice (17 per cent).

MetLife Australia chief Richard Nunn called the statistic of advisers potentially being dropped “concerning”, saying it highlighted a need for advisers to demonstrate the ongoing value of their service.

“Advisers can’t take their clients for granted,” Mr Nunn said.

“With such a high proportion of consumers and SMEs looking for change, advisers must constantly be looking ways to build trust and develop genuine relationships with clients.

“Those advisers who take the time to have deep and ongoing conversations with their clients about their individual needs, and demonstrate the benefits of personalised and tailored advice, will likely gain a competitive advantage.”

The top attributes when seeking an adviser were voted as being honest and trustworthy (85 per cent), transparent around fees and commissions (78 per cent) and being experienced (75 per cent).

Life insurance commissions not necessarily a deal breaker

MetLife Australia has recommended advisers consider implementing a range of payment options to suit the individual needs of clients.

The majority of consumers (78 per cent) were found to prefer payment for future advice as an upfront fee if it meant lower insurance premiums over the lifetime of the policy.

These consumers who expressed a preference for an upfront fee were willing to pay an average of $1,700, a lower figure than the average cost to product comprehensive insurance advice.

Three in 10 consumers said they were willing to pay 1-5 per cent extra in premiums to offset no upfront fee.

But while the government has considered the removal of life insurance commissions, the research pointed to a lack of awareness around commissions that advisers earn, with slightly more than half (55 per cent) of consumers unaware of the amount of the cut their adviser receives.

When asked if expelling commissions would change their willingness to see an adviser, nearly half (47 per cent) said no and only 19 per cent said it would increase their willingness. Around a quarter (26 per cent) said it would decrease the likelihood of them seeing an adviser.

Nearly three-quarters (72 per cent) thought removing commissions would result in more people being underinsured, due to a perception of higher up-front fees leading to people choosing lower levels of cover.

For consumers potentially seeing an adviser about life insurance, 25 per cent indicated cost was a barrier, up from 18 per cent in 2018.

But for most consumers, 75 per cent first figured out what cover they needed before looking at whether they could afford it.

Matt Lippiatt, head of adviser experience at MetLife, said while the study has shown customers are looking for alternative payment options, many don’t have an issue with the traditional commission-for-advice model.

“There’s a growing number of consumers who are interested in fees as an alternative payment structure for risk advice, which means it’s important for advisers and product manufacturers to offer consumers multiple options when it comes to paying for financial advice,” Mr Lippiatt said.

“Consumers don’t have a problem paying for their insurance advice by way of commission taken from the product, but there is an opportunity for greater education around how they work.

“Advisers who are embracing highly transparent charging models and have systems in place to continuously educate clients about the value they provide seem well placed to thrive in this environment.”

When asked what types of advice they would be willing to pay a fee for, the top drivers cited were investments (54 per cent), saving for retirement (50 per cent) and getting life insurance (46 per cent).

For SMEs, the top reason for seeing an adviser was seeking out life insurance (59 per cent).