Technology key to surviving Trowbridge

Speaking to Risk Adviser, Enva principal and director Michael Baragwanath said if the recommendations of LIAWG chairman John Trowbridge are implemented, advisers will need to be “significantly more efficient” in order to reduce costs and turn a profit.

“If you have a look at what is required by the future adviser, an adviser must be significantly more efficient than they are now; they must be using every bit of technology that they can get their hands on to basically lower the cost of delivering advice,” Mr Baragwanath said.

He also pointed out that advisers will need to look at ways to reduce the amount of time they spend servicing their client, from 10 or more hours down to "no more than two".

As part of the process for reducing this time, insurers will need to take responsibility for the underwriting process, he said.

“I think the idea of underwriting will die. You will not have any time to be involved in underwriting,” Mr Baragwanath said.

“Now it might still happen, but the insurer needs to do all of it and the adviser needs to be completely separate from it, because if you are spending more than two hours [servicing a client] you are now losing money."

He added that if the remuneration structures proposed by Mr Trowbridge were to be introduced, marketing and client acquisition will need to be another key focus for advisers.

“If you look at what commission is in insurance, commission is really the insurer foregoing marketing expenditure by using the adviser as their distribution,” Mr Baragwanath said.

“[Insurers] are expecting the adviser to take the commission to use it to advertise, to market, to grow brands, but advisers don’t do that. They don’t have brands, we are splintered all over the place and their volumes are low because they are running really tiny businesses.

“The only way you can change this is if less commissions are being paid, then they are going to have to be invested in marketing and advertising [and] we are all going to have to be seeing more [clients],” he said.