While commission levels are a major hurdle to advisers writing more risk, an industry expert says improving efficiency can help maintain profitability and reduce the cost to serve.
Cost pressures impacting risk advice is nothing new, with the lowering of commission levels on the back of the Life Insurance Framework (LIF) severely impacting the ability for financial advisers to cost effectively write risk business.
According to Marc Fabris, the founder of Risk Hub, efficiency needs to be the goal for advisers because there’s no rebound in commission levels on the horizon, noting that the firm is putting a focus on this area at its risk support showcase next week.
“The bottom line is there’s massive efficiency challenges. Risk is under a heap of pressure. There’s less revenue that comes from risk sales,” Fabris told ifa.
“So, whilst that isn’t increasing, and whilst we’re not getting risk back to where a lot of advisers and me would like it to be – more of a hybrid, rather than the current levels of commission – you need to bring more efficiency.”
Among advisers that are still providing risk at a lower level, improving the efficiency of their processes can help them expand how much they write, he said.
“You’ve got three groups of advisers: those that do a reasonable amount of risk, those that do a tiny amount of risk, and those that do no risk,” Fabris said.
“There’s 5,000 or 6,000 advisers doing a tiny bit of risk – how can that be cost effective? You need to either get someone to do it for you or bring a specialist in or increase your volume to make it a more effective and efficient process.”
According to research from Risk Hub, 61 per cent of advisers said that just the cost of delivering advice, the viability of delivering advice was an obstacle for them, followed by compliance, pre-assessments and underwriting, and product knowledge.
“But what I loved is 43 per cent said that they would like to grow their focus on risk,” Fabris said.
“So, the majority of advisers are finding it a struggle, but they do want to do more, and so they’re looking for answers.”
Statements of advice (SOA), he said, are emblematic of the need to improve processes, with the time to progress from initial meeting with a client to SOA delivery sitting between eight and 16 hours for around 60 per cent of advisers.
“Constructing a statement of advice is frighteningly heavy in time,” Fabris said.
“Now you might actually say constructing the statement of advice there is obviously a few steps to it, because you might actually go, well the AI piece helps to tell your paraplanners more accurately and easily and consistently what’s needed.”
This also opens the area up as a place that is rife for improvement, whether that is through AI tools to improve file note generation or streamlining the fact-finding process.
“Whilst we’ve got the current table stakes, we have to be thinking about what else we can do to actually help with advice delivery to be more efficient – systems, software, people, outsourcing, AI, and learning all of that kind of stuff,” Fabris said.
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