Business & Finance February 2013
As we begin what will most likely be another challenging year for the life and pension industry here in Ireland, spare a though for our UK colleagues who have now entered the unchartered landscape of the post RDR world. For Independent financial advisors in downtown UK the challenge of advisor fees and having to stand up for the value of the advice they provide to client is now a reality. Time will tell whether the Retail Distribution Review (RDR) in the UK and the removal of the commission bias in the provision of independent financial advice will be a success. All indications are that new business volumes will contract in the UK in the first six months of 2013 as organisations adjust to their new surroundings in the hope that by the second half of the year new business volumes and persistency will improve. There will be lessons to be learned from the UK experience. We will all wait anxiously to see how the UK based Pan-European life and pension providers adjust to their new reality, and what if any implications this will have on their Irish operations?
What if 2013 was the year that our industry confronted reality here in Ireland and collectively decided to address the now unanimous consensus that our business model is in need of some real adjustment? While an RDR type assessment is perhaps a step too far surely it is time for the industry and all its stakeholders to consider how we can stand up for what is good about our profession, differentiate ourselves from the banks and address the flaws in our business model in the best interest of our customers, our brokers and the life companies.
What if this year the industry decided to invest in an educational co-operation and together inform all financial consumers about the benefits of getting independent financial advice? About the difference between banking services and what banks do and financial services and what brokers and life companies do. Wouldn’t things be so different if your customers clearly differentiated you from the banks and the product providers and began to put a value on the professional independent advice that you as brokers provide.
What if we decided to address the chronic persistency issue that is eating away and destroying our industry? What if we re-directed all the investment and energy that goes into transferring business from one Life Company to another into our existing business and customers? Could we replace price pledge with price promise so that when a customer buys life assurance to protects their family they get a commitment that if the price drops by a certain percentage in the first five years in the market this price reduction is passed on by policy endorsement. Why keep dropping the price to win transfer business rather than invest in retaining your existing business? Should over-ride be replaced with a persistency bonus that allows brokers to build up value in their back book of business? Could customers receive a loyalty bonus in the form of premium reduction or premium holidays for every three years their policy remains in force? What about a no claims bonus for health and income protection products?
What if the industry established a central debt register which allowed companies to track broker commission debt? So that favouring one life company over another because of debt with particular life companies, which is not in the spirit of the agency agreement, not to mention in the best interest of the client is no longer possible.
What if we decided to put value into the agency agreement and re-engineer the now out dated existing agreement to address such things as a common basis for measuring persistency. Should we introduce a quota system for agency appointments and remove all the dormant and part timer agencies so that those brokers who have invested in their practices don’t see this value destroyed by the continuous granting of new agencies by life companies? Is it time to reconsider the hurdles for entry into our market?
What if the industry co-operated on the establishment of a business model transition process that enabled and assisted brokers who wanted to move to an advisor fee model? Should the burden and cost of remaining independent be solely born by the brokers who many life companies depend on for distributing their products? Could life companies develop remuneration structure for existing business without the brokers having to move provider? Is access to a share in the annual management charge out of the question? Is it time to reconsider the concept of restricted or tied advisors? What if the industry decided to simply explore the possibility of reaching a consensus on what are the issues that are affecting our industry and preventing it from moving forward? Many will state competition law as the barrier to establishing meaningful dialogue. Certainly competition law must be respected and adhered to. However the reality is that it should have no impact on an industry that has simply decided to create a dialogue for change, so that the interest of its customers, its independent advisor and its providers are better aligned for the greater good of all.
On the other hand, what if we just continue to protect the existing status quo and let regulation alone be the dominant change agent in our industry. Our industry needs change and none of us are as good as all of us.