Life insurance and annuities embedded in financial planner revenue


Life insurance and annuities have become far bigger parts of the revenue model for financial planners, according to the latest data compiled by Wealth Insights.
The data, the result of surveys and focus groups conducted over the past month or so, has confirmed a significant increase in the number of planners advising on life insurance.
According to the data, the provision of advice around life insurance has now become an integral part of the offering of almost all planners.
The latest Wealth Insights research points to the continuation of a trend which emerged as traditional revenue streams retreated after the outset of the global financial crisis.
The data suggests that the changes to the revenue models are unlikely to become embedded in practices, particularly as planners seek to accommodate the regulatory environment emerging out of the Government's Future of Financial Advice changes.
Commenting on the data, Wealth Insights managing director Vanessa McMahon said almost all financial advisers now advise on life insurance, which typically accounts for over one-quarter (27 per cent) of planner revenue.
McMahon said her company's research also suggested the trend towards providing advice around life was not about to end any time soon.
"More than half of all advisers (56 per cent) expect life insurance to become more important to their practices over the next few years," she said.
Commenting on the results, McMahon said she believed the take-up of advice around life insurance was being driven by a number of factors, not the least of which was investor sentiment, with investors becoming more fearful and cautious in general terms.
"The increase in household savings (built on the belief that there could be rocky times ahead) has also been evident in increasing levels of insurance coverage," she said.
McMahon also pointed to a pick-up in the number of planners deriving increased revenue based on advising around annuities.
She said the Wealth Insights research had revealed 33 per cent of planners now sourced revenue from annuities - up from 22 per cent last year.
Recommended for you
Quarterly Wealth Data analysis has uncovered positive improvements in financial adviser numbers compared with losses in the prior corresponding period.
Holding portfolios that are too complex or personalised can be a detractor for acquirers of financial advice firms as they require too much effort to maintain post-acquisition.
As the financial advice profession continues to wait on further DBFO legislation, industry commentators have encouraged advisers to act now in driving practice efficiency.
New Zealand’s financial regulator is following the footsteps of its Tasman neighbours and proposing to conduct a review on improving the accessibility of financial advice and advice business models.