A new generation of lifies

Today’s risk advisers are having a tough time replacing themselves. There are no hard figures to prove numbers are dwindling, but most in the industry accept there is a problem. Well, two problems really. The first is that more risk advisers than usual have recently left the profession. The second is that less young people want to be a risk adviser when they grow up.

The recently retired past president of the Association of Financial Advisers (AFA), Robin Yates, last year estimated the age of the average risk adviser was somewhere between 45 and 65.

So why are so many risk advisers leaving the profession and, more importantly, what’s driving young people away?

On the first question, Financial Recruitment Group executive director Peter Dawson says financial services reform (FSR) is to blame, with its costly and time consuming administrative requirements, while the issue of dollar disclosure is seen to inhibit the adviser’s ability to write business.

“They also know time will be needed to commit to further education and this is often the straw that breaks the camel’s back.

“The baby boomer generation of life planners were probably looking to retirement anyway and FSR may have brought forward their plans.”

Because less young people are entering the profession, the succession plan for your average risk adviser will increasingly involve them selling to a respected colleague who is also probably nearing retirement age, according to Dawson, or to planning practices that are looking to expand their advice model to include risk.

This is why Dawson believes the pure risk adviser will become increasingly rare, with most insurance advice offered as part of the broader wealth management process.

As for the shortage of younger people entering the profession, David Callender, chief executive of risk at the Tower Group, says this phenomenon is part of a wider problem.

“I think it’s a little bit like the reason for the under-insurance crisis in Australia. There’s a lack of understanding in the community about how important [risk insurance] products are to buy.

“Risk insurance has always had a reputation as being a hard thing to sell. Your insurance can be quite expensive and, if it’s the difference between a holiday or paying an insurance premium, some people would much rather take the holiday.”

Callender predicts the hole in risk adviser numbers could partly be filled if young people start to realise the potential to cash in on the under-insurance problem and also exploit the lack of competition in the job market.

“Yes, the adviser shortage is an issue now, but I think the law of economics says that where there’s a gap, the gap will be filled. If there’s money to be made, people will replenish some of those writers leaving the market.”

Nevertheless, Callender also thinks demand for pure risk advice might drop anyway if the market follows recent international trends and is sold more directly through different channels.

Australia might even follow the lead of the UK, where, according to Callender, 70 per cent of risk insurance is sold to people when they take out a mortgage.

Then there’s the possibility that insurance could be sold at your local supermarket, like it is at Tesco in the UK.

“It probably costs you the equivalent of a cup of coffee each day… and you can get it at the checkout,” Callender says.

Although this might work in some situations, for example, when someone needs about $100,000 worth of life insurance, it might not be appropriate for larger amounts, where Callender says more traditional forms of risk advice will still be in demand.

To meet that demand, Callender agrees with most industry commentators that Australia needs to provide a greater range of education facilities to attract more young people into the profession.

The AFA is currently trying to attract funding to set up an adviser academy and has recently created its own mark of adviser accreditation.

Callender is also a fan of recent FSR regulations that demand ongoing training and quality assurance of licensees.

He says there’s no better way to breed risk advisers than to get young people into practices to get experience. To do that the industry needs to talk up the value of risk insurance and the money that can be made from selling it.