More financial planners turn to life/risk
Record numbers of financial planners are turning to the provision of risk advice to underpin their revenues, according to new research released exclusively to Money Management by Investment Trends.
The research found that 93 per cent of planners now provide risk advice, up from 73 per cent in 2005, and typically spend a fifth of their client time (20 per cent) discussing insurance needs, up from 17 per cent last year.
The Investment Trends analysis also found that, on average, risk advice now accounts for a third of the revenue financial planners are currently generating.
{^image|(width)300|(height)151|(url)http://media.cirrusmedia.com.au/Money_Media_Library/Print_Images/120906…"http://www.moneymanagement.com.au/tag/recep%20peker">Recep Peker said market volatility was not only driving a greater proportion of clients' investments towards cash and cash products, it was also increasing the role of insurance advice within planning businesses.
He said this served to diversify revenue streams for planners' businesses, which could benefit both the client and the adviser.
"Empirical evidence demonstrates the importance of risk advice in the current climate, especially in driving profit growth," Peker said.
"Our analysis shows that planners reporting an increase in practice profitability derive a greater proportion of their revenue from risk commissions than those who said their practice profitability declined," he said.
The Investment Trends research also pointed to the manner in which the major insurance providers had moved to meet the needs of the planner community, resulting in higher levels of satisfaction.
It found that the number of planners rating their insurer "good" or "very good" had increased from 77 per cent to 82 per cent over the past year, albeit that planner ratings of individual features offered within insurance products were more mixed.
Peker said that planner satisfaction was a critically important factor for insurance providers, with planners very willing to seek out better arrangements for their clients.
He said nearly half (47 per cent) of financial planners said they had reduced usage of or stopped using at least one insurance provider in the past 12 months, and a very strong statistical relationship existed between satisfaction and switching behaviour.
"With planners demanding further enhancements to underwriting and technology, these areas will continue to be key battlegrounds for insurance providers over the next 12 months," Peker said.
Looking at the overall insurance provider market, the Investment Trends research identified the preferred providers as being:
However, Peker noted that competition remained strong between the major providers, with planners using an average of 3.8 insurance providers for new business, albeit they tend to place an average of 56 per cent of their premiums with a single provider.
The top five insurance providers by number of primary relationships are:
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