About 60% of advice clients believe the removal of life risk commissions would increase underinsurance in Australia, latest research shows.
That is a key finding of MetLife's second annual What Clients Want: 2019 MetLife Adviser/Client Research Report, previewed at the Association of Financial Advisers' National Conference in Adelaide.
MetLife head of retail sales Matt Lippiatt revealed three in five consumers and small business owners with life insurance purchased through a financial adviser believe removing life risk commissions would have a detrimental impact on Australians and further increase the underinsurance problem.
MetLife surveyed 1110 consumers and SME owners with insurance through an adviser and a further 288 who are very likely to buy insurance through an adviser. MetLife also worked with 200 advisers to frame the questions asked in the survey.
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Among other things, the insurer sought to uncover what clients think about fees and commissions.
To date, the discussion around fees and commissions has been too binary, Lippiatt said.
"It's either fee for advice or commission for advice. In our view, we actually think that it's appropriate and it's actually a good idea to have both models in place and then let the consumer decide which model is right for them," he said.
The survey found consumers have a high level of awareness around commissions being paid to their adviser by product providers. At the same time, majority have no idea how much that commission was.
The majority also said that the removal of life risk commissions would not stop them from receiving financial advice.
Given the choice of paying an upfront fee and lower premiums or no fee and higher premiums, 75% survey respondents said they were willing to pay an upfront fee.
However, the amount they were willing to pay was out of step with what it actually costs to have an adviser design and implement an insurance plan.
Respondents said they were willing to fork out between $1100 and $1300. When told it can often cost anywhere up to $5000 for an adviser to complete, respondents adjusted their responses to an average of between $1700 and $1900 - still well below the actual likely cost.
Lippiatt said the response demonstrates just how vital it is that commissions be retained.
The research also found clients who have had a review within the last 12 months are 2.1 times more likely to refer their adviser to family and friends, the data showed.
However, it also revealed that 30% of consumers and 50% of SMEs plan to change their current adviser or stop receiving advice at all in the next 12 months, citing high fees and lack of contact.