Life insurance provider MetLife Australia has released a new report revealing a disconnect between perceptions of cost and value when it comes to insurance and financial advice.
Now in its second year, the MetLife Adviser-Client Relationship Report 2019 is the largest quantitative study of its kind and includes insights from consumers and small to medium enterprises (SMEs) with up to 20 employees who have life insurance purchased through a financial adviser and consumers who are likely to see a financial adviser about life insurance in the next two years.
This year’s research revealed that advised Australians are more informed about their insurance than last year, with more respondents able to state their level of cover, premium amount paid, as well as explain the difference between stepped and level premiums.
Despite this, confusion around the value of expert financial advice remains, suggesting there is an ongoing need for financial advisers to demonstrate their value by properly educating clients of the benefits of the service.
The research found that three in 10 consumers and five in 10 SMEs report they are considering either changing their current adviser, or ceasing to use one completely, citing high premiums, lack of affordability, no ongoing need for insurance or a lack of contact as their top reasons.
Understanding of insurance remains low among consumers and SMEs. Of those surveyed, 40 per cent of consumers thought life insurance bought through an adviser is more expensive than a policy they could buy directly online or through a super fund but only a third of consumers believed the product was better quality.
The research found consumers and SMEs were willing to pay an average upfront fee of $1,700 for insurance advice. This is below the average cost to deliver quality financial advice, suggesting there is a critical need to retain commission-for-advice as a way for people to pay for these services.
“Awareness of what advisers do and what those services should cost is low. Part of the battle for financial advisers is how to make the long-term gains to be had from seeking expert financial advice more tangible in the short term,” the report noted.
“Advisers who are successfully bridging this gap appear to be setting and agreeing on realistic expectations for both clients and advisers in initial meetings. Further, they are working closely with their client like a partnership and demonstrating ongoing care and value through simple measures such as annual reviews and contacting clients at important times in their lives, such as buying a house and having a baby.
“In making a concerted effort to demonstrate the value of tailored financial advice through ongoing and transparent communications, financial advisers can help tackle some of the biggest misperceptions that inhibit consumers and SMEs from seeking out the services of financial experts.”
Matt Lippiatt, MetLife Australia head of retail sales, said the recent spotlight on the financial services industry has caused clients to take a more active interest in the financial products and services they hold and question the value they’re getting from these relationships which can perhaps explain why Australians know more about their insurance cover this year.
“But this year’s research has found there’s still a lot of confusion about insurance and the true benefits of seeking out expert financial advice,” Mr Lippiatt said.
“As with any service that doesn’t provide an immediate pay off, it can be hard for consumers to appreciate the value of seeing a financial adviser. Sometimes this realisation only comes well down the track as life unfolds and the unexpected happens.”
Given this, Mr Lippiatt said a key challenge for financial advisers is demonstrating value right from the outset of a relationship and reinforcing this value over time through open and regular communication.
“If there’s a key takeaway from this research it should be that there is no such thing as a ‘set and forget’ client anymore. Client engagement should be the number one priority on every adviser’s business plan for 2020,” he said.