One of the financial services industry’s most respected trade journalists, Jason has worked in finance media and communications for around 20 years, including roles with Money Management and the Financial Planning Association. We sat down to get his take on the impact of the Royal Commission, how technology will play into funds management and life insurance in the years to come, and how the industry could do more to call out bad behaviour.
What issues are top of mind for your readers right now – what stories do you find they respond to the most?
Many of our readers are life insurance advice specialists and for them the key issues are the ongoing impact of the life insurance framework (LIF) and the proposed education and professional standards released by FASEA. LIF had more news coverage last year, ahead of its implementation, than this year but it will remain an issue for some time as advisers adapt their businesses to deal with reduced up-front insurance commissions they will receive from this year onwards.
These changes were significant in their own right but the proposed education changes add a new level of concern as a number of advisers feel they will not be able to meet the new standards within the required time-frame, while re-engineering their business and still providing advice to new and existing clients. At present, certainty around what they will have to do to their business, and to re-qualify to provide advice, is an ongoing issue.
What do you think is the biggest issue in the industry this year?
Taking a wider view from LIF and education standards, the impact of the Royal Commission on the business models of the institutionally-owned financial advice businesses has to rank highly. So far, vertical integration, grandfathered commissions and fees for poor or no service, and superannuation fees and charges have all been examined and issues found in each area.
ASIC has been making similar comments for some time but the Royal Commission has elevated them into front-page news, and despite the focus being on large-scale players, the reputation of advisers from across the industry is being negatively impacted. It is likely similar findings about product providers, and advisers will come out once the Commission begins its hearings into the life insurance sector.
How do you think financial services has changed since you’ve been a journo?
I started writing full-time in the financial services space in 1999 and the consolidation and concentration of advice, funds management and insurance under a few institutions started shortly after. That trend peaked a few years ago and in the last 18 months we are starting to see a shift away from that model, which has yet to play out fully, but will change the way consumers regard those businesses and their services.
A number of the banks are already talking up their ‘new’ streamlined model of providing banking services only, having exited funds management or advice or insurance. Alongside these changes, the non-aligned advice model has continued to operate, employing around 50 per cent of licensed advisers, and will remain a viable market as consumers seek more transparency from their advice providers.
This transparency has not changed the fundamentals of good advice but the level of skill, expertise and professionalism that is expected of a financial adviser has increased, leading to the current calls for the adoption of new standards.
How do you think the industry might evolve in the next few years?
The proposed FASEA standards have moved forward the retirement date of many advisers. Those who remain should no longer have to hold conversations around their skills and qualifications as consumers take it as a given that they are qualified and compliant with relevant standards.
The funds management sector will continue to wrestle with the issue of technology and how much value active managers can add to an investment process that may become more automated.
The life insurance sector will also have to address issues around sustainability and under-insurance while keeping the advice profession onside and making better use of technology to reduce costs and time frames associated with applications, underwriting and claims.
What do you think the future holds for risk advisers in particular given the scaling down of commissions over the next few years?
Risk advisers will always hold a niche place as specialists in the financial advice sector but with reduced up-front income streams, implementing a new business model, or modifying their current model, will be critical. These advisers are some of the best-equipped people to tackle underinsurance and lack of knowledge about the value and purpose of life insurance.
I expect some will add complementary advice services to their business, or team with other advisers in referral arrangements or partnerships to build their client base. They will also be closely watching what life insurers provide in terms of products, support to the adviser and service to clients.
What’s an issue you would like to see get more attention/coverage in industry media?
The positive side of financial advice and the benefits of life insurance – but for consumers of industry media that would be preaching to the converted!
One issue the financial services sector does not do is calling out bad behaviour. There have been many instances where industry representatives have called for the rebuilding of trust and reputation with consumers. A possible first step is identifying and calling out poor practices, and where appropriate, those who are carrying them out.
The issue of life insurance churn – both to and from an insurer – is a case in point, with advisers, licensees and insurers having been aware in the past of who was churning but little public action was taken to stamp the issue out.
What is your view on the Royal Commission – do you think it will create real change in financial services?
It already has. The announcement of the unwinding of vertically integrated structures owned by the banks and the decision by some product providers to end grandfathered investment commissions is the first ripple of change we are seeing.
The Commission has not been tasked with praising the financial services sector, so most of the news coming from it will be negative and that will drive more change. At present, the court of public opinion has not come down on the side of the industry and I expect the final report of the Commission won’t do so either.
If that is the case, the government will have little choice but to take on board its recommendations, which will be the catalyst for further regulatory, and possible structural, change.