The popularity of the authorised representative (AR) model continues to grow in Australia.
“AR networks are more significant now than, say, 10 years ago,” says Shaun Standfield, managing director of Insurance Advisernet.
“And that growth is likely to continue for a long time to come.”
Travis Kemp, executive director of Marsh
Advantage Insurance, says the AR model provides insurance professionals with an opportunity to earn an income based on their client relationships.
“This drives high service standards and competition in the marketplace and, ultimately, customers are the biggest winners,” Kemp says.
The growing popularity of the AR model in recent years owes partly, he says, to the regulatory challenges associated with operating an Australian Financial Services Licence (AFSL), which makes the model more appealing to insurance brokers.
Of course, as Standfield reminds us, while ARs are authorised to transact business by the licence of another, they’re held to the same standards in their provision of advice.
“ARs, like brokers, are subject to the same AFSL regimes, including all compliance, ongoing educational learning and reporting. The same rules apply, because the principal licence holder needs to manage and protect their licence in exactly the same fashion as a broker does.”
Correcting the record
Over the years, some unfavourable perceptions of ARs have persisted. Kemp says the biggest misconception people have with respect to the model is that ARs lack professionalism.
“It is contrary to the experience we have had across the Marsh
Advantage Insurance network,” he says.
“Cynics will say that any model that drives personal revenue based on how much a client spends is unhealthy. However, for many ARs, their business model is based on building strong client relationships, which are paramount to their success. As such, they provide not only a high level of service, but are also attuned to the commercial impact failing these clients would have on their business.”
According to Brent Campbell, a director of Oracle Group Insurance Brokers, when acting professionally, the only divide between licensed brokers and ARs should be ownership of the licence itself.
“An authorised representative still holds the responsibility to manage their corporate entity and act as a qualified, compliant professional,” he says.
“We shouldn’t hold a division between ourselves, rather work together to build a better image for the industry.”
Standfield speaks highly of his own IA network of ARs.
“I would 100% back every one of our advisers,” he says.
“The culture across the IA network is unique and whilst we have individual adviser businesses, we team well where it counts. The diverse professional experience of our advisers is on show every day, as they work together to solve clients’ issues.”
Standfield emphasises that becoming an AR with IA is not automatic.
“We cherish our AFSL and it is not for rent. We have a stringent on-boarding process that includes potential new ARs meeting existing advisers to ensure they understand our culture, and to allow one of our existing advisers to gauge how the potential new AR will fit into our IA culture.”
The state of play
Standfield thinks perceptions of AR networks today are strong.
“I say this by the number of new AR models that have developed over the last few years, the fact that large insurers are now owning their own AR networks, and from the quality of professional brokers who are becoming ARs,” he says.
“From an Insurance Advisernet position, the perception of what we offer in terms of professional advisers, geographically diverse distribution, [and] advisers who are equipped with technology to enhance their strong client relationships, were key features in our recent collaboration with the Commonwealth Bank. The CBA saw the potential in our network to assist their business bankers to provide broadened financial peace of mind to their clients.”
On the importance of the AR model in today’s broking community, Standfield says you can’t beat local business people dealing with local businesses.
“ARs have the passion because, ultimately, their success is based on how well they manage and service their clients. If they’re not attentive, in simple terms, their business suffers and so does their financial position,” he says.
“ARs aren’t guaranteed a salary each fortnight. They need to build their book, network well and, most of all, be there when the client needs them. My observation is that the vast majority of IA’s advisers are growing their businesses and IA’s client count is increasing also.
“So, as a team, we are getting a lot right!”
Discussing precisely what the AR model can offer, Campbell says he believes the real benefits are flexibility and freedom.
“You may be an individual entering the later stages of an accomplished career, simply looking to achieve a better work-life balance… Others are seeking to concentrate on building a solid portfolio whilst meeting their compliance obligations yet avoid costly overheads including IT, licence fees and PI premiums,” he says.
Kemp opines that while many people cite good work-life balance as the main benefit of being an AR, he’s not sure how true that rings in reality.
“The most successful ARs I encounter work harder and more diligently than most, and their success is no accident,” he says.
“The real benefit of becoming an AR is that the model provides ARs with the opportunity to back their ability to cultivate a client portfolio and be remunerated in correlation with their performance.”
Standfield says one of the key benefits of becoming an adviser with IA is getting the opportunity to build an asset for yourself and your family.
“Whilst the thought of running your own business can be daunting, the comradery and willingness of others within the IA group to assist you in becoming successful is also a great benefit, often not felt until you join. If you are willing to invest in continuing your professional development, using the support services we offer, I haven’t seen any new advisers fail yet,” he says.
“There are many great brokers out there who would make great advisers; however, many brokers are now caught up on the corporate treadmill and are spending less and less time with clients, and more time on corporate projects and other non-value adding activities.”
ARs today advise in a space that’s increasingly competitive. So, how do individual ARs stand out from their competitors?
“The environment is no more competitive for ARs than it is for brokers,” Kemp says.
“It comes down to quality of advice and value being provided to clients based on a foundation of trust and relationship.”
Talking specifically about his IA advisers, Standfield says they don’t talk about price.
“We seek to understand the business and then we can work through the areas where insurance can provide some risk mitigation,” he says.
“The 5 star Benchmark Survey has been invaluable in pointing out how underinsurance can be a real issue, and hence many clients who have had a survey completed for them have increased their property sums insured.”
He also talks about other tools with which IA advisers are equipped to provide key client support.
“Whether that be our IA App, early warning weather alert service or our IA emergency claims response service … We can provide these services for all clients due to our buying power and the cloud technology we employ right across the network. We have technology infrastructure that is flexible enough to provide our advisers and clients with timely information.
“Our advisers also have access on their mobile devices to business intelligence reports that show how they are tracking in terms of GWP written, income, client numbers and other benchmark activity to assist them in making the right decisions for their own business.”
Standfield also mentions IA’s rebranding and its work to increase its reach via several digital and social marketing campaigns.
“These initiatives have increased the number of leads going to our advisers. The importance of a nationally recognised brand to supplement our advisers’ strong personal brand is now paying dividends for our team,” he says.
And just how important is specialisation for ARs?
“Specialisation is important to the extent it displays professionalism and knowledge, therefore value and trust, to clients and prospective clients,” Kemp says.
Standfield says it’s a personal decision, based on which direction an AR wants to grow their business.
“We have many advisers who are specialists in certain industry groups, schemes or occupations. Those advisers who specialise, in my observation, are very willing to share their knowledge across the IA network,” he says.
But he adds that the essential point is that, at IA, culture drives outcomes for advisers and clients.
“Culture can’t be taught,” he says.
“It is derived by having a united sense of purpose and aligned values in the way we strive [to] provide ‘advice you can trust’. This can’t be replicated and, in my opinion, acts like a magnet to professional brokers who wish to build their own business with the support of a professional network of likeminded advisers, and systems and processes to allow them to spend quality time with new and existing customers, in the knowledge that all the back-office functions are delivered in such a way to reduce their time spent on non-value-adding activities.”