New MetLife research has revealed a disconnect between perceptions of cost and value when it comes to insurance and financial advice, as it identified the number one priority advisers should have to retain clients.
The MetLife Adviser-Client Relationship Report 2019 suggested that confusion around the value of financial advice remains despite an increase in the number of advised Australians who are informed about their insurance than last year.
The report said more advised Australians were able to state their level of cover, premium amount paid, as well as explain the difference between stepped and level premiums. However, three in 10 consumers and five in 10 SMEs consider 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, suggesting an ongoing need for financial advisers to demonstrate their value to clients.
Consumers and SMEs would have to be educated more on insurance, given that 40% of consumers think that life insurance bought through an adviser is pricier than those which can be bought directly online or through a superfund, but only a third of consumers believed the product was better quality.
Findings showed that 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 a critical need to retain commission-for-advice as a way for people to pay for these services, MetLife 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,” said Matt Lippiatt, MetLife Australia head of retail sales.
“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. 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, 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.”
In order to demonstrate the value of tailored financial advice, MetLife urged financial advisers to engage in ongoing and transparent communications to help tackle some of the biggest misperceptions that inhibit consumers and SMEs from seeking out the services of financial experts.
“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 advisers’ business plan for 2020,” Lippiatt said.