Provide valuable, efficient & compliant risk advice using a next generation Risk Insurance Needs Analysis calculator suite that also produces a Strategy Paper and SOA. The visual nature of these tools allows for the advice to be conducted in virtual (screen sharing) meetings as easily as physical meetings in your office.
This AstuteWheel solution links the insurance needs analysis to other upstream tools such as an electronic fact find; goals-based advice tool; and scope & scale of advice wizard to provide the basis for an easily generated insurance strategy paper or statement of advice.
Each of these tools provides the adviser and client with an interactive and visual experience that is part of the value chain of advice and also captures an evidence audit trail for compliance. The information is only ever entered once and then is passed onto downstream tools where required.
Life Insurance Framework
The Life Insurance Framework (LIF) legislation came into full effect on 1 January 2020 capping upfront commissions to 60% of the first year’s premium and trailing commissions to 20% of premiums in subsequent years. Also legislated were clawback provisions of 100% in the first year and 60% in the second year if a policy lapses (is cancelled).
These rules have made providing life insurance advice a very risky business for financial planners as a substantial amount of work completed could result in little or no remuneration for advisers if the client decides to cancel their policies.
A key driver of the LIF legislation was ASIC Report 413 Review of Retail Life Insurance Advice a damning review of the quality of life insurance advice provided by financial planners which found that of the 202 files reviewed 37% failed to meet the relevant standard for compliance with the law and of the 63% that passed there was significant room for improvement in regards to the quality of advice provided.
The reduced commissions and increased clawback provisions were legislated mainly to put an end to the ‘unnecessary or excessive switching of clients between policies to maximise commission income’ and to ‘improve the quality of advice’.
Aspect of poor advice that was targeted in the report were:
- ‘the complexity of the client’s personal circumstances was not taken into account’ and,
- ‘industry participants employed (rules of thumb) to provide guidance about appropriate levels of insurance for example a multiple of the insured persons annual income’
It is self-evident that these short cuts don’t represent quality advice however it is hard to understand how the legislators expected financial planners to find the extra time to provide a higher standard of advice and adhere to the more stringent level of compliance given the subsequent reduction in revenue.
To strike a commercial balance between these competing forces requires a rethink of the traditional paper-based process still used by many advisers that is both time consuming and inflexible requiring information to be captured and re-entered multiple times from initial fact find to statement of advice.
Provide Valuable, Efficient & Compliant Risk Advice
AstuteWheel has developed its next generation technology-based solution that allows information to flow seamlessly along a workflow path from beginning to end. The process is super-efficient because:
- new clients complete an online About You Questionnaire
- review clients complete the Electronic Reverse Fact Find
- the information flows into the system’s Fact Find Database
- this information pre-populates the Insurance Needs Analysis Calculator so fewer additional inputs are required
- the adviser uses the Insurance Needs Analysis Calculator to collaborate with the client in the meeting to determine the types and levels of insurance the client requires
- the tool provides advisers with a structured series of questions to capture the complexity of each client’s circumstances and is easy and logical for both the adviser and client to follow
- along the way the system allows for the adviser to include the reasons for decisions made
- comprehensive file notes can be generated as part of the audit trail
- a strategy paper and/ or statement of advice can be auto-generated
- compliance is built into the process.
- The system calculates the client’s insurance needs and presents a breakdown of the components of the total sums insured in a way that is easy for the client to understand rather than just producing a total amount that may seem excessive to the client.
Efficient & Valuable Annual Reviews
A comprehensive review process for life insurance can now be offered to your clients every year as the needs analysis process can be completed in minutes once the client’s fact find information is completed.
This provides real value for your clients as death and TPD insurance can, where appropriate, be reduced annually as living and education costs are adjusted each year and debt reduction or asset value increases are automatically factored into the sums insured.
Financial planners can now provide high quality life insurance advice in a cost effective and compliant way either as part of a holistic service offering or a stand-alone service knowing that their clients will see the value of their advice.
Turning grandfathered commissions into fee-for-service
Efficient scoping & scaling of advice