Risk advisers are starting to review the way they charge for advice and whether they will have to change their pricing models in light of industry reforms, says one practice management consultant.
Speaking to Risk Adviser, Elixir Consulting managing director Sue Viskovic said that following the release of the insurance edition of the Adviser Pricing Models research conducted by her firm, more advisers are analysing the different remuneration models employed by other advisers.
“I think the peak interest from people talking to us about getting help from the research is that a lot of them have stopped and looked at what it actually costs for them to deliver advice from their business,” she said.
Ms Viskovic added that these advisers comprise two groups: those looking to introduce partial fees with commissions, and those considering dropping commissions entirely for a full-fee model.
While the reduction in upfront commissions is motivating those considering partial fees, the three-year clawback period is also pushing advisers to consider introducing this type of pricing model, she said.
“Particularly if the three-year clawback provision is going to stay the way it has been suggested... [advisers] are starting to realise that they can’t put that much income at risk for that period of time for matters outside of their control,” Ms Viskovic said.
The other group believes this is an "indicator of things to come" and as a result, they are contemplating "removing commissions altogether".
Ms Viskovic added that her firm's research is proving to be a “tremendously powerful tool” for helping advisers in their business.
“Whilst we always find it is important for each business to determine their own pricing model to suit their service proposition, clientele and their aspirations, it is incredibly helpful to understand how others have approached their pricing,” she said.
"In previous editions we found most advisers received commissions for insurance, but this time around we drilled into that area in more detail, and the result is that we have found a variety of quite distinct models for pricing risk – between the three options of commission, plus blending commissions with fees, and even the new trend of charging fees only and writing insurance premiums with nil commissions."