Trying to solve the mystery of normal action
Industry statistics have always been an interesting talking point as it allows advisers to take some time for self-reflection where they ask if they are acting in the same way as the statistics painted of the industry.
RGA – in association with the Financial Intermediaries Association of Southern Africa - did a survey of the financial advisory market to find out what the trends and challenges are in the industry.
A total of 273 completed responses were received from 865 clicks on an online survey link. While the numbers may be a bit low, the statistics and insight gained remain very interesting.
The tale of the tape
Based on the 273 respondents, the survey shows that the average adviser in the industry is between the age of 50 and 64 years old. The second most popular age group was surprisingly over 65 years old. A frightening statistic is that the combined numbers in the age groups of 25 to 34 years old and 35 to 49 years old do not equal the number of advisers in the industry that are aged between 50 and 64. Or is it rather an indication that the wiser, older advisers are completing the survey because the younger advisers are focussing on other things?
This does however mean that ours is an industry with a wealth of experience. The survey shows that 61% of the survey’s respondents have over 20 years of experience in the industry while only 10% had between 16 and 20 years of experience in the industry.
What products are these advisers selling to the industry? Diversification seems to be the order of the day with over 96% of the respondents indicated that they sell both life insurance and investment products to the industry, while 4% were limited to a single product strategy. The majority of these respondents (92%) are independent or multi-tied advisers while 8% are tied to a single insurer.
So if we take the survey as the baseline profile of the typical industry adviser, they are aged between 50 and 65; they have over 20 years of experience in the industry; they sell both life and investment products and they are not tied to a single insurer.
Is money to tight to mention?
According to the survey, about 27% of respondents are getting paid between R5 000 and R15 000 for investment fees while 25% of respondents are earning between R16 000 and R30 000 in commissions for life products.
But when do these advisers receive the commission they earn? Fifty eight percent of the respondents indicated that they receive their commissions upfront when it comes to life products as opposed to on an as-and-when basis. But when asked what percentage of their commission will be on an upfront basis in two years’ time, 70% of the respondents indicated that 20% of their remuneration will be in the form of upfront commissions.
Spreading the word
The insurance industry has had a reputation of being an industry of complexities and intricacies. And there is a problem with encouraging young talent to enter into the industry in order to sustain its growth. But is this a fair assumption?
When asked the question if the respondents thought that products sold within the industry were too complex, the response was astounding. Forty eight percent of the respondents felt that this was a fair statement while 52% disagreed with this sentiment. Respondents highlighted critical illness and disability benefits as the most difficult two aspects to explain to clients.
The question of whether an adviser should throw their lot in with one insurer or to keep their options open will be a debate that will take centre stage in the industry forever and a day. According to the survey, 92% of respondents will never tie themselves down to one insurer while a minor 7% feel that the safety net provided by an insurer is beneficial.
But will the experienced skills base in the industry recommend the industry to newcomers? According to the survey, 54% of respondents indicate that they would recommend financial planning as a career for newcomers. However, this is more prevalent with advisers that have over 20 years of experience in the industry. As one moves down the spectrum, the eagerness to market the industry is less resounding.
Editor’s Thoughts:
Does this mean that the industry is waning? Of course it does not. Over 60% of the 273 respondents feel positive or very positive about the future of the industry and have stated that there will always be a market for face-to face planning particularly for high net worth individuals. Is this the general feeling in the industry? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
