Risk advisors. What are your options?

Post the Haynes royal commission and QAR the Life industry has faced increased costs, compliance and uncertainty.

Whilst political parties have different views on risk businesses and the advisors who provide this critically important help and advice, the fact remains that the public service and the permanent bureaucrats seem to have a lasting and powerful impression and influence on what happens in this maligned sphere of advice.

And it is not necessarily what risk advisors want!

Whilst it appears that the industry is trying to become more efficient and utilise technology to reduce costs it cannot escape the day-to-day challenges of:

  • Rising costs operational costs (ASIC fees)
  • Increased premium rates
  • More stringent underwriting conditions for new business
  • Client affordability
  • Combined with a regulator that is constantly reviewing advice and consumer benefits.
  • Ever increasing ages of clients

As an industry there are an increasing number of advisers questioning the future and looking to realise and stabilise the value of their asset before retiring.

Or are you waiting like a possum in the spotlight to see if the industry takes an unexpected lurch into the unknown to lowered returns, more turned off commissions leading to lower resale values for risk?

From my experience in and around the industry I understand that there are probably 1000+ risk advisers over 50 that are in this position.

One could guess that there is a higher proportion of risk advisers over 50 than under 50 in this position.

What are your options?

  1. Remain and hope that the industry stabilises, and multiples remain firm for the foreseeable future. And that people and serious investors will still want to buy risk books.
  2. Take the capital that your risk business is worth now. Invest it into less volatile assets or allow it to be eroded as the client base ages

Based on current age and CPI increases overlayed with cancellation rates running between 12% and 16% there is risk of your asset losing value every year. This is a reality even with CPI increases of premiums for risk.

Please, do your sums. If your risk book is worth $200K in RR now and it decreases by just 12% p.a. it will only be worth around $140K in 3 years.

But what if you took the $200K @ say 2.75 times RR today, your capital is just over $500,000. It is in your hands, NOW. Not subject to the vagary of some product manufacturer’s whim!

At present Knowledgemaster (KM) has cashed up national buyers ready to acquire risk books. On such acquirer will even offer a no rise and fall condition!

Don’t you owe it to yourself to at least discover what multiples, amount (%) up front and the time a sale contract is exercisable?

KM can help you set up your IM (Information Memorandum), discuss realistic market sensitive multiples and a sensible time frame for final payment after the caretake period is over.

Contact us at jim@knowledgemaster.com.au or on 0408 520 453.