Copper-fastening our relationship with the broker market

Diarmuid Kelly, CEO and Rachel McGovern, Deputy CEO Brokers Ireland recently paid a visit to Irish Life to discuss their relationship with the Financial Broker market and other issues.

What is Irish Life’s commitment to the broker market?

PR: Brokers have, and we believe always will, dominate the Life & Pensions market in Ireland. Last year, broker introduced business accounted for 78% of the total market and 80% of the individual market. This is because brokers are entirely focussed on their clients – providing the best advice, getting them the best value, and arranging the most suited product. They are also with them throughout their financial lives, especially at the critical milestones and events, when trusted relationships matter most.
In Irish Life, we mirror the market as brokers dominate our individual business flows, so the reality is that we are totally committed to the broker market and our success and that of brokers are intrinsically aligned. In recognition of this we have made some changes to our internal structure, so we are better positioned to serve the needs of brokers. 
Additionally, when making strategic choices at a Group level, brokers sit at the top of our stakeholder tree, so we consider the impact of any decision on our brokers before we finalise it. 

AK: Before coming over to the Life company side of the business both myself and Patrick worked in the broker market. I started my career in financial services as an adviser dealing with clients across three different brokerages in both Dublin and Limerick, and Patrick worked in Cornmarket for 20 years. I think this experience gives us understanding and empathy, and for my part I have I have always looked to use this to add value to the brokers I work with by trying to think ‘what would I do if I was still a broker’. Continuing to put brokers at the centre of the process is something both of us will champion as influential voices across Irish Life.
Even though I’ve only just landed in Irish Life, I’ve already been so impressed by our broker proposition. In recent years we’ve invested heavily in broker focused solutions and innovations, such as the broad and high performing fund shelf, the Underwriting Submission Platform, the suite of digital tools, and in making it easier to do business. Additionally, we have excellent people and brilliant service, which comes through consistently in the Brokers Ireland quarterly Life Office Service Survey. For me, it’s really reassuring to see the value that Financial Brokers put on an efficient, reliable, and dependable service proposition. This all adds up to a really compelling package which I intend to continue to develop with the team to ensure the broker always stays at the heart of what we do in Irish Life.

What do you think the Financial Broker’s role will be in relation to the new Auto Enrolment system?

PR: Minister Heather Humphries recently remarked that Auto Enrolment (AE) represents ‘the biggest reform of the pension system in the history of the state’. Only 35% of the private sector have some form of retirement savings and AE is expected to automatically enrol more than 800,000 employees who would not otherwise be saving for retirement. This is a hugely positive and progressive move, and we welcome it, though it remains to be seen if the 2025 target date can be met. AE is not an advice model so Financial Brokers will have a very limited role in its direct implementation. In many ways this lack of advice will highlight the overall value brokers bring to clients through the expert retirement planning advice they offer in comparison. One thing that is very clear is that Employers have questions on AE right now, and they are not waiting until the Government has finished building out the AE framework to get answers and plan accordingly.

AK: This is where there will be opportunities for brokers to add value. Employers in the SME sector always look to their Financial Broker for advice, so we see many brokers helping those clients stay updated on developments, understanding the proposed timelines, and planning how to make the implementation of AE a positive experience for their staff. We want to leverage our insights and knowledge as the largest group pension provider in the country to help brokers to stay informed and to simplify the AE introduction. Additionally Financial Brokers have an opportunity to highlight some of the key differences between the proposed AE ‘government bonus’ model and the long-standing income tax relief model associated with traditional occupational pensions and PRSAs. These are two very different pension models which will co-exist after the introduction of AE. This will lead to an increased need for advice and opportunities to show where the income tax model is more advantageous for individuals. I often highlight to brokers that every time something changes, be it legislation or systems, it creates the need for advice for employers and individuals, and brokers can add value here by removing the complexity for their clients.

How do you think sustainable investing will affect Irish Life’s product offering?

PR: While many of our funds have used ESG related screens for quite some time, the introduction of SFDR regulation has helped the industry to classify these funds more clearly. For Irish Life this means we can now offer brokers a wide choice of both green and darker green fund options from each of our investment managers. Like most providers right now, we see current demand for darker green funds as being low but growing. We are confident that the wide range of funds we offer means we are ready to meet increased future demand. Rather than adding the next in vogue fund for brokers to “sell” we want to continue and build our investment proposition to enable the broker to solve the investment needs of any client in any situation. This quality of this proposition will allow the broker to add value consistently through their advice, rather than feeling they always have to pick the next top performing fund.

AK: Although the regulation has been a step in the right direction, I think it’s fair to say that the retail market has struggled with the interpretation of the new guidelines. It also looks likely that SFDR regulation may be modified in the future to address this issue. At Irish Life we remain committed to supporting brokers and their clients in adapting to any changes in this space, and we benefit from the breadth of knowledge and expertise of our different fund partners – Amundi, Fidelity, ILIM and Setanta. The advantage of dealing with 4 different managers is they each bring different capabilities, philosophies, and styles, and we can leverage this diverse global knowledge to bring valuable insights and solutions to local brokers. I’m keen to explore opportunities to continue to expand our fund offering, so that we always bring the best quality solutions to the market.

How do you see the Financial Broker market evolving?

AK: Over the past few years the dominant theme has been the volume of aggregation and consolidation activity in the market. I think it’s particularly interesting that so much of this is driven by foreign advisory firms looking to develop a presence in the Irish market. I think it’s a real testament to the vibrancy and attractiveness of the Financial Broker market that such firms are willing to pay large multiples of earnings to acquire quality advisory businesses. This has been accelerated by the transition to recurring income over the last 10 years. Sustainable, advice-focused business which can demonstrate value and client proposition are best able to justify fees and trail. We want to support brokers in this space, and this model makes them very attractive to buyers who clearly see value and scope for further growth in this market. Based on this I think this trend of consolidation will continue.

PR: I would agree, and I think this is a great outcome for the industry. These firms look to be here for the long haul and are investing beyond just the purchase price of the business. I think this will lead to fewer firms but more advice, both in terms of access to expertise and through an expansion of the range of services offered clients. It also provides an exit mechanism for brokers, who are able to monetise their lifelong effort and entrepreneurialism, while giving clients important continuity of service and relationship, which is a hugely important consideration for brokers retiring from the business.

What do you think are the strategic threats and opportunities for Financial Brokers?

PR: In a recent survey we asked Financial Brokers what the greatest challenges facing their businesses are right now. We had almost 200 respondents across a broad spectrum of firm sizes and geographies. The number 1 answer from 58% of respondents was the burden of Regulatory Compliance. With a new Consumer Protection Code (CPC) due next year, I don’t think this challenge is going to reduce any time soon. However, there is no doubt digital tools can help brokers in positioning and documenting their advice and bring efficiencies where manual processes exist. Overall, we have to view Compliance positively because as we professionalise and improve transparency, we build trust with customers and therefore grow the numbers who get regular financial advice. Advised customers are proven to achieve better financial outcomes, and Financial Brokers are ideally positioned as the go-to for advice.

AK: The second challenge our survey identified, called out by 31% of respondents, was recruiting and retaining the right talent. This was particularly focused on qualified financial advisers, of which there is a significant scarcity at present. This is having the impact of bidding up salary and incentive packages that advisers can command, which in turn is creating a lot of movement in the market. For broker firms with salespeople, this is creating a lot of headaches and financial challenges. Again, I think we have to look at this as an opportunity. Having started my career as a lowly adviser it’s really heartening to see this role elevated to its rightful position amongst the ranks of professional vocations. The growing proliferation of industry credentials such as the CFP, MSc, SIA, Chartered and RPA qualifications on top of the QFA supports this professionalisation. In the long term it is great for the industry and the customer as this will attract more talent to the role and allow existing advisers to build lifelong careers which are attractively rewarded. 

Do you think it will be necessary for Financial Brokers to have scale in the future?

PR: Scale clearly brings many advantages to a business, however, scale doesn’t build relationships and trust, so I think there will remain space for Financial Brokers of all shapes and sizes to continue to thrive. Brokers have tended to evolve with the market in order to always remain relevant to their clients. There is an ever-present and growing need for the provision of professional advice on a range of important areas including protecting loans, families and businesses, taxation, investments, attitude to risk, retirement accumulation and decumulation, and inheritance planning. This is the cornerstone of what brokers do best, no matter their scale, and will remain a hugely valuable and necessary service to their customers.

AK: I firmly believe the smaller, rural broker will continue to play an important role in our industry. These firms are embedded as part of the commercial fabric of their communities. They are often long established, inter-generational, family businesses, but no matter what their backstory they are always highly trusted. If anything, their customer proposition is even more focussed than their larger, urban counterparts, as their clients are also their neighbours, their friends, and their extended families. This bestows a personal responsibility to ensure the best outcome, as well as a professional one.
Irish Life has a shared responsibility here as brokers need consistency from their life company partners across the products provided, the fund proposition, the pricing and charges, the broker supports and the overall service. Whether part of a large advisor network or a one-person firm we are trying to make sure that all brokers benefit from our market leading proposition and are supported in a way that fits their business model.

How do you think artificial intelligence will impact on Financial Brokers and advice?

PR: Artificial Intelligence is a fast-moving area, and I have no doubt that the likes of Chat GPT will become a more integrated part of our business going forward, and as well as accelerating efficiency and experience, it will have predictive and propensity forecasting benefits. In Irish Life, while we are experimenting with a number of such cases, the main way we use artificial intelligence right now is process automation. AI and machine learning works well where there are repetitive, often manual processes, that can be learnt and automated. Unlike people, computers don’t get bored doing the same thing every day. This enables dual benefits of improving efficiency and service and allowing us to redeploy our staff to more fulfilling and value adding roles. There is a good example of this in our Health business where we have been able to deploy a bot to read day-to-day medical expense receipts, which there are no standard templates for, and some dubious handwriting exists and transposes the data onto our claim portal in digital form. This allows us to pay claims faster.

AK: For some time there has been a lot of talk of robo-advice replacing the actual human financial adviser. There are undeniable benefits to roboticization of parts of the advice process – information gathering, factfinding, needs analysis and report writing can all be made more efficient, repeatable, and scalable. Similarly, simple needs and transactions can be automated to improve product coverage and access to the top of the advice funnel. However, you don’t build long-term relationships and trust through a robo-advice process. I firmly believe that for the big decisions at the key moments, clients will always want to look into the eyes of real people to get the reassurance they need. As such I believe we will always be at most hybrid when it comes to key advice consideration - the execution of the business can be electronic, but the empathy cannot. If AI empowers brokers to spend more time doing what they do best – namely simplifying complex financial decisions and taking stress out of their client’s lives - then I think we will all welcome it.

Finally, what are you most excited about in your new roles?

PR: I really believe the future is so bright for brokers. The opportunity in an affluent Ireland is huge and the value brokers can bring to clients has never been greater or more necessary. Irish Life is dependent on a vibrant and successful broker market in order to share this opportunity. I’m looking forward to bringing my experience as a broker into Irish Life and challenging the organisation to find new and mutually beneficial ways we can harness the power and breadth of the group to best support the needs of brokers. 

AK: In all my prior roles I’ve always preferred being out of the office meeting brokers, building relationships and developing business. We have a series of in person and virtual events planned over the coming months so I can’t wait to get out and about to meet and thank as many brokers as possible. This will give me a great opportunity to listen, and to bring these insights back as we shape the future of our business around the needs of the broker.