Australia’s underinsurance gap is a growing concern that threatens the financial security of millions.
According to the Financial Services Council’s Life Underinsurance Gap report, more than one million Australians are underinsured for death and Total & Permanent Disability (TPD) insurance, and around 3.4 million lack adequate income protection. Given the cost-of-living crisis, these numbers have likely increased, making the role of risk advisers more critical than ever.
The financial advice industry has faced its share of difficulties in recent years, but there are signs of a promising recovery. Adviser numbers are beginning to stabilise, offering a hopeful outlook for the future. Wealth Data Insights recently reported an increase in adviser numbers, now reaching 15,562 – a sign of renewed optimism within the sector.
However, despite this positive momentum, the industry still faces a significant hurdle: bringing new talent into the risk advice space.
Recognising the need to attract new talent, both the government and the opposition have supported reforms to the FASEA financial adviser education requirements introduced on 1 January 2019.
These reforms aim to offer more flexibility in degree requirements, encouraging more advisers into the market while maintaining the professional standards of the industry. The new framework still requires a minimum bachelor’s degree and study requirements in finance, economics, accounting and financial advice. Furthermore, the government has proposed cutting back on red tape in the application process, which could help streamline entry into the profession.
However, for individuals looking to specialise in risk insurance, these reforms could go one step further. Tailoring the curriculum to focus more on risk-specific training, rather than a broad-based financial planning education, would help create a stronger pipeline of talent equipped to meet the growing demand for risk advice.
Industry efforts, like the ‘Better Off’ campaign launched by the Financial Advice Association of Australia (FAAA) are also helping address adviser shortages by attracting professionals from diverse backgrounds into financial advice. As FAAA CEO Sarah Abood said, “We believe many people are at a point in their careers where they want to make a real difference, and the financial advice profession offers that opportunity.”
But the ‘solution’ doesn’t stop with education. To truly attract new talent into the field, the industry needs to take a multifaceted approach, including:
Address the ‘image issue’
One of the biggest hurdles to attracting new talent into risk advice is the industry’s image. Risk advice is often overlooked by graduates in favour of industries like investment banking or financial planning, which may be perceived as more glamorous or financially rewarding. However, this perception overlooks the unique and valuable opportunities within risk advice.
Risk advice offers a uniquely fulfilling career – one where advisers help clients make life’s most critical financial decisions, like securing life insurance. These decisions shape not only a client’s financial future but also their family’s security.
Yet, this profound impact is often misunderstood or underappreciated.
The industry must do a better job of telling its story. Risk advice isn’t just about selling policies; it’s about forging deep, lasting relationships and being a source of strength and security during life’s most challenging moments.
We must invest in showcasing the incredible work financial advisers do for their clients. Industry bodies, insurance providers, and advisory firms should work together to amplify the message that risk advice is a noble profession – one that changes lives and provides essential financial security for Australians.
Highlight that it is a career built to last
Another powerful draw for new talent in risk advice lies in its long-term stability and growth opportunities.
For graduates seeking independence, managing a practice in risk advice allows for the flexibility to enjoy a healthy work-life balance while developing a loyal, sustainable client base.
In contrast to the potentially high-pressure, rigid environments of other finance sectors, risk advice offers a refreshing alternative-meaningful, client-centric work that fosters autonomy and deep, lasting relationships.
This appeal is bolstered by growing demand. A recent Adviser Sentiment Poll conducted by Viridian Advisory revealed that the demand for specialist advisers is on the rise, driven by the growing complexity of Australians’ financial needs. As Australians face increasingly intricate financial challenges, the need for expert, tailored advice has never been greater.
Beyond the intrinsic career satisfaction, the financial rewards are also compelling. In 2024, adviser salaries saw a significant rise, climbing by 37% according to recruitment firm Robert Walters, with ranges reaching $160,000-$220,000 in New South Wales alone.
Risk advisers who specialise in high-earning professional clients stand to benefit even more, as these clients often require comprehensive support with complex financial matters such as estate, tax, and succession planning -creating opportunities for collaboration with accountants and investment advisers. This, in turn, allows risk advisers to tap into additional revenue streams (e.g. referral opportunities) and enhance their service offerings.
For younger advisers entering the field, the long-term growth potential is enormous. As their clients’ earning power increases, advisers can cultivate lasting relationships and continue to benefit from new revenue streams-ensuring that risk advice is a career not just for today, but for the future.
Streamline processes and address financial viability
To attract new talent into risk specialisation, we need to address the structural barriers hindering growth, particularly the current commission levels. At 60%, commissions often fail to cover the costs of delivering advice, making it harder for firms to recruit and retain advisers. This gap between earnings and operational costs is widening.
A significant opportunity for improvement lies in simplifying and streamlining processes across underwriting, compliance, and administration. These areas can be cumbersome for advisers, especially for those new to the industry, and take valuable time away from client-facing activities.
Simplifying these processes would increase efficiency, allowing advisers to focus on what truly matters: serving clients and growing their practice.
However, simplifying processes alone may not be enough. The current commission structure, while common, isn’t financially sustainable for many firms. To cover the costs of training, compliance, and client relationship management, firms may need to rely on alternative funding sources.
One possible solution, in the absence of raising commission rates, is for advisers to supplement upfront commissions with fees or seek external funding to finance new advisers into the business. While raising commissions back to pre-LIF levels may not be feasible, a move towards a more reasonable rate-such as an 80% upfront commission-could help bridge the gap and make the model more sustainable.
The industry must adapt to these challenges to ensure the cost of advice doesn’t limit access to critical protection. Low commissions and rising premiums are already driving some advisers away, which contributes to the under-insurance problem.
The cost of advice is too important to ignore, and anything that can be done to make it more accessible for both advisers and clients should be considered.
By streamlining processes and adjusting commission structures, we can build a more sustainable industry, attract new talent, and ensure that Australians can access the advice they need.
Creating a Sustainable Path for Risk Advice
The future of Australia’s financial security depends on the choices we make today. While there are encouraging signs of growth and opportunity, the key to realising its full potential lies in attracting the next generation of risk advisers.
By reshaping the perception of risk advice, promoting career longevity, and addressing structural barriers, we can secure a sustainable path forward-not just for the industry, but for millions of Australians who depend on it.
