Consumers to gain from shake-out of financial advisers: ClearView boss Simon Swanson

ClearView boss Simon Swanson says structural change occurring in the under-pressure life insurance sector is still a ‘work in progress’.

ClearView Wealth managing director Simon Swanson.

ClearView Wealth chief Simon Swanson has labelled the structural change occurring in the under-pressure life insurance sector a “work in progress”, and believes a shake-out among financial advisers is set to benefit consumers.

His comments come as the life insurance, wealth and financial advice company ratcheted up annual earnings guidance, and said it planned to restart dividends in fiscal 2021, subject to its capital position and second-half performance.

In late 2019, the Australian Prudential Regulation Authority focused on troublesome individual disability income policies and hit life insurance groups with capital penalties, which came into force last year. They remain in place until companies “demonstrate sufficient and sustained progress” to return their businesses to a sustainable footing.

APRA took the industry to task over huge losses and risks in the disability income insurance industry, which provides replacement pay if policyholders are unable to work due to illness or injury.
The regulator said unless the losses were stemmed it was only a matter of time until individual disability income insurance was no longer available.

Mr Swanson said ClearView had moved early and harder on a raft of changes, but the industry continued to navigate the process.

“The big issue is the entire life insurance industry is relaunching at one time,” he said. “There has to be significant investment in people, technology and processes.”

ClearView flagged that fiscal 2021 will be a “transitional year” as the life insurance industry shifts over time to rational pricing, increasing sales and sustainable product features.

Still, the group expects underlying full-year net profit to print at $21m to $25m, up from prior guidance of $20m to $24m, and buoyed by a strong claims performance.

That helped lift the stock by 3.3 per cent on Wednesday to 47.5 cents.

Underlying net profit climbed 27 per cent to $13m for the six months ended December 31 compared to the year earlier period, and interim statutory net profit dipped to $9.7m from $9.8m.

Life insurance gross premium income grew 7 per cent in the first half to $133.3m.

ClearView’s accounts also showed it received $2.4m in JobKeeper support payments during the COVID-19 turbulence.

Mr Swanson said while ClearView was retaining the JobKeeper funds, the group had not paid bonuses or approved pay rises last calendar year.

While life insurance earnings are overwhelmingly ClearView’s biggest earner, Mr Swanson also said he remained committed to the group’s wealth and financial advice units.

The wealth division saw underlying profit tumble 61 per cent, while the advice arm posted a 66 per cent jump in first half underlying income versus a year earlier.

Mr Swanson said even though the numbers of financial advisers across Australia was sharply reducing after the Hayne royal commission, he remained confident the shake-out would lead to an improved industry and consumers receiving better quality advice.

In November, the corporate regulator released a consultation paper looking at access to affordable advice and seeking stakeholder views.

Mr Swanson said while some simplification would be useful in the industry, he didn’t want to see standards drop.

AMP chief executive Francesco De Ferrari is among industry CEOs that have talked about the challenges facing the domestic market and providing customers affordable advice.

The industry was tainted by a spate of scandals and poor behaviour that was fleshed out at the royal commission.