The clocking is ticking for older life insurance advisers contemplating whether to stay in the industry or quit, with changes to remuneration and education standards due this year, according to Connect Financial Service Brokers CEO Paul Tynan.

Remuneration changes will also affect the sale price of life books.

“Life advisers have traditionally focused on upfront commissions, not recurring revenue, but buyers aren’t interested in upfronts,” he says in a ClearView research paper. “They add no capital value.

“In the end, all the effort the industry has put into trying to maintain the status quo will prove fruitless for many old ‘lifies’ who won’t have much to sell.”

Mr Tynan says advisers who stay will have to provide broader, holistic advice and a higher level of ongoing service to get paid.

“That’ll result in more resilient and profitable practices with valuable recurring revenue streams and higher capital values,” he said. “When the time ultimately comes for principals to sell up and cash in on decades of hard work, they’ll actually have a compelling story to sell.

“This may provide little comfort to those who plan to sell in the next few years.”

ClearView predicts up to 30% of life advisers will sell their practices and retire in the next few years. The exodus is not dissimilar to the situation in 2004, when the Financial Services Reform Act forced out many experienced advisers.

ClearView GM Distribution Christopher Blaxland-Walker calls for a different approach, to avoid repeating the mistakes of 2004.

“For those in, or nearing, their 60s, who plan to retire soon, the industry must find creative ways to retain their knowledge and expertise,” he said. “That may include formal and informal mentoring programs that marry experienced advisers with newcomers.”

The white paper says mature advisers must start formalising and implementing their succession plans.

“Being well prepared will help them to attract the right buyer at the right price on their terms,” the paper said. “This might include a transition period to ensure the smooth handover of clients and retention of key staff.

“This approach would also allow retiring principals to coach and mentor new staff.”

The paper expects adviser numbers to bounce back after a period of consolidation.