Aaron Zelman (00:00):
It’s advice for everyone, is self-awareness, whether it’s in business or in life, and I think achieving more self-awareness will lead to better outcomes. If you really know what you want, and what you’re good at and what you’re not good at it, and you think it through and you apply it to your job or your business or which clients you wish to use or what type of advice actually ticks your boxes or makes you feel comfortable in what you do, that will lead to much better outcomes.
Fraser Jack (00:30):
Hello and welcome to the Goals Based Advice podcast, where I have conversations with pioneers in the new world of financial advice. I’m your host Fraser Jack, I want to thank you so much for tuning in today. I would also like to thank our supporting partner, Advice Intelligence, for powering this podcast. If you’re enjoying the show, then please help me spread the word. Find your friends and colleagues that don’t listen to podcasts, and teach them how you find and listen to your favorite shows. I’d also love it if you give me a quick review on iTunes.
Fraser Jack (01:00):
In this episode, I chat with award-winning specialist risk adviser Aaron Zelman. We chat about how the new world of advice will affect risk advisers, and if they will be able to maintain sustainability. Aaron tells us about his business and what his plans and challenges are for the future, how he finds his clients by attending medical conferences, and how he started and ran one of the original advice communities, the LinkedIn group Australian Risk Advisers, that grew to over 3700 members. He also mentions his rockstar days, when he played bass in a band, and his time onstage performing with the artist formerly known as Prince.
Fraser Jack (01:40):
If you’re thinking about what the new world of risk insurance will look like in 2020 and beyond, then this is the episode for you. Let’s hit play now on my chat with Aaron Zelman.
Fraser Jack (01:55):
Welcome to the show, Aaron.
Aaron Zelman (01:57):
Thank you, Fraser. It’s an absolute pleasure to be here.
Fraser Jack (01:59):
It’s fantastic to have you on, actually.
Aaron Zelman (02:02):
Yes, well, you’re getting a rare breed today.
Fraser Jack (02:05):
So we’re coming up, it’s currently still December, probably by the time this comes out it’ll be closer to January, but getting ready for a bit of a break over the summer.
Aaron Zelman (02:14):
Looking forward to it. It’s been a hell of a year for not just me, but I think for everyone in our whole industry. I’m sure everyone’s ready to unwind.
Fraser Jack (02:21):
Yes, I think a well-deserved R and R is on the cards. Mate, do you want to give us a quick overview, give the listeners a quick overview of yourself?
Aaron Zelman (02:32):
Absolutely. So, I’ve been in financial advice for about 15 years now, but really entirely risk-focused. I just sort of landed in that area. I was interested, I had been a bit exposed in my prior job, which was at the ANZ bank, and I saw, those days they were essentially selling FUM, and there was a bit of risk that I got exposed to, and I just took a real shine to that. So, for the last 15 years I’ve literally been talking to people about death and disability and all these terrible things that can happen. But I know that they can happen, and I just want to get people well protected, and I don’t really mind having those conversations, in fact, I really love it. So, that’s what I’ve been doing for 15 years, mostly employed by a particular business that I’ve now exited, and self-employed, and enjoying it very much.
Fraser Jack (03:19):
Fantastic. So, specialist risk, mostly to professionals and medicos?
Aaron Zelman (03:24):
That’s right. Medicos are the big segment within the professional group that I’ve looked after over the years, I seem to have quite an affinity with that group. And I have dealt with others, and also just people in business scenarios, which is pretty rare still. Even though I’ve been a risk specialist [inaudible 00:03:44] covers come up from time to time, but that’s really on the periphery. I enjoy those advice scenarios, but it’s really I suppose you could say mums and dads, people who have higher incomes and often higher lifestyles than your typical mums and dads, and that brings with it some challenges and opportunities as well.
Fraser Jack (04:05):
Fantastic. So, almost people like yourself in a way?
Aaron Zelman (04:09):
Well, I try to pretend I’m a doctor occasionally when I run through the personal statement and start to tell people about their liver functions being a bit hard, but no, I’m not a doctor, and I don’t know how sophisticated I am. I was going to say you should see me at the footy, but then again, I don’t go to the footy, so you probably won’t see me there.
Fraser Jack (04:27):
So, let’s go back to the beginning. How did you get involved in the industry in the first place?
Aaron Zelman (04:34):
Yeah. Well, I was actually on path to becoming a psychologist, possibly a teacher. I was doing an arts degree, but also a business degree, and I don’t know why I just had a gut feeling that would be useful, but I was more interested in, essentially, helping people than making money. And then I did, at the time, find myself in the ANZ graduate program. I’d applied for various other groups and I thought, “Let’s give this a shot.” And as I said, I started there, I was actually a teller, and I got exposed to the year 2001 and I got exposed to financial planning there, and there was some people who I quite respected and there were other people who I felt were pretty slimy and pretty dodgy.
Aaron Zelman (05:12):
In a way, that was encouraging, because I could see they were doing something very important, they had the trust of their clients and they had a big responsibility and I thought that was really important, but I could see it was a particular sales agenda there. But still, that kind of attracted me as well, because I like business and I do like making money as well so I thought, “Hopefully there’s a path for me there.” But I really just had a real affinity to the risk side from the beginning. This adviser who was there who I really did respect encouraged me to get my own insurances in place, and having type 1 diabetes, I found that wasn’t quite as simple as it sounded. I found it really difficult to get insurance, and I really wanted insurance.
Aaron Zelman (05:55):
I wasn’t married at the time, but I was pretty serious and conservative-minded, so I could see why this would be important stuff. And then I went on this journey of trying to get myself cover and it was really difficult, and then before I knew it I was employed in that context, but I always kept in mind how important it was to get people cover when there were challenges. And also, I know that things happen in life. I’ve actually had a brother who passed away many years ago, and I’ve seen death and disability amongst people not too far from me, so I know things happen in life. So, I just have a real natural interest in this stuff, and been very fortunate to learn from some of the best and apply my skills accordingly.
Fraser Jack (06:39):
Yeah, it’s amazing, isn’t it, how the past makes up so much of us. Going back, your teaching and psychology interests, really about communication and how people think and understand information, all the way through to your own type 1 diabetes and conversation and if you can help other people go through that, and then of course your brother. So, it’s amazing how that past shapes what we do now.
Aaron Zelman (07:06):
It is, and I think in my area of risk advice, so much of it is the psychology. And it’s not about selling a person, giving them something that they don’t really want. It’s not about that. It’s about moving them forward along a process and helping them think about things that they don’t really want to think about, and taking appropriate action. You have to kind of almost overlay the technical side so that it’s all logical from a technical perspective, but so much of it is just the conversation and getting them to take action, and helping them see a context for it in a way that it’s palatable. That’s the real skill set, and that’s about reading people and I suppose sometimes softly introducing them to these concepts, and not banging them over the head with it, and making them fear even.
Fraser Jack (07:53):
Yeah, understanding when to accelerate and when to brake I guess.
Aaron Zelman (07:57):
Mm-hmm (affirmative), absolutely.
Fraser Jack (08:00):
So, as you said, you went in as an employee to start with. How did you get that role?
Aaron Zelman (08:08):
So, I was at the ANZ bank and, perhaps ironically, I couldn’t actually get an advisory role. Maybe I was too young or perhaps my sales skills weren’t sufficient to the powers that be. So, I ended up working in the private bank, but I stayed very interested in risk, and I was introduced at the time to Wayne Handley, who was the MD of Apogee, which is a NAB licensee. And Wayne understood, he could see where I was going with all this and he was really encouraging, and he introduced me to one of the Apogee businesses at the time. I guess we hit it off, we took greater steps forward to work together, so I was an employee for there, and I really found my role in the industry in that context.
Fraser Jack (08:59):
So, you almost went and found it and pushed your way in to what you wanted to do?
Aaron Zelman (09:02):
I did, it did sort of happen that way. And I don’t know if it’s a good thing or not, but I was never a paraplanner. I don’t call myself a financial planner. I don’t feel like I’ve ever done a financial planning role, I really haven’t. I’ve never written an SLA or presented an SLA that’s really beyond risk only. Whether that’s a good thing or not I don’t know, and it’s interesting now in line with the Code of Ethics, which is really forcing us to broaden the advice that we do and the considerations we take. That’s quite interesting for me right now and perhaps challenging because it’s pushing me in a different direction, but I’ve really been very, very focused from the get-go. I’ve done a Master’s in Financial Planning so you’d think that I’d be able to bring all that sort of knowledge in, but I’ve never really practiced in that area, as I said. So, I’ve been risk-focused and love it, but it raises its challenges for the next phase.
Fraser Jack (09:58):
Yeah, this is a really interesting point, because there’s a lot of risk specialists around in the same boat, haven’t really felt ever that they were a financial adviser or a financial planner, because they weren’t doing full financial plans. And this sort of came in when FSR came it, didn’t it, with the scenario that anything under the Life Insurance Act became a financial product and therefore advised from a financial planner. So, yeah, it’s an interesting one for risk specialists in this space, to actually, they grapple with all the time, are they a financial planner or aren’t they? We sort of group it together, and maybe we need to reassess whether that’s the case.
Aaron Zelman (10:44):
Well many people would love a reassessment. I don’t think that’s going to happen, personally. It’s quite conceivable that back in the day when they grouped it, they could have put life insurance advice in the category of general insurance advice, which is just a different world to financial planning, but it didn’t happen that way. So, people like myself, I don’t know how many pure risk specialists there are out there. I would have said in the past it’s a bit of an endangered species. I’m hoping now it’s not literally a dying breed, but there’s definitely challenges for us, how we grapple with that, just with the Code of Ethics itself, which requires the broader consideration of other areas and the identification, et cetera. So, I would say that people who want to be literally risk specialists going forward won’t really be able to do that. They’ll have to work with others. And that will work for some people, some people just won’t find others to work with or be suited to that at all. So, that’s the real challenge I’d say.
Fraser Jack (11:45):
Yeah, there’s plenty of challenges ahead for risk specialists, including reduction of commissions coming up, 1st of January there’s some changes coming. We’ve noticed recently with APRA some changes coming up.
Aaron Zelman (11:58):
Fraser Jack (11:58):
Things like agreed value contracts and a few other things that we’re not quite sure where it’ll settle yet, and the idea of people talking about using fees or charging fees. So, there’s a big changing landscape going on. How are you doing with your fees versus commission conversation?
Aaron Zelman (12:17):
Yeah, so, to this day I’ve really just run the traditional model of commissions. I’ve thought a lot about the alternatives, and I’ve had discussions with some clients and given some the option. The commission model, it has its conflicts and it has its negatives potentially. For me, and I think for my clients, it’s worked. And whether I’ll become forced to only go on a fee basis in future, time will tell. Perhaps if we’d had a different win over the last federal election things would have sped up on that front, but at the moment it seems there is a way forward with commissions it would seem. But again, it’s another area of challenge for me. how do I incorporate more fees rather than commissions, et cetera? And I don’t really have all the answers there at all.
Fraser Jack (13:11):
Yeah, this really should be up to the client, shouldn’t it, the consumer, to decide how they want to pay you. But have you had that conversation with them? Have you found that they prefer to pay it out of the product?
Aaron Zelman (13:25):
Yes, I have. The conversations I’ve had, and the way I’ve positioned it, the commission model was preferable. You could imagine a scenario where the opposite answer would be true. It depends, also, what an individual is willing to do. At the moment we have that choice, and there’s no limitation on what fees we charge. So, if my fees are $100 million to do something versus the commission, as an extreme example, commission will win up. But that will be on a case by case basis as well. If that becomes mandated, it’s just going to increase the trend of advisers being pretty much forced out, because I don’t think the average bit of insurance advice will be economical for the average person requiring that advice. I think the economics won’t work, so again, it will just push everyone towards the higher end, which is definitely happening in the advice space broadly anyway.
Fraser Jack (14:28):
Yeah, it’ll be interesting to see how this pans out I think with pricing and how that’s going to work for the end consumer and how they end up paying, and whether the not so high income earners families are actually going to be able to get advice in this space, so we’ll have to wait and see.
Aaron Zelman (14:48):
And I think just the other major trend there which you didn’t quite touch on is the educational hurdles, and although things have been pushed back, that’s just I think really going to see a huge number of very skilled professional people exiting sooner than they otherwise would, and the demographics probably weren’t great even before all this, there was going to be too many older people leaving, not enough younger people coming in. So, I think the average Australian in need of advice, the average mum and dad who wants to get advice, will really struggle to find the right people in several years to come, let alone at a price point that works for them. Aside from the risk landscape, you’re seeing massive increases to licensee fees, and just overall the compliance cost, and that has to get translated back to consumers. I’m not whinging about it per se, it’s just, there’s major, major changes afoot and I think unfortunately, financial advice will be for the wealthy.
Fraser Jack (15:48):
Yeah, I can certainly see it heading in that direction. I guess that’s where technology’s going to have to step up and come in and help out.
Aaron Zelman (15:55):
Fraser Jack (15:57):
Now, as you mentioned before, you’ve been employed in a business for a long time, you then spent a little bit of time on your own, and back to being employed again, and now back on your own again, sort of moving through a few different phases of your career. Talk to us about the difference between being a self-employed and employed?
Aaron Zelman (16:17):
Yeah, I’d say like anything there’s pros and cons, and there’s reasons for heading in one direction or another. That’s pretty vague I suppose, but I believe that to be the case. Self-employment has a certain freedom to it, there’s an excitement to having a direct proportion of everything you earn is yours, everything you spend is yours, et cetera. There’s obviously security in being part of a bigger team and having other people be also the revenue generators, et cetera. That gives a level of security as well. I’m still working out what’s most suitable for me. The other thing with partnerships as well is you need alignment, and that can vary over time. We’re talking about a very dynamic environment that we’re in, and there’s even personal philosophies that change over time or get expressed over time. So, I think, yeah, it’s probably pretty rare for partners to be all on the same page, definitely, just like with rock bands. They often get together and have success, and they often split up. It’s sort of the general nature of things, and to some degree, even marriages are a bit that way in today’s world.
Aaron Zelman (17:34):
So, there’s pros and cons with it. I think the opportunities for self-employment, unfortunately, certainly for risk advisers, is on the decrease. I mean, with the commission structure, even what it will be in a few weeks, it makes it really, really hard for people who aren’t established and don’t have a client base or don’t know how to attract clients to really go out and become self-employed. I think you’re going to see very few people who are brave enough to do that, but in some ways, it’s going to be a time of greater collaboration as well, which can be really positive.
Fraser Jack (18:07):
Yeah, that’s a really interesting piece, that collaboration piece. As you mentioned, getting into a business partnership with somebody, really good idea to make sure you have that prenup agreement in place to make sure when things, and let’s just assume that they always do, when it’s time for one or both of the partners to move on, it’s time to invoke those agreements. So, they’re pretty handy.
Fraser Jack (18:32):
Now, you mentioned rock band. You’re a bit of a muso yourself, aren’t you?
Aaron Zelman (18:36):
Yeah, I definitely am. My kids find it surprising when I start telling them about the various bands I’ve been in and who I’ve been onstage with. They sort of find it hard to register that daggy dad did all that, but yeah, I’m a very passionate musician. I mentioned before I don’t go to the footy, that’s true. Sport’s not my thing, but music is absolutely my thing. At one stage I did link it to my world of life insurance. I remember, I think I’d been onstage with Prince, well, that’s a fact. And I had a picture of it, so I got to send my clients an SMS of my picture of me and Prince, and got to tell them, you know, “At least you know you’ve got the funkiest life insurance adviser in the world,” or something like that, I can’t remember what it was. But it was quite a rare combination of life insurance and rockstardom. Don’t know if I’m a rockstar, but you know what I mean.
Fraser Jack (19:29):
The Prince of Risk.
Aaron Zelman (19:30):
Yeah, that’s right.
Fraser Jack (19:32):
Is it bass guitar?
Aaron Zelman (19:34):
Yeah, I play bass. I play guitar, but in bands I often play bass guitar. And in a way there’s, again, a connection to what I do in my work because bass guitar’s a bit, you know, it’s essential. To get that rock sound you really have to have the bass. It just makes it all gel and gives it a bottom end, and that’s a really fundamental thing to what I bring to a band. But also, in the competitive world of getting into rock bands, it’s actually good to have something that’s a bit nichey, it’s a bit in demand. So, I always found it really easy to get gigs playing bass guitar, and I kind of realized one day that it’s a bit like what I’ve done focusing on risk. It’s not the thing that your average financial adviser wants to even go near, so it always gave me a lot of opportunities as well.
Fraser Jack (20:20):
Hey, there’s lots of synergies, isn’t there, because if you think about risk setting the base platform for them to grow upon.
Aaron Zelman (20:29):
That’s exactly right. That’s where I like to be.
Fraser Jack (20:31):
Right, okay. So, we’ll have to come up with a new nickname for you, as the bass guitarist. The Bass of Risk, something.
Aaron Zelman (20:37):
Fraser Jack (20:39):
We’ll work on that one.
Aaron Zelman (20:40):
Okay, got it.
Fraser Jack (20:41):
We’ll get some people to leave some comments in your LinkedIn post about it.
Aaron Zelman (20:45):
Yeah, thank you.
Fraser Jack (20:49):
So, you’ve set up your own business now, you’re out on your own. It does provide a little bit more flexibility, as you mentioned, for yourself and your family.
Aaron Zelman (20:56):
Yes. Yeah, that’s a great thing. And getting to be quite choosy about the clients that I bring on. That’s good, because I think, again, there are clients who are not going to be profitable or not suitable to deal with, especially considering the level of care and attention that we have to give in this new world, and there’s a finite number of clients that we can take. So, I’m enjoying that aspect as well.
Fraser Jack (21:25):
Yep. Now, you mentioned before that medicos and doctors and professionals in that space were sort of your niche client. Now, you go to conferences don’t you, and talk to them there?
Aaron Zelman (21:41):
Yeah, so, the main area I’ve brought on new clients aside from client referrals is not through referral partners. It’s really been availing of opportunities that anyone can discover, but not anyone can actually succeed in. It’s a little bit perilous in the sense that you can easily spend a lot of money to go to a medical conference and walk away with very little. So, I don’t mind talking about it because, frankly, it’s great and it’s really difficult [inaudible 00:22:12]. But medical conference has been a great source of new clients. It’s a little bit transactional... Sorry, I’ll rephrase that. When you meet someone in that context it feels quite transactional. It’s a bit like when you’re walking in the train station and someone wants to sell you a credit card. It can be awkward to meet people in that context, and it’s not what many advisers would consider a starting point to an advice relationship. So, that’s one of the, I don’t know if it’s a downside, but it’s just the realities of. But I’ve met some of the most lovely people and some of my greatest clients in that context, so I keep doing that, and obviously it then leads to more opportunities as well.
Fraser Jack (22:54):
Yeah, do you find that, the whole reason you would do that is that know, like, trust piece of introducing, that very initial stage of the relationship. Do you find that if you don’t push too hard, and you’re only just trying to get to know them, or around that consistency of going and they start to just see that consistency?
Aaron Zelman (23:15):
Yeah. Well, there are people that fit into that scenario where I’ve met them a few times before they eventually give you time of day. But often, people will... Yeah, it’s a start to a conversation. So, you might meet someone at that sort of conference and you get nowhere because they’re just not at all interested, and that’s quite a lot of the people actually. But every one in 10 or one in five or something like that will start to chat to you. So, it’s a good way, and I suppose it’s a numbers game. The more people you chat to, the more people you’re going to find who, in speaking to you, they realize, “Oh yeah, this guy is okay. Let’s discuss further.” So, I just think it’s a very helpful environment. But I guess for anyone, if you can be in social settings or business settings where you’re exposed to more people and you don’t look like the three-headed monster, or you allay people’s fear that you are some sort of unrelatable person or maybe someone who’s therefore a bit dodgy or untrustworthy, then you will get to first base more, and then you’ll progress that each time.
Fraser Jack (24:27):
Yeah, so it’s really just about starting conversations and then [crosstalk 00:24:30] later on.
Aaron Zelman (24:31):
Yeah. I think so, I think so.
Fraser Jack (24:33):
Yeah, good, good. Now, when it comes to setting up business, how have you gone with using, say, business coaches?
Aaron Zelman (24:40):
Yeah, I’ve used business coaches at times, and probably some of my greatest times I’ve used them, and for various reasons that’s fallen off. You think, “Oh, I’m okay now,” or, “I’ll come back to this,” or, “It’s not quite working,” or whatever it is. So, I would say it’s probably time to use coaches more, and just to reflect on things, because you have a limited perspective on things and you can always learn from people. But again, you’ve got to make the time and you’ve got to pay the money, but I’m quite a fan of that.
Fraser Jack (25:17):
Yep. Now, I first got to know you many years ago when you jumped on LinkedIn and LinkedIn became a thing, and you started up a group called the Australian Risk Advisers group.
Aaron Zelman (25:30):
Yeah, I did. It feels like a while ago now.
Fraser Jack (25:32):
Talk us through that, yeah.
Aaron Zelman (25:34):
Absolutely. So, that was a fun time in my career. I had just read a book by Seth Godin called Tribes, and he was all about leading people who want to be led, amongst common interests, and I saw there was LinkedIn, and you could just start a group, and why not? And at that time, I was particularly focused, I suppose like yourself, certainly now, on my fellow advisers. So, I really created that forum and really encouraged people to join, and also ran some, I think really good events, frankly, bringing people together and learning, and there was a real sense of community amongst the group.
Aaron Zelman (26:13):
So, that really just went from strength to strength. There was a thousand people, then two, then three, et cetera, and I think people got a lot out of it. And then at some point, I got out of it. Actually, I did a bit of a 180 and just thought, “I want to stop focusing on the industry, focus on my business,” because it did take a lot of my time and energy and effectively my money to do all that. So, I kind of exited left, although I think the group still goes. I don’t really go there anymore, but yeah. Do you ever see it?
Fraser Jack (26:48):
Yeah, every now and then something’s on, so it’s still ticking over. But it was a really interesting experiment I guess from your point of view, just how this social media thing can take hold, and obviously LinkedIn was a group for professionals, which you’re still interested in now. But yeah, it’s interesting. It would have been some great learning together, but you’re absolutely right, you’ve got to at some point work out, is this for pleasure or for kicks, or is this for your business, and I guess it was...
Aaron Zelman (27:20):
Yeah, there was also a third element to it, which was it was also for, I was advocating for my fellow advisers as well. And this was also before LF became a reality as well, for riskies to kind of really get their voice across, and there’s been pages and pages of comments on various blogs or whatever it is over the years on all these topics, and everyone’s a bit sick and tired of it all, but I think it was good to sort of galvanize people to advocate for themselves, and I was really proud to be doing that. I think that was fantastic.
Aaron Zelman (27:59):
I should also mention, I’m not really so involved in any of these other online forums, but I think there are some really great online forums in financial advice, and even what you’re doing here is a classic example of that, and I think that’s great. Just people looking not just dead set ahead, but helping each other, using these technologies to share ideas and connect with people. I think it’s a fantastic thing.
Fraser Jack (28:22):
Yep. And it’s certainly, well, it’s how I got to know you, and it gave you a great profile. You’ve also over the years won a few awards on the way.
Aaron Zelman (28:34):
Yeah, that’s been very nice to do. They’re all connected. I think people, they get recognition when they stick their neck out and do something a bit, I don’t even think it’s right to say daring, but just do something. We all have these ideas. If you actually just go out and do something, you’ll make a big impact. So, at times I’ve done something. I’ve done something beyond my own backyard, and I think that’s been well-recognized and I’m very glad. I’m just very glad for that.
Fraser Jack (29:06):
Yeah, yeah. And so, the Risk Adviser of the Year was one of those.
Aaron Zelman (29:12):
Yeah, the IFA award. Yeah, that’s right. So, thankfully I’ve won that twice. And then, it’s even just great to be involved in that over the years, and I’ve been a finalist a couple times too. Just meeting great people. You can sometimes really be a bit of a... I don’t know, you can be a bit isolated in what you do. So, those initiatives are very good just connecting people. You and I both recently met when you won your award recently, and that’s fantastic. I just love collaborating with people who are so passionate about it, and beyond just themselves, I think that’s good. I mean, yes, there’s a bit ego involved in all these things that I’m a bit partial to myself at times, but it’s just great to connect and collaborate and share and make something better for everyone. I love that.
Fraser Jack (30:00):
Yeah, some of the best moments of learning just happen to be at those sort of moments, aren’t they? It might be standing around chatting about stuff in a foyer somewhere, and you get some great little nuggets of gold.
Aaron Zelman (30:15):
Fraser Jack (30:17):
I wanted to go a little bit deep into the actual insurance itself. There’s obviously a huge amount of changes coming up next year. Maybe we should touch on those. We’re losing agreed value contracts, and income protection, and there’s going to be some massive changes I think in insurance over the next 12 months to two years.
Aaron Zelman (30:39):
Absolutely, yeah. Absolutely. I mean, these things have been coming for some time. My first reaction to the recent APRA announcements about the changes to income protection are, yes, I knew that was coming. Maybe not in that exact form, and like everything, it comes around a bit quicker. It’s a bit like your next birthday or next decade or whatever it is, it just seems to come around quicker than we would expect. But I actually think there’s a need for the industry and the product manufacturers to work in a viable space, and continue offering products to protect Australians in a meaningful way. And I’ve been hearing this over many years now, and people may not be really too familiar with it, but income protection insurance is a really difficult protect for all the insurers, really, and that’s why we’re seeing massive increases year on end. And if we want income protection to be around in future, they have to change course. And it’s quite upsetting, because my clientele generally want agreed value and often high sums insured, and they want to be insured throughout their career.
Aaron Zelman (31:56):
So, I’m going to be forced to offer some sort of watered down solution to my clients going forward, and that kind of upsets me, but I also think some things you just can’t control and this is what’s happening. We may actually see this with trauma insurance in future as well, which hasn’t been the most profitable product as well, and we as advisers, it’s like when the legislation changes. We just have to do our best to advise our clients in light of these things. We can bitch and moan about it that it shouldn’t have happened, they shouldn’t have done it to super or whatever it is, but we just have to advise them as to what is best for them with the tools and the landscape that we’re in.
Fraser Jack (32:36):
Yep, I can see both sides of this. I can see how insurance companies need to be profitable, if they’re not then they’re not there to pay the claims which is the main reason that they’re there. But I can also see it being unusual for, as we mentioned before, those people that are high in net worth, they’re going to be able to get advice regularly with things like contracts being open for re-underwriting or re-negotiation every five years. It’s sort of one of those things that, it’s not a set and forget strategy, and so again, the mums and dads who aren’t high net worth are going to be struggling here.
Aaron Zelman (33:17):
Yep. I think there’s also, something should be mentioned about the pricing of insurance in today’s market, and also just the reality of insurers having really negative inflows. So, all these things are connected. You’ve got advisers, also, who are not as productive as they’ve ever been, and so many of them exiting. So, for those who have noticed, there’s been a massive push to discount year one premiums by most insurers in today’s market. I just think we’re going to be faced with even greater premium hikes in future, because, there’s been a lot anyway, based on underwriting and claims outcomes. There’s just been a lot of upward pressure on premiums broadly, and then I think my reading on it is in today’s world, you’ve got insurers that are really fighting for market share, and they’re literally giving massive honeymoon discounts. There’s one provider that’s giving a 25% discount in year one. That’s before next year’s premiums which will have an age-based factor, and the loss of that discount.
Aaron Zelman (34:24):
So, we’re going to see a lot of pressure and disappointment by consumers, and unfortunately that’s going to be pushed back on advisers who will then be dilemmad as to, well, how do we maintain these policies? That’s a real issue that I think advisers are having in this world.
Fraser Jack (34:41):
Yeah, and I’m just hoping that at the other end of these changes could be some downward pressure on pricing. If the terms are not as long as they were, then insurance companies have a chance to get out of the, say a five-year contract, then hopefully that may have some effect on bringing the premium back to where it should be.
Aaron Zelman (35:02):
Yep, one would hope, but I’m not that optimistic about that, yeah.
Fraser Jack (35:06):
Yeah. Now, there’s been a lot of change with insurance and super, and certainly the big group funds have had some cover in them. What are your thoughts on that?
Aaron Zelman (35:18):
Well, I understand the basic rationale around Protect My Super is to essentially give the average member of a super fund a chance not to have their funds depleted unnecessarily or inappropriately. I get the logic of it. I think there’s a big flow-on effect whereby a lot of people will find themselves uninsured or underinsured as a result. It’s going to be quite a negative thing. I think there’s already been some cases of that where people have come in to claim on their life insurance and it doesn’t exist anymore. It’s created a lot of noise around people getting statements and not really knowing what all this means and should they do, and that often falls back onto advisers to sort things out. But it’s also, again, an opportunity for advisers to get involved and work out what they have and tidy things up in ways that have never been done in the past, so that’s important. Again, one change just has lots of ramifications elsewhere, but it needs to be done, and there needs to be a spotlight.
Aaron Zelman (36:24):
Also, I think as good as life insurance arrangements in super can be, I think it needs to be a more thoughtful process by advisers around that, and hopefully by consumers as well, who don’t just assume, “Well, I’ve got all that.” There’ll be a time where I think the average punter won’t just say, “Oh, yeah, I’ve got all that in super,” they’ll think, “Yeah, I don’t think I’ve got anything in super.” And maybe that will lead to better outcomes, getting more advice, or getting so-called proper policies elsewhere.
Fraser Jack (36:54):
Yeah, and for somebody like yourself who’s a type 1 diabetic, if you weren’t paying attention to those changes in super and you lost your cover, it could be pretty daunting.
Aaron Zelman (37:04):
Yeah, absolutely. That’s right.
Fraser Jack (37:07):
Yeah. Now, how do you see the near future panning out? What are the sort of things that you’re working on for 2020, and what do you think that advisers need to focus on for 2020?
Aaron Zelman (37:16):
Well, I think just bedding down on the fundamentals is more important than ever. I’m really grappling with, how can I ensure that my clients are better advised beyond risk? And I haven’t quite worked out all the answers there. But I think for me as well, it will be about forming relationships with non-risk specialists who simply don’t want to do the risk, and need a solution for their clients. I think that’s pretty encouraging. So, looking for more collaborations on that front. And again, I think everyone needs to be quite choosy and thoughtful around this. Often there’s a feeling, “Oh, we can do something together,” but I think you need to think longer term, like the Code requires us. Think of long term implications of what we do. So, that’s a big thing for me to work through for next year.
Fraser Jack (38:08):
Fantastic. And what sort of qualifications, you said you’ve got a Master’s in Financial Planning?
Aaron Zelman (38:13):
Fraser Jack (38:13):
Have you still got to do some more study?
Aaron Zelman (38:14):
Yeah, thankfully I’m always done. I’ve actually just got the ethics subject and then I’m done. When I did my Master’s years ago I thought, “Do I really need to do this?” I did imagine myself going into risk, so I was probably overqualified in some respects, but I am really thrilled that I’m almost done. I wonder what it will be like for people, because it’s just hard enough with day to day life and business, to then have to do all this study. I say that really just sincerely, empathizing with the extra load it’s going to provide people. But I suppose in a way, these are best of times, worst of times. We will get a profession that is more trusted, better educated, certainly have more of a focus on ethical outcomes and process, and I think that’s a really good thing. There’s just a lot of discomfort and difficulties in the meantime for a lot of our colleagues, and I think things will be better, but going through a bit of a storm at the moment, or difficult period, let’s just say. Let’s not use the word storm.
Fraser Jack (39:18):
Don’t use the word storm. But you got your Master’s a while ago, and how have you found that, maybe dealing with other professionals? Is that something you...
Aaron Zelman (39:27):
Yeah, you know, I wouldn’t talk it up. My experience was, I learnt, but I then went and did a specialization that I really... You know, what I brought to my advice was 95% what I learned in the context of my work, and through dealing with underwriters and all the technical services things that you do over the time. That’s where I really honed my skills, as well as the client contact. It wasn’t the Master’s. The Master’s for me was no more than a DFP 2 or whatever it was for the average adviser learning about risk. So, I’d like to talk it up, but it wasn’t really that helpful for what I do, focusing on what I do. I imagine it would be very good for people who are more holistic, but that’s not something I’ve ever done.
Fraser Jack (40:23):
Yeah. Do your clients ever value it?
Aaron Zelman (40:27):
I don’t think so. I actually don’t really promote it that widely that I’ve done it. My wife’s telling me I really need to make it front and center on my website and my cards and the rest of it. She’s a lawyer, maybe that sort of group might look to it more. But I’d say people trust me to do the right thing by them professionally just based on a whole range of factors. I don’t think it’s necessarily about having a Master’s degree or any particular degree. Maybe I’m wrong.
Fraser Jack (41:02):
No, well fair enough. It’s just interesting because that’s been the big drive obviously with the higher education standards, because clients will value it, and it’s interesting to hear that you work with a lot of professionals and it’s not something that you’ve really pushed out there, and you’ve still had a very successful career by not necessarily telling everybody that you got your masters. It’s just interesting.
Aaron Zelman (41:31):
Just to give you a bit of feedback on that, perhaps if you were dealing with a real estate agent who had a Master’s in real estate, that may not be the reason you choose him. And that example might sound like I’m downgrading what it is to be a life insurance adviser, that it’s effectively a salesperson, it’s not. Because I think you can be a professional real estate advisory person as well. So, the actual Master’s itself doesn’t mean that’s a person I should have in my corner or trust. That’s my take on it.
Fraser Jack (42:04):
Yeah, yeah, I tend to agree. Now, if you were at a barbecue talking to a consumer thinking about going to get financial advice, what tips do you give them?
Aaron Zelman (42:14):
Well, I think don’t just deal with the first person you’re introduced to or you meet. I think it’s worth having more than one, and asking around broadly. Making sure that you speak the same language I think is quite important. But I think one of the traps might actually just be around the friendliness of people as well, because just because you might have a common interest or go on your holidays together, whatever else may be the case, I don’t think that’s a reason to choose a professional either. So, it’s beyond, “Do I like this person?” We say know, like and trust, but I actually think as a consumer, you’ve got to be a bit weary just about the like aspect. Yeah.
Aaron Zelman (43:00):
But often these things are really quite hard to consider. I think about my accountant and my lawyer and the like, and, say with my accountant, I’ve often wondered, “How do you know if this is the right accountant for me?” And in my case, what really concluded things a lot initially was getting recommendations from people that I did trust, and thought would really be in a position to make a good assessment. Now, that’s hard for some people. If you don’t know anyone who’s referring you, that’s quite difficult. But I think a deeper level of reference checking is actually really quite valuable. That’s my answer.
Fraser Jack (43:35):
Yep. And what are your tips for advisers in 2020? What do they need to be focused on?
Aaron Zelman (43:42):
Well I would just say, this is a general bit of advice that I give myself and I suppose for other people, I think we both discussed an admiration for Gary Vaynerchuk, or Gary V, who is an amazing businessperson who publishes a huge amount on every sort of media platform. And one of his major bits of advice for everyone is self-awareness, whether it’s in business or in life. And I think achieving more self-awareness will lead to better outcomes. If you really know what you want, and what you’re good at and what you’re not good at it, and you think it through and you apply it to your job or your business or which clients you wish to use or what type of advice actually ticks your boxes or makes you feel comfortable in what you do, that will lead to much better outcomes.
Aaron Zelman (44:42):
So, I don’t know if that’s a 2021 thing or a 2031...
Fraser Jack (44:44):
It’s something that’s ongoing, isn’t it?
Aaron Zelman (44:48):
Yeah, it’s an evergreen bit of advice that I try to give myself, and would really want to share with everyone. Understand yourself and be true to yourself.
Fraser Jack (44:56):
Yep, fantastic. And what about for yourself? If you could go back in time, where would you go? What tips or advice would you give to yourself if you could do it again?
Aaron Zelman (45:05):
Well, it’s probably not to become a rockstar, because I think that will lead to... I’d be a real aging rockstar now. I don’t know if that would have been so fulfilling. They generally don’t have great lives after their heyday. And also, it’s very hard to just capture those sorts of things. There’s a lot of randomness. But I suppose in financial advice, it’s a more conservative world, and I think if you do the right things, you’ll get the right outcomes generally. But what would I give to myself? I’d say it would still be along those lines. If I’d known myself better over the years I think, for example, I would have delineated more between the front end and the back end of advice. I feel very comfortable on the front end, and feel I’m effective on the front end, and the back end is something I’ve either needed to partner with people better or get the right people around who I can work with very closely, to get things done smoothly. So, that’s something I wish someone wish had told me in the past, but it’s been what it’s been. So, that’s what I’m trying to bring to my world right now.
Fraser Jack (46:19):
Fantastic. Understand your skill, and your superpower.
Aaron Zelman (46:22):
Fraser Jack (46:24):
Mate, so if someone wants to continue the conversation, what’s the best way of getting hold of you?
Aaron Zelman (46:27):
Yeah, I think for other advisers, just through LinkedIn is great. You can Google me, Aaron Zelman. You will find the writer for Law & Order or CSI, whatever it is, a Hollywood screenwriter, and there was a Jewish gun lobbyist by that name, but I think I’m probably the third person. If you have the word insurance, I think you’ll find me okay.
Fraser Jack (46:46):
It sounds like if we just follow the Google, we’ll have some interesting conversations with people that aren’t you, and then have a conversation with you.
Aaron Zelman (46:54):
Yep, that’s fine too.
Fraser Jack (46:56):
Fantastic. Well, thanks so much for coming on the show, really appreciate it. I hope you enjoy your time with your family over the summer break.
Aaron Zelman (47:04):
Yeah, absolutely. You too.
Fraser Jack (47:05):
And we’ll see you in the new year.
Aaron Zelman (47:07):
Great, thanks mate. Really good.
Fraser Jack (47:10):
If you haven’t already, I’d love you to subscribe to the podcast on your podcast platform of choice. And to continue the conversation, head over to our social media channels. We’ll catch you next time.
Disclaimer: This document is a transcription obtained through a third party. There is no claim to accuracy on the content provided in this document, and divergence from the audio file are to be expected. As a transcription, this is not a legal document in itself, and should not be considered binding to advice intelligence, but merely a convenience for reference.