ClearView Wealth has rejected the remuneration recommendations contained within the final Trowbridge report.
Responding to the recommendation by John Trowbridge that adviser remuneration for life insurance advice be restricted to a flat 20% level commission, supplemented by a $1,200 Initial Advice Payment, ClearView’s position, outlined by its Managing Director, Simon Swanson, is that “Level commissions are not the answer. Nor is a restrictive and inadequate initial advice payment allowance and ongoing commission. In fact, they are both well wide of the mark,” he said.
Mr Swanson and ClearView were responding to the recommendations contained both within the final Trowbridge report and the recommendations made within the David Murray-led Financial Systems Inquiry that “… upfront commission for life insurance advice is not greater than ongoing commissions.” (see also: Ban Upfront Commissions – FSI).
In a release issued by ClearView, the insurer said the adviser remuneration recommendations made within both the FSI and Trowbridge reports ‘…were excessive and would lead to undesirable outcomes for consumers and financial advisers.”
ClearView reiterated that in its submission to the Financial System Inquiry it noted, “Changes to adviser income structures must be carefully assessed in terms of their likely impact on incomes and how advisers can or will likely respond.”
Any remuneration design should… take into account the real and tangible upfront costs associated with delivering life insurance advice…
Considering future adviser remuneration structures, Mr Swanson added, “Any remuneration design should support quality advice. While it should discourage over-selling and churning, it must foster competition and take into account the real and tangible upfront costs associated with delivering life insurance advice, the validity of appropriate replacement business, the need to adequately support new client acquisition and the entry of new advisers into the industry.”
While ClearView has gone further than other life companies in their initial responses to the final Trowbridge recommendations, Zurich Financial Services has reiterated its position to advisers and licensees on a number of ‘pertinent matters’, contained in its original submission to the Life Insurance and Advice Working Group, as it determines its formal response to Trowbridge. These include:
- We reiterate our belief that consumers should be free to chose how they pay for their advice and advisers should be free to choose the remuneration mechanism that best suits their business model.
- We believe that advisers should be fairly remunerated for the true cost of providing advice, at the time they provide it.
Zurich also stipulated that any deviation from its full list of key principles may impact both the availability and affordability of advice, especially for those customers who are less willing or able to pay an out-of-pocket advice fee.
For years the question has been, how does the Life Industry retain existing clients and enable advisers to bring in new clients in an efficient and cost effective manner.
28 years ago it was a simple exercise to see potential clients and write them up, as the reporting was short, concise and easy for clients to understand.
Underwriting was a nightmare and that has improved, though the retail Life sector now faces a barrage of competition that is at best, unprofessional due to lax regulations that allow direct life policy spruikers to promote inferior rubbish, without warning people of the major pitfalls if they dare to claim and as much as they deny it, these product floggers are giving advice which is to tell people to cancel quality policies based on price alone, without considering the existing policy benefits and definitions.
Retail Life policies are the backbone and work horses of the Australian market and many of the issues around sustainability, have nothing to do with upfront commissions or any form of commission.
It is much simpler than that. It is about honesty and a level playing field with a robust regulator that can act in a swift manner that does not involve legal eagles muddying the waters and confusing even themselves trying to fix issues they were instrumental in implementing, by making even a simple increase of cover, a major exercise in red tape, while turning a blind eye to rampant abuse by product peddlers.
Imagine all commissions were scaled back making premiums up to 30% cheaper. Then advisers would possibly need to charge $3,000 (or much more) for all the work advising, researching policies, and the often long & tedious process of following underwriting to a successful conclusion. How many clients would pay that fee up front? Especially if there’s some element of not being successful in the application. The end result would be a rapidly reducing level of personal insurance cover across the country with the gap being picked up by the health and social security systems. is that a win for the economy?
How are upfront commissions any more than a conflict of interests than a fee for service?
In either case you can potentially create a reason for moving the clients policies from one insurer to the next and charge a new fee.
Unlike most industries our recommendations come under close scrutiny so long as the audits are done correctly and thoroughly we should have comfort that the advice is sound and not driven by the advisers interests.
So why aren’t we focusing on that and removing the ones who have a pattern of bad advice instead?
35 years in and around the industry writing business, never had a salary. All I can say is 1. grab the movie “tin men” cause thats what these “social engineers” think of us. 2. get used to it, there will be a new remuneration model implemented in next 18 months (and it will probably reduce field staff by around 30% or more.3. re-invent yourself into a more rounded holistic “coach” and charge a fee accordingly.
We will now be in the bucket of general insurers who charge a hefty fee and are lucky to get 18% renewals comm. Unfortunately Life risk plans are not so easy to “sell” or implement advice – Thats why Life insurance companies Globally for over 300 years have used a commission model – because its”danger” money for a very difficult and arduous task , only for the brave and fearless (unless you are a salaried planner of course). When was the last time someone rang you up and said “I really want to take out $500K of the best Trauma cover you have and by the way I don’t think I have enough Life or income cover”
It will change, It won’t really help the consumer, the regulators massive SOA’s are a joke.Less people will get Life risk and other planning coaching and the long term effects will be very dramatic. But the social engineers won’t care. They have their State & Comm Gov super benefits!! PS. The Banks basically brought this on with massive upfront cultures and budgets of over $300,000 per annum of commission to keep your job. Good on ya fellas.!
its not about how we are paid
its about the insurance companies cutting costs
Another thing
If our friends in the insurance companies stopped pandering to the industry super funds with cheap premiums and dodgy definitions, benefits and shifting conditions, the attack on commissions might go away…. Oh yes
Is this whole debate bordering on “restraint of trade” ???? Obviously I don’t know “me legals ” but. But but ….?
At last a little common sense from Simon Swanson. Where in all of this is the consumer going to gain? In actual fact who is going to gain? Perhaps only the big institutions.
With respect to the ASIC report, having been in this industry for 50 years I know that report is not indicative of the Industry as a whole. We cannot base our judgment on such a selective narrow dissection.
Back in South Africa many years ago, this same topic and issues took place.
Initially, they substantially reduced Retirement Annuity Policies( individual pension policies,offering tax deductions).
Behold, what do you think happened,advisors stopped selling Retiment Annuities.
Thereafter commissions for life policies being sold ,were basicaly capped at 85 % of the first years premium with an annual renewal commission, after a commission restructure within the industry,mostly motivated by insurers.
Remember” Life Insurance is Sold not Bought “.
Dont destroy an industry that is the salavation of individuals and familes when the need arises and in times of crisis.
From my experience members of Super Funds are not even aware of their covers.
An advisor looking after a clients interests,should put his client and family in a stronger position when the need arises.
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