AMP has made the first move in the life insurance advice remuneration debate, mandating hybrid commissions for its insurance products, as well as for all AMP licensed advisers.
Responding to recommendations made in the Trowbridge Report, AMP will cap the commission payable on its life insurance products to all advisers, regardless of licensee, reducing upfront commission to 80% with an ongoing commission of 20%.
In addition, AMP has announced reforms to the payment structures for all AMP licensed advisers (including its aligned brands such as Hillross), mandating a maximum 80% upfront commission for all life insurance policies, with an ongoing commission of 20%.
The upfront payment will also be subject to a ‘single payment period’ meaning AMP advisers will only be able to access a year one commission once every five years. This will be irrespective of the life insurance provider and applies to all insurance policies written since 1 July 2010.
AMP noted that it recognises there will be cases where a material change in a customer’s circumstances requires a replacement policy in the first five years. In a very small number of cases, for policies written between 1 July 2010 and before 1 July 2015 only, advisers may receive a year one commission of up to 40% to assist with the costs of re-writing the policy.
AMP advisers will only be able to access a year one commission once every five years
The final part of the reform package announced this week is to require other life insurance providers on AMP licensee Approved Product Lists (APLs) to comply with the hybrid payment model and single payment period. Only those insurers that can offer 80% commission upfront and implement the five year rule will be permitted on AMP licensee APLs.
All the changes will take affect from 1 July 2015.
Announcing the changes, AMP CEO, Craig Meller, said it was clear the Australian life insurance industry needed to reform in order to help restore customer confidence.
“This confidence is essential for AMP to achieve its most important objective – offer financial advice to help people improve their lives. These changes, which are initial steps towards a fee for service model, support this objective,” Mr Meller said.
We have consulted with adviser associations to develop these reforms
“We have consulted with adviser associations to develop these reforms – they also recognise that change is required to build trust and secure long-term benefits for our customers.
“We will support advisers through the transition and are committed to developing technology and systems which allow advice to be delivered more efficiently.
“AMP and its licensees will also work closely with regulators, business partners and the industry to identify further opportunities for reform, in line with the direction and intent of the Trowbridge Report. Part of this process will be assessing the impact these changes have on customers and advisers, many of whom are small business owners.
“As a leading life insurer with Australia’s largest advice network, it’s appropriate that AMP supports industry reform – just as we did by moving early with both fee for service for investment advice in 2010 and initiatives to lift adviser professionalism last year.”
AMP said it would provide an update on the implementation and the next phase of transition in August.
To read the full media release from AMP, please click here.
AMP off my preferred provider list as of today.
Why?
If you’re taking that stance then you wont have anyone to do business with come June 1……
July 1, sorry.
AMP’s 5 year rule does not seem to differentiate between product replacement due to churning, and product replacement due to significant price increases or declines in service. It effectively reduces competition, and is likely to lead to worse outcomes for consumers. Seems like a good reason to favour other insurers who still support a competitive marketplace.
If all insurers followed suit, it would be a coordinated reduction in competition, and give the whole industry a green light to increase prices and decrease service. I hope the ACCC is watching.
Having said that, there is a lot of merit in the rest of AMP’s approach. But it ultimately has the same weakness as the FSC (Trowbridge) report. Penalising all consumers and advisers for the behaviour of the serial churners, rather than targeting those churners directly.
Paul, my understanding of our obligations to customer’s is to provide the best advice and most appropriate product for their individual situation – so if a planner were selling an AMP product it wouldn’t matter whether they were tied or independent, or what they thought of this move.
Surely your personal feelings on your remuneration would not impact the impartial advice you give to customers?
So it’s all about the commission for you then Paul not the best deal for the client? This is still 5% higher than Macquarie commission both up front and annually.
I guess somebody had to be first, but basically back-dating part of it to 2010 is immoral.
Immoral? just means the insurers won’t have mass replacement business (churn) over the next few months.
I hope that’s not what AMP were expecting from its network of advisers
Commissions are capped from 1 July 2015. The five year rule relates to the SPP that applies to AMP licensed advisers, as this is implemented at adviser/ practice and licensee level.
No prizes for working out at least who one of the main drivers of the Trowbridge option is
Do you have a source for the ‘single payment period’ claims?
No mention of that in AMP’s announcement.
Hi Brent,
This is exactly what was included in the AMP release sent to riskinfo today:
Single Payment Period
AMP advisers will have access to a year one commission only once every five years per policy. This will be irrespective of the life insurance provider and applies to all insurance policies written since 1 July 2010.
AMP also recognises there will be cases where a material change in a customer’s circumstances requires a replacement policy in the first five years. In a very small number of cases, for policies written between 1 July 2010 and before 1 July 2015 only, advisers may receive a year one commission of up to 40 per cent to assist with the costs of re-writing the policy.
We subsequently followed up to confirm these details.
Regards,
Editor
Thanks for that.
Seems they’ve sent something different to the advisers. Can’t see how that benefits anyone. Are you happy to share the rest of what they sent you? This is the online version of the e-mail sent to advisers http://view.exacttarget.com/?j=fe641174736604797116&m=fe601570726706747317&ls=fdc915737760077f7c17747761&l=fe8f1377736c047f77&s=fded15767c62007c71127672&jb=ffcf14&ju=fe21107770640275751c78&r=0
The press release has now been added to the bottom of this article.
– Editor
What confuses me about the five year rule is it only applies to advisers from the same practice/corporate authorized Representative.
Unless I have read this wrong, it still does not address the problem of churning in is entirety as the replacement of policies in the first 5 years does not apply to advisers that replace business from outside licencees/practices.
(ii) Single Payment Period (SPP) five-year rule applies
“When providing any advice to a client that involves the replacement of an existing insurance policy, the adviser must determine the commencement date of the original policy. Where the commencement date is within five years of the date that an application for cover is made to a manufacturer, and the policy being replaced was written by the adviser or an adviser from the same practice/corporate authorised representative, then the adviser:
– must dial down the initial commission to a rate that is equal to or less than the year two and ongoing commission rate of Hybrid commission that will be earned on that policy. On an 80/20 Hybrid the adviser must dial down the 80% to 20% in year one.
– should inform the client that, as a result of the advice to replace product, the cost to the client of that insurance will be lower than it otherwise would have been. By dialling down the initial commission, manufacturers will decrease the annual cost of cover over the life of that policy.
– may negotiate with that client a Fee for Service for the advice. The client may agree to an advice fee because the client is enjoying a lower cost of insurance as a result of the dial down of the initial commission.
Where have you gotten that extract from?
Brent this is correct, I am an AMP adviser as well. You should read the full update on portal
Sue you haven’t read wrong and no it doesn’t address the issue of churning; it was never supposed to.
Profit for the insurers and screw the adviser. Mission accomplished.
It will stop churning within AMP licences, as they won’t be able to regularly rewrite clients and get an upfront again.
The industry needs to come up with a solution, or someone else will.
Good on them. All this stuffing around with consultancy groups and submissions etc, someone just needed to make the move and get all others to follow.
As an AFSL we had already mandated the removal of upfront after the release of the ASIC Report.
Industry needs to respond which such measures to avoid government regulation.
Its about time the insurance companies made the move to self regulate with a reasonable level of commission to keep advisers and themselves in business. Lets hope the rest follow suite so that Trowbridge becomes a mute point and puts everyone in a worse position that is unsustainable for all.
I have no problem with AMP’s decision.
However, the greatest issue with sustainability is customer affordability. I hope the next phase will be the introduction of level premiums only. This would go a long way to stop churning!
Totally agree – reductions in commissions and reductions in churning should logically lead to reductions in premiums.
Frank, I also agree that an uncapped hybrid system is better for the adviser longer term and that level premiums are generally better for the clients from a long term affordability perspective and will reduce churning. This is especially true for income protection and trauma insurance as clients will generally want to keep this cover until retirement if they can afford it. However, I still believe stepped premiums have their place, particularly for Life and TPD insurance to cover debts and children’s education, for which the amount required should reduce over time. If we could only offer level premiums, a lot of clients may not be able to afford to take up as much cover as they need.
after being aligned with this company for 18 years ( left 2009 )
this is no surprise.
Disappointing that my business partner would take advantage of a flawed report to maximise its own profit margin at the direct cost to myself and our clientele. Also disappointing that out brave associations apparently signed off on it.
Await Craig Mellers next announcement of himself and senior admin taking the equivalent 20% reduction in salary to do their bit for group profits.
A little sick of being a part of the “life blood” of an industry yet, treated with such disrespect.
The issue John is that change is coming, whether you like it or not. Whilst you may feel the ASIC report is flawed, it has legs with the political parties and regulators and no amount of argument that the current upfront system is ok is changing their minds.
Simply put, The industry doing nothing will result in level commission only or potentially fee for service only. That will likely be a lot worse for advisers who provide risk insurance advice, and also to clients who cannot afford to pay for advice upfront.
The solution put forward will hopefully be given a chance by the regulators and legislators to work, otherwise we level and/or fee for service it will likely be.
Someone needed to make the first move, if no one did then it would be legislated by the government to be at best 20% level, not a good result for us planners. Let’s move on now, the rest of the insurers will now follow
Scott, this is step one of AMP’s “Managed Transition” with more bad news to follow! The objective is very clear and it’s not Hybrid.
Roger, you are absolutely correct.
This is the first step in a downward spiral regarding how we get paid.
Roger and Paul, we all need to hope that the solution put forward by AMP and its Adviser Associations is given time to work.
If not we will be on level or fee for service and this will not just impact advisers but many clients who will not be able to afford to pay for the true cost of paying advice.
Scott,
Completely agree, except for your ‘move on now’ comment. Frydenberg has already said that this is not enough. We could have had only responsibility periods to deal with, but nobody wanted to get behind the FSC. Well whadaayaknow, the FSC weren’t scaremongering 3 years ago – the gov’t are locked and loaded on this and ready to act with flat level. We need to stop insurer bashing and work with them to come to a consensus opinion – it’s not in the interest of the insurers or advisers for the pie to shrink by 30 – 40%. And some insurers need to stop giving advisers false hope we can stay at upfront, or even full hybrid.
so the insurer increase the premium by 25% + on a client
you advised 1 year ago. They cause the issue that results in a review
and re write of existing policy but you cant receive
a payment for being forced into this position?
how about they guarantee premium rates for 5 years on a new client
This is a really good point. I’d also like to see if the premium rate changes as a result of this 5 year lock in or does the Insurer’s comm payment balance out for an 80/20 v traditional upfront comm after this period of time?
Adviser need to meet BID is recognised and is addressed in the detail communicated by AMP to their advisers.
I assume that the “upfront” commission ban by AMP today is step one of AMP’s “Managed Transition” with more bad news to follow. What was AMP’s submission to LIAWG? What happened to their motto “AMICUS CERTUS IN RE INCERTA” (a sure friend in uncertain times)? I see nothing friendly to Advisers in AMP’s “knee jerk” reaction. The solution to the current problem requires ALL PARTIES to pay a price NOT JUST ADVISERS. Effective immediately L/O’s should increase ALL IN FORCE RENEWALS from 11% to 30%. This will protect this “in force” business. There will be a cost but it’s the L/O’s that want change also. In exchange Advisers with 5+ years service will accept Hybrid commission only (say 80/30) for 12 months then all future business income would be Level at 30%/30%. Advisers of less than 5 years need a 3-5 year Hybrid transition period. I have seen many changes in my 47 years in the Industry. The proposed changes are the most far reaching and will decimate our Industry.
It goes to show that AMP don’t really care about market share from the Interdependent Market as they still have their tied Advisers network and their own Dealer groups..
The company that had the highest upfronts is moving first…. and so it should!
Looks fair to me, but then again I am a hybrid writer already (although AMP’s renewal looks a little on the low side..prefer 75/25 to ensure client reviews are paid for). 40% looks fair for replacement.
The insurers always had the information to combat any churning that took place, I’m pleased they are using it now.
Lets hope all insures adopt the same stance, so as to eliminate advisers chasing highest levels of commission or rewriting for sake of income.
Risky, can you clarify this for me?
Why was any of this necessary?
How, if an adviser follows BID, can they “chase the highest levels of commission or rewriting for the sake of income” ????
80/20 commission – it could have been far worse [$1,200 and 20%]. This at least allows us to almost cover costs in yr 1 with the following yrs positive earnings.
I would like to see the rest of the insurers come out and follow suit with 80/20 hybrid.
I am unsure on the details of the 5 yr rule with it being backdated to 2010 – seems like a licensee issue and it is per policy not per client.
This bold move may just keep the Government from mandating something we really cannot survive with.
As an AMP licenced adviser I am very pleased with this stance given AMP were very much on the Trowbridge side of the discussion. Fact is, we already use the hybrid system so no real change for us if this is how it ends up.
I am also encouraged that they (AMP) recognise that “material change in a customer’s circumstances requires a replacement policy in the first five years” happens.
However, time taken to do this is often the same if not more than a new policy so as long as the change is in the best interest of the client (See SoAs Life Companies!) the full 80% should be paid.
On another issue, at 80% as I prefer for replacement for good reason, there will still be a temptation to churn. The solution is and has been easy for a long time,
1. A application form has Qs about existing cover. The new insurer can see this
2. If the change is within 5 years the insurer asks for the SoA or relevant advice document to assess best interest
3. If the Life company is not satisfied that best interest is being served, that adviser is immediately reported to his licensee or relevant authority. End of .. I still can’t believe this has not been done since the churning issue hit the headlines years ago. If it had been we wouldn’t be here!
Thank you
so you are happy for a provider to look at your SOA & decide if they think your reasoning is acceptable to them? The SOA is a document between you and your client.
The “churn” lie is a joke, sure some advisers “churn”, you think the companies dont know who? They ALL know and yet they ALL do nothing.
They have set this up from the beginning, they paid for the FSC and Trowbridge, dont fall for their lies!
It was always a furphy that a Liberal government would either legislate or allow ASIC to dictate the commission levels on life risk products.
Lets put that to bed once and for all
Any Government who tried that would be flooded by lobbyists representing every other industry which pays commissions, including loans officers in banks. Other industries could foresee a disastrous precedence and react according.
Any incentive left in our faltering economy would disappear and blow up the joint
Lobbying by real professional lobbyists, not ex pollies on a gravy train, scares the crap out of any Government, not just an un-popular government. The hated pay-day-loan industry, with at least one bank involved, lobbied both Labor and Liberals to water down recent strong consumer protection
Flat fee for selling a house would, in the long term. achieve nothing for anybody
Think about it. No commission from re-insurers to life offices, no commission from insurers to ISA funds. It was never a real threat
Totally stunned – I honestly thought that the industry would continue with the same stale-mate, let’s-do-nothing-until-we’re-told-to, keep-up-with-the-Joneses approach that put us in this situation in the first place!
This is a great move because all other Insurer’s can do what they do best and follow suit to now start to put in place the reforms recommended in the Trowbridge report.
This is particularly good news because it may just prevent the government from stepping in and doing it themselves which would surely see us all in a worse position.
Have you seen the tooth fairy lately?
Q1) Are AMP guaranteeing the 20% renewal brokerage will stay with the originating adviser for the life of the contract?
Q2) When an adviser under an AMP licence reviews a client and finds the policy they bought 3 or 4 years previously is no longer in the client’s best interests, will AMP
(a) insist the adviser make the change (losing $s in the process but fulfilling their legal obligation to the client) or
(b) stand behind their adviser’s decision not to look after the client’s best interests (bypassing their legal obligation) and accept both full responsibility for any subsequent losses incurred by the client as well as liability for any legal action taken against the adviser?
The ambulance chasers will be going to bed happy tonight.
Very good point!
well, it is AMP…………
Guy,
Q1 – No
Q2 a/ unfortunately is the correct answer according to their internal adviser briefing pack:
“Where the adviser is obligated to provide advice under BID to replace product, but the circumstances don’t
allow for a transition exemption, then the adviser must still provide the client with the advice. However,
remuneration will be limited to 20% in year one plus any fee that the adviser can negotiate with the client.”
I don’t know what the hell “negotiate” means; I thought this was Australia not the back streets of Kuta.
I thought I was running a business where I set the fee and that was it. What if the client then turns around and says no they won’t go ahead because my extra fee (that I now have to charge to make a living) is too much?
Is it then my duty to advise the client it would be in their best interest to go find another adviser who can accept full hybrid and therefore doesn’t have to charge a fee.??
I’m all for removing upfronts, but Zurich, as an example, has a good 67.5%/27.5% option that I use but won’t be able to now as the on-going exceeds 20%. I think all they’ve done is reduce the amount an adviser can earn over the long term with no benefit to the client.
Remove stepped premiums, ensure all insurers pass-back policy enhancements and then wham, churning problem stopped.
If i am a AMP aligned adviser and after July 1 i write new business with say TAL and TAL still have upfront commissions, who gets the difference between the Upfront (e.g.115%) & Hybrid Amp is going to offer (80%)? Do AMP keep it?Do TAL?
Boris the answer is there is no Upfront after 1 July as we are moving to a Communist regime.
You must select hybrid (or level) and all insurers will be asked to manually adjust hybrid to 80/20. As per briefing pack.
So effectively yes the insurer keeps the profit as that was the hidden agenda all along; this whole thing has nothing to do with churning; whatever the definition of that is.
cheers Rusty, it leaves me all warm & fuzzy inside knowing i work in the only industry where potentially my earning capacity is capped.
Adviser can pass back to client as a saving 🙂
Am I the only one who seems to be concerned on the part of the announcement that states that “only insurers that can offer 80% commission upfront and implement the five year rule will be permitted on AMP licensee APLs.”
So if nobody else follows suit then AMP’s advisers will be subject to an even tighter APL meaning they are almost guaranteeing vertical integration.
Excellent point Katherine. Maybe this is the end objective?
I personally think that most insurers will follow suit and join AMP very shortly.
(Continued from above)
Let’s hope that the insurers like Zurich, AIA, Clearview and TAL continue to provide options to advisers on how they can earn their income moving forward.
This may mean a serious windfall to those insurers who openly support the IFA market and strengthen their position in the marketplace.
There is an old saying “be careful what you wish for” as AMP may get what they want but not like it in hindsight.
The APL’s are not changing for AMP licenced Advisers. The upfront must be dialled down to 80%, therefore benefit passed back to the client.
If we are really talking about best interests of the client, then there shouldn’t be an APL. Being a charter based adviser it is extremely difficult to go off APL even when in the client’s best interests because AMP effectively want you to use North/AMP FS. Then you find out the only reason said company isn’t on the APL is because they won’t pay the entrance fee. Double standards.
Curious that insurers have always known who the churners are and have done zip for many years with the information. Why? Because it would cost them a lot of business.
Along comes John Trowbridge offering insurers another avenue to pursue churn and BAM! they’re on it within days. Why? Because it will save them money.
Call me a cynic – but for thoughtful, ethical small risk advice practices this (and I’m not talking about just AMP) is a kick in the face.
I am happy to support a hybrid remuneration structure, but not with barbs in it.
5 year single payment periods (ie for first year Commission rates) is unreasonable. Especially when your consider that most insurers develop and launch new products with significant enhancements to terms and definitions more regularly than every 5 years (usually every 3-4 years) and not many insurers pass back the improved terms. 3yrs is more palatable, but still unacceptable………. the simple solution (for the churn issue), is for insurers not to accept business from serial churners!!!
I think you’ll find 5 year periods will still put many young/smaller business under significant financial pressure and many out of business and it will slow the number of new start-ups.
What is concerning is AMP’s throw away line …..“This confidence is essential for AMP to achieve its most important objective – offer financial advice to help people improve their lives. These changes, which are initial steps towards a fee for service model, support this objective.”
” a fee for service model” are you kidding …. this just equals no IFA’s and increased under insurance problem…. remember Insurance is sold not bought!!!
have I missed something? or have others not seen this statement.
Jonathan, you haven’t missed anything.
You are spot on.
AMP have just put their cards on the table and we now know exactly what they want long term.
As the issue regarding risk advice remuneration is not legislated at present every individual insurer or licensee are able to decide the level of remuneration options available.
If AMP want to move first on altering their options, then that is their choice.
No doubt others will follow, but those who decide to continue with present options may well find an incredible level of support from the IFA market.
There are a number of insurers who currently believe that level or even hybrid models should not be the only option available to quality risk advisers and that the level of remuneration does not determine the quality of the advice provided.
What is Josh Frydenberg going to do if 50% of insurers make alterations to their current remuneration models and 50% decide to leave their current models as they are are?
Is he then going to turn around and demand that every insurer must offer exactly the same remuneration model otherwise he will commence legislative process?
This becoming a farce, as demanding that every insurer must offer the same remuneration model is totally against the basis of a free market and represents of level of government intervention that is anti-competitive.
For those insurers that make changes, it would be very interesting to see what impact this will have on the underinsurance issue…………….it will be nothing.
AMP seems to have jumped the gun.
It is one thing to make bold statements and promises. It is another thing to deliver on them.
To dictate to the adviser market when AMP still uses old and time consuming processes, though state they are committed to improving their technology and systems in the future and then to have the temerity to say AMP will backdate to 2010 an effective zero commission if advisers dare to do their job in 2015, is a brave step, though I fear for AMP, a big mistake.
The administration complexity of what AMP is trying to achieve will cost them millions of dollars and instead of simplifying, it will create a minefield that will leave many disgruntled people.
I feel AMP is going to suffer a major backlash for creating more uncertainty and with a blanket attack on Advisers Businesses ability to do their job, without recognising the Life Companies own inadequancies, will come back to bite them.
It shows a lack of respect and an eagerness to be first to show how AMP can be better and knows more than everyone else, without taking into account expert knowledge and the chance for true debate and concensus.
This will create opportunities for other Life Companies to carefully consider ALL the reasons for the Life Companies woes and with proper consultation, come up with long term solutions that benefits all Australians and the under-insurance epidemic we face, without resorting to attacking advisers.
I agree Jeremy there needs to be a big push to reduce the cost for all advisers to provide advice.
From reading through these posts what I am surprised about is that a lot of Advisers don’t seem to understand how close we are to having a legislative imposed solution forced on us. Commissions were banned on super even though the industry initially argued that it will stop the more financially disadvantaged getting advice. It could happen with insurance commissions too.
Different situation I think Todd. Most of the previous changes were brought in by a union controlled government to favour union controlled superannuation. And yes, the outcome was as predicted, fewer low income people are receiving advice. More and more superannuation decisions are now being made on the basis of misleading advertising. Not just by the unions now either.
That is what will happen with insurance as well, except the consumer impact will be greater. A poor superannuation decision driven by advertising rather than professional advice is likely to lead to reduced retirement savings. A poor insurance decision driven by advertising rather than professional advice is likely to lead to denial of claim when the person desperately needs it.
In 1992 I worked with Lumley Life to create a new product range with a revolutionary new commission structure – 80% first year / 20% second year.
It’s only taken the good old AMP 23 years to arrive at the same point.
The above said, as an advocate of hybrid commission for 20+ years I congratulate the AMP on being the first to move and am disappointed when an adviser states “…off my preferred provider list” as a result of this decision. As they say “resistance is futile”. It’s 2015 and we have to adapt!
Over the last few months I have heard rumours from inside AMP that their approach to the future of insurance marketing in Australia is simple. 1. Get rid of expensive IFAs (who hold them, their products and claim processes accountable in a free and open market). 2. Create a force of salaried advisers who will only sell AMP products. 3. Ramp up direct and online sales 4. All contact with clients through the net. The result means they would be free to charge whatever they wanted with no-one to hold them accountable.
Don’t think we’ll be seeing Mr Mellor cutting his immediate income by 1/3 any time soon…
How do you eat an elephant? One mouthful at a time.
This is obviously only the first stage in the attack against Independent Advisers. Sadly, the ultimate goal appears to be the flat 20% model (or worse).
If you are worried and interested in adding your voice to IFA concerns, please complete the 2 minute survey at
https://www.surveymonkey.com/r/futureofindependentlifeinsuranceadvice .
The survey was set up and is being administered by concerned IFAs.
So far 178 respondents (out of 308) have reported if Trowbridge comes in they would either partly or completely close their business. They are also stating there would by over 770 job losses.
The final information will be passed on to the decision makers.
Have always used Hybrid anyway so 80% upfront is fine but max 20% ongoing is unders for mine. Who died and made 20% gospel?
Does it state anywhere that AMP’s 80% upfront or the 20% ongoing includes GST or is the GST in addition to those figures?
I am all for a feasible model that stops churning. However this should not be at the expense of IFA nor clients expense. This bold move is commercially smart on behalf of AMP, I congratulate them for this, however I sincerely hope some other dealergroups team up with non bank aligned insurers to create a more sustainable model that firstly serves clients best interest (lower premiums), then IFA’s commercial realities, and then finally addressing the Insures profit margins, which largely goes towards paying exhorbitant bonuses anyway. This would ensure AMP cops its just dessert as would all other bank aligned insurers that take such bold moves. It would force a 2 tier insurance market.
First good thing AMP has done in many years. Much better than the Trowbridge recommendation and will mean that risk insurance advice businesses remain viable. Five years is a good trade off as compared to the Trowbridge five years. Hopefully this will be a lead for the other manufacturers to follow suit and will keep the Government out of it as well.
I understand the need for changes and at the end of the day it will only help your revenue stream in the long run. I sincerely hope though this isn’t a move by AMP to increase their profit margin. Fully support this move if it means a dramatic decrease in premiums, as that will make it more affordable for people to hold policies with a level premium, which I think most would agree in the long run will save the client.
If the premium drops and you write level your up front ends up being the same, but a stronger ongoing, while at the same time stopping churning. Would have preferred slightly more notice though than the 8 weeks.
More like breaking wind. Hopefully AMP will sit on that lonely limb for a while assuming everyone else will follow and banking on their tied agency force remaining in place.
If you are with an AMP licencee you would have to ask yourself why ? What do they provide apart from headaches and now it appears an aim to go into direct competition with you. Product providers know they are the problem. FoFA and Trowbridge are not worried about advisers per se they are worried about advisers that work for product providers. This will include advisers in Industry Funds in the near future. The sooner advisers start to run advice businesses not product distribution businesses the sooner the pollies and regulators will be off our back. Everyone will be better off especially the consumers and the advisers. If products are no good or too expensive they wont get any support.
Advisers, back yourself and your advice and tell any product focussed dealerships to nick off. You should determine what your pricing model is not some product manufacturer after a cheap headline. Run your business like a business for the long term. When you do that you will write Hybrid or level anyway with a fee from the client as well because you want to as it is good business. You will be shocked as the clients prefer it as they do not actually want the product they want the advice. I have done hybrid or level for years with fixed dollar plan fees and fixed dollar implementation fees. The future is now and the phone has rung three times today with new clients from recommendations.
You will have a better business. Your cashflows will be stronger and you will have happy clients that are keen to refer you to their friends. Financial planning has an incredible future for advice businesses and a very limited future for product distribution businesses.
I have been asking “why” for quite some time and the question has consumed me since about 12pm yesterday when I had a brick thrown at my head.
Have already sent 2 emails asking for explanations on certain elements of 5 year rule and telling them in no uncertain terms what I think of them.
All that is left now is who will be the first to say nick off and from my end the question is whether it is nick off to AMP or this entire sordid industry before the next brick hits me.
“These changes, which are initial steps towards a fee for service model, support this objective,” Mr Meller said.
Obviously AMP are not intending to honour their Hybrid solution for very long! reduce costs and increase profit margins is the name of the game here- not reduce churn or improve quality of advice…
How can they dictate to other insurers that they MUST follow AMP’s lead in order to be allowed on their APL? I thought the goal of this Trowbridge report was to ensure these large banks and insurers made their offering more competitive and increased their APL. This is a way for them to restrict it isn’t it?
I bet the big four will all be on their APL and vice versa. Collusion or what!
I doubt this is a unilateral move by AMP. It more likely an orchestrated strategy by the banks & insurers on the FSC. The others will follow over the next few weeks, althoguh it will be intersting to see the response of the non-bank aligned insurers (TAL, Zurich, & AIA). As Sally Loane has commented the FSC response to the government will reflect the views of the insurance members (read bank owned & AMP). AMP, as the largest ,has been nominated to take the lead (did someone mention collusion?) after the FSC has seen the backlash against the level commission proposal, and I believe been messaged by the Assistant Treasurer that he is sensitive to the impact on IFAs. Undoubtedly the ongoing strategy will be to move to a fee for service model allowing the banks & AMP to eradicate IFAs and improve their own profit margins.
“AMP noted that it recognises there will be cases where a material change in a customer’s circumstances requires a replacement policy in the first five years. In a very small number of cases, for policies written between 1 July 2010 and before 1 July 2015 only, advisers may receive a year one commission of up to 40% to assist with the costs of re-writing the policy”
Why would it be a “very small number of cases”? If the policy is replaced it would need to meet the Best Interest Duty? If it does not meet the Best Interest Duty it cannot be replaced…Will this mean for all of the other cases that the Year 1 commission of up to 40% does not apply are deemed to not meet the Best Interest Duty? Surely if this is the case they should refer the case and adviser to ASIC not just issue the policy and not pay any upfront commission?
80% is better than $1,200 + 20% per client. I think its foolish to think that things were going to stay as they were so if this is the middle ground then it could be a lot worse.
BREAKING NEWS!
To ALL PARTIES involved in deciding the fate of Risk Adviser’s future remuneration in Australia PLEASE NOTE that there are NO queues of people clamouring to buy Life Insurance at Advisers office doors.
THESE QUEUES SIMPLY DO NOT EXIST
The premise that you have been operating under in determining OUR FUTURE AND THE FUTURE OF YOUR STAFF is totally incorrect.
Advisers work extremely hard to FIND A CLIENT IN THE FIRST PLACE then look after their clients simply to generate a fair and reasonable reward for effort.
Spot on Roger!
The problem is of course – and this has been said time and time again – that these people don’t understand what you are saying because they have never sat in front of a client and followed the process through to the issuing of a risk insurance policy, not to mention the servicing of the client including the work we do helping clients at claim time.
I still believe that if these parties such as the FPA and AFA, etc are serious about getting this resolved in the best interests of everyone concerned, then get about 20 risk only advisers together and have them come discuss the issues and together arrive at a solution.
Can anyone tell me why this isn’t even being considered?
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