- Yes (74%)
- No (20%)
- Not sure (6%)
Most advisers believe life product shelf space fees paid to dealer groups represent conflicted remuneration.
As we go to print, almost three advisers in four (74%) agree that these shelf space fees are conflicted. Meanwhile, one in five (19%) do not believe they are conflicted and 7% remain undecided.
A few straight-forward comments we’ve received seem to encapsulate the state of play on this question, with one adviser noting,
“Of course it’s a conflict – why would the insurers pay shelf fees if they did not expect to exercise influence and gain a benefit.”
And this:
“How can it not be conflicted remuneration?”
The circumstances ASIC says it would take into account when considering whether life product shelf space fees represented conflicted remuneration include:
- The size of the fee
- How the fee is calculated
- How the licensee uses the fee
- Whether the fee was passed onto advisers and in what form
- How the insurer’s products were presented (eg: as ‘preferred products’)
While many advisers and others may form the view that these shelf space fees may be banned after 1 January 2018 (see: Shelf Space Fees May Continue Under LIF), we note one of the circumstances listed above includes how the licensee would use the fees.
We understand many licensees use risk product shelf space fees to fund adviser education, training, compliance and other services necessary to support the business requirements of advisers operating under the dealer group’s banner. While these payments may be perceived as inherently conflicted (as is risk commission), there may be a chance that shelf space fees may nonetheless continue to form a part of the industry ‘construct’ in a post LIF world.
Perhaps a better way of framing this question would have been to ask whether you believe life product shelf space fees would continue under the LIF reforms, rather than simply asking if you think it’s a form of conflicted remuneration.
In any case, our poll remains open for another week and we welcome your further thoughts on what is not necessarily an open-and-shut case…
Conflicted or not, the cost of ongoing education, training and compliance must be paid by someone.
We live in a heavily regulated world that advisers must live under and the cost is extremely high as it stands now.
People that do not run their own adviser practices and are paid their salaries each week, seem to live in a perfect world of, “let someone else pay for it, so long as I don’t have to.
License fee’s will rise and more advisers will be forced to exit the risk space, as once again, another cost impost will further reduce any profit opportunity and the risk versus reward pendulum will tip too far.
With every argument, there are other considerations that need to be taken into account before we all go off and vote, based on emotion.
By voting that shelf space fees are conflicted, is obvious, though it will enable the Life Companies an opportunity to further reduce their outgoings, which will shore up their margins in the short term, though I fear the adviser practices will end up paying more, which is clearly what is happening right across the board.
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