Should advisers be required to charge a fee for their investment and superannuation advice, but still be able to access commissions on risk products?
Our latest riskinfo poll asks:
In future, do you support commissions being paid to advisers for life insurance products only?
Adviser and other industry opinion on the issue of commissions appears to fall into three main categories:
- Retain commission as a remuneration option across all financial products
- Retain commission for risk products only
- Abolish all remuneration by commission
Based on adviser comments from previous polls and other industry feedback, there is a proportion of advisers who argue that remuneration on the sale of life insurance products should be considered as separate from the broader debate over payment for investment and other financial advice.
This point of view is supported by a number of life companies, by the Financial Planning Association (FPA), and by the Ripoll Inquiry itself, where Mr Ripoll has previously confirmed to riskinfo that life insurance products should be considered separately in this debate.
Many in favour of completely abolishing commissions argue that the financial advice sector has been tainted by issues, both real and perceived, as a result of commission payments, and that removing commissions entirely will allow the industry to move to a more ‘professional’ standing.
Meanwhile, the argument in support of retaining consumer choice is best expressed by the Association of Financial Advisers (AFA), which holds that the question of how advisers should be paid is for the adviser and his/her client to determine, as long as there is full disclosure. The AFA has long argued this debate should be about the value and quality of advice and its price, rather than simply about how the price should be paid.
The outcome of this debate is yet to be determined, with the Ripoll Inquiry recommending that the financial services industry and its regulators collaborate on the issue of adviser remuneration. This is why your opinion is more important than ever.
What is your view? Should commission be retained for risk products only? Should commission be abolished all together? Or should commissions continue to be allowed as a remuneration option for all financial advice?
Have your say. Add your comments. Make your voice heard.
I think the commissions could certainly be reduced, or alternatively if advisers discount their commission the premiums should reduce reflectively, rather than just minutely as they do now. Seems funny how when the markets were falling and adviser incomes falling, the amount of risk being written increased because advisers needed to get income to replace what they had lost. Must be something to do with the commission rates? I guess a fair bit of churning helped also. Can’t see why the insurance industry should be exempt from the fee v commissison debate, seeing as most the problems in the industry stem from the old school insurance salesmen (Cassimatis /Storm). Having said that, banning commission altogether is not a good idea, it just needs to be reduced. If an adviser feels they are not compensated enough for the work done, they can charge the client an additional fee.
Let the client decide.Too many people in the industry giving their opinion just to to big note themselves.
I should be up to the client who is after all paying for thr service.
I agree with M Lowe RE: giving the client the option how they pay – I think clients should also be able to go to the doctor and elect to have the drug company pay for their consultation also…the doctor can elect to prescribe the drug that provides them with the best incentives…great idea.
The reality is – no other professions give clients a choice how they pay for the service – why should Financial Planners…I doubt those who suggest this give their clients the choice either.
M Lowe also mentions that the client is paying for the service regardless – correct – the client can pay for the advisor’s advice and pay an appropriate flat fee…but then pay 25% to 30% less each year in premium (thanks to the advisor rebating the commission in the form of a reduced premium) – or they can pay 25% to 30%pa more premium each year and the advisor (sales-person) gets a commission up-front and ongoing…regardless of any services being provided.
Would be simpler to get rid of commission and for advisors to charge for their advice – instead of allowing product manufacturers to determine how much advisors are paid.
I have never had any client complain that I earn a commissiom for setting up their insurance plan.
I have however heard people complaining about the fees Financial Planners and Banks charge and in some cases they do bugger all for it.I have been proud to be a Risk Writer (Insurance salesman) for the past 30 years.Up until recently most financial planners didn’t even address risk as they only wanted FUM, risk was too much trouble and work, heaven forbid you had to handle a death claim, no money in that so clients were left without any cover until they saw a Risk Writer (Insurance Salesman)Then along comes the GFC. Finacial Planners incomes went down by say 40% so what did they do, they started to write risk and from what I’ve seen and heard, not very well.This industry is imploding we have too many associations heading in differant directions with their own agenda. My thoughts are this: Risk Insurance should still be commission based and Financial Planning on a fee for service. If you financial advisers have a conscience about receiving commission then why don’t you rebate it back to your clients and don’t forget about the trail that you have priced your business on as well.If you take the time to compare dialling down commission you will see that the premium does not come down that much compared to the commission.I further believe that the financial service industry should be more regulated by way of the advice being given. Clients also have an obligation to make sure they completely understand what they are purchasing. Seems to me they only really understand when things don’t go their way ie downturn in their super fund due to fluctuations in the market or no claim due to non disclosure.
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