Portfolio administrator Praemium Ltd (Praemium) has partnered with TOWER Australia to provide fee for service life insurance solutions for two of its platforms.
TOWER will be the underlying insurer for Praemium’s SMARTwrap and V-wrap, providing advisers with what Praemium calls Australia’s first fully flexible insurance solution.
Speaking to riskinfo, Praemium’s Group CEO, Arthur Naoumidis, said the FoFA reforms, announced in April 2011, were a catalyst for the progression of the partnership with TOWER.
“We had already been in talks with TOWER, but the FoFA announcement (that insurance commissions within super will be banned) helped push this forward,” Mr Naoumidis said. “The key change is the product integration which will allow advisers to charge a fee for insurance.”
“Our V-Wrap and SMARTwrap platforms have been designed for fee-for-service advisers since inception.
“It’s really messy to say: ‘I’m going to charge a fee for this part of your plan, but I’m going to charge a commission over here,'” he said.
He likened the current situation to the industry’s move from retail to wholesale investment funds which removed commissions on investments and allowed advisers to charge a fee instead.
Why bother to charge commission for one component if you can charge a fee for everything?
“The industry was already moving in this direction, the FoFA announcement has just accelerated the natural progression for fee based planners.
“Why bother to charge commission for one component if you can charge a fee for everything?”
Mr Naoumidis added that TOWER was a natural choice because both groups are independent, non-aligned firms. “They seem to be fairly nimble, and react quickly to opportunities. The two organisations are a good cultural fit,” he said.
TOWER’s CEO Retail Life, Brett Clark, said: “At TOWER, our objective is to make life insurance a valuable component of every financial plan. We want to see vastly more Australians seeking financial advice and increase the access to life insurance for all Australians.
“All the studies show that value financial advice brings to people’s lives providing appropriate and adequate levels of protection. TOWER strongly supports flexibility and choice in product remuneration structures. This partnership with Praemium provides that flexibility and choice for advisers and their clients,” Mr Clark said.
