The majority of advisers say their business would not be sustainable if all commissions were banned, but there are indications a growing number of advisers may be preparing for this eventuality.
Responding to our latest poll, 58% of respondents answered ‘no’ to our question (prompted by Dan Sullivan’s message to Australian advisers):
If all commissions were banned, would your practice be able to survive and prosper under a fee for advice structure?
However, 29% have indicated their practice would indeed be able to survive and prosper under a fee for advice system.
While we cannot determine what percentage of survey respondents currently rely strongly on a commission-based remuneration structure, we see a ‘yes’ vote of 29% and another 14% ‘unsure’ as indicators that more advisers are planning for a future without commissions.
The underlying argument from the majority of advisers is that consumers will not pay a reasonable fee to receive insurance advice. These adviser comments support this contention:
They [consumers] will simply not pay for the real value of what we do
Dan Sullivan … is making an assumption that Investment and Insurance advising are the same in a clients mind and that they are happy to pay for both. This could not be further from the truth.
Others argue that trends elsewhere do not necessarily apply to the Australian market:
Consumers really don’t care how we get paid: the real difference here in OZ is they get full disclosure from us
While some advisers raised the point of change being inevitable over time, the question of customer acceptance remains:
While I agree … that change is inevitable, I am concerned about how long it will take for consumers to accept fee for service for risk insurance.
This last comment is perhaps another way of asking our poll question. That is, will Australian consumers ever be prepared to pay a fair fee to receive life insurance advice?
As always, we would like to know what you think. Our poll remains open for you to vote and to register your views in this debate…
I don’t think that the public in general will ever accept fee for service for risk insurance in Australia. We don’t pay fee for service for general insurance, health insurance, car insurance, house insurance, landlords insurance, professional indemnity insurance, so why would the general population pay a fee for “life” insurance advice?
I think that banning insurance commissions will more likely lead to the scenario where customers are only offered a single “commission free” product rather than a choice from a range of providers.
We have all lived through the horrow of the GFC that was caused by American Know How. I suggest the honorable gentleman returns to the USA and keep his misinformed opinions to himself.Australians are underinsured now and if clients had to pay a fee to see me Im sure there would be even less people with insurance.
I saw Dan’s video but don’t agree with his views that a move away from commissions is inevitable. It will only happen if politicians ban it! As Duncan says above if it doesn’t apply to other insurance why should a ban on commissions apply to risk only! The left wing politicians have an ideological problem with Advisers being paid commissions for risk insurance its that simple. So we have no option but to fight the proposed changes so they aren’t implemented rather than accept the change as inevitable!
The Government pushed through massive change with onerous, legalistic complexity, causing Advisers costs to increase, more time having to be spent on compliance and red tape and now they want to ban how Advisers can be paid on some advise models.
A big proportion of ‘commission’ income advisers receive for Insurance advise, is to cover the administrative mistakes Insurance Companies make and to cover time consuming and in many instances, unnecessary processes that confuse clients, which leads to our time being taken, fixing the issues.
Can anyone explain how we can easily charge clients for that time, when as the client would quite rightly point out, the problem should not have occured in the first place, therefore I am not going to pay.
Would the Insurance Company pay us our hourly fee to compensate us?
I think we all know the answer and of course even if the Insurance Companies did make provisions, it would be a administrative nightmare that could never work.
Until clients themselves, are happy to pay for advise around Insurance, plus the time it takes to advise in a compliant manner within the current regulatory regime reduces considerably, then the debate is mute.
You cannot force clients to pay fee’s and we cannot improve Insurance Company efficiencies, that is something they must do in consultation with experts who have real experiance dealing with clients.
To answer the question, for Investment advise, the banning of commission and charging fee’s will improve Business.
For Insurance advise, it will destroy the Insurance business.
Don Trapnell’s article, “An Open Letter to Bill Shorten” published in this month’s IFA magazine summarises accurately the problems which will be created if FOFA goes ahead in its current format. Banning commissions for investment related business is right in my opinion, though the proposal to ban commissions relating to life insurance is flawed, unlikely to work, and will ultimately worsen Australia’s underinsurance dilemma.
For that percentage to be meaningful the question should have directed to those advisers who primarily deal in risk products. INVESTMENT ADVISERS dabling in risk as a sideline can cross subsidize with fees.
By the way, a risk only adviser with a prominent Canberra based advisory firm tells me that while fees are charged for all other advice, upfront full commisions are taken on risk.
This firm has in the past been viciferous in hacking at commission-based risk ” salesmen ” for many years in very public forums. Hypocricy abounds, and self-interest always wins the race.
Question:-
Will Australian consumers ever be prepared to pay a fair fee to receive life insurance advice?
Answer:- NO ! as Insurance is SOLD not
bought !
The Government & its Advisers should
realise this.
I read all this and listen to what is being said about commisions and my opinion is as follows…
The adviser see the client and completes Financial Needs Analysis.
The Adviser then completes the research that is required to ensure their advise is complete and beneficial for their client. Research that involves finding the righ investment, insurance, superannuation so on vehicle that will provide financial benefits and security to their client moving forward.
The adviser then puts together the Para Plan
The Para Plan is used to create the Statement of Advise, completed by adviser, their para planner or by their dealer groups para planner any way its done it is paid for by the Adviser
The Adviser then presents the advise to their client. Ensuring that their client understands clearly what they are being advised to do .
Client agrees with advise and adviser now sells the clients the vehicles by which their goals will be achieve ie the PRODUCTS or as Dan Sullivan stated COMODITIES that will assist client to achieve their goals.
Once client agrees to the vehicles the adviser helps the client to complete the applications and collect and collate all the required paperwork.
Adviser returns to office places copies of documentation on file sends original applications to Product or Comodity company provider.
Adviser then follows up of the applications processing with the company providing any further information that they require to complete the application all the while keeping their client up to date on what is happening.
Application complete,Business in place company recieving payment from advisers client in form of fees or premiums.
During the whole process not once does the company providing the vehicle ie Product or Comodity have one of their PAID staff speak with the advisers client to explain their product or comodity, complete applications, collect information or generally create a relationship with their new consumer. NO
All communication is between adviser and client. And with the new system all monies earned for product or comodity being put in place is earned by the company providing the product or comodity while all the work is done by the ADVISER.
every year adviser does review with client and continues to build on the relationship.Every year company providing product or comodity has their computer generate a statement for a number on their system that is mailed to client or better put the companies NUMBERED MONEY MAKER.
if its insurance and claim is made the adviser again does all the paperwork and has the face to face or phone to phone contact with their client. The company just processes another NUMBERED APPLICATION FOR CLAIM….
My question here is this…………
WHAT ARE THE COMPANIES PROVIDING THE PRODUCTS OR COMODITIES PAYING THE ADVISER FOR ADVISING THEIR CLIENT TO USE THAT COMPANIES PRODUCT, THAT THE ADVISER HAS KNOWLEDGE OF TO ENSURE THEY ARE GIVING THE RIGHT VEHICLE TO THEIR CLIENT FOR THEIR GOALS ????
ANSWER —— NOTHING…….
WHAT TYPE OF WORKING SYSTEM IS THIS CALLED?????
WELL ILL GIVE YOU A HINT………..
IT WAS FINALLY DESTROYED BY THE CIVIL WAR IN AMERICA WHICH RESULTED IN THE DEATH OF ONE………..
ABRAHAM LICOLN
COMPANIES GET MONEY FROM ADVISERS WORK………
ADVISER GETS NOTHING FROM COMPANY
= SLAVE LABOUR
this new system of fee for advise should also include fee for advisers sale of companies product….. oh wait that would be classed as incentive to sell product and remove fiduciary responsibility……
so SLAVE LABOUR IT IS AND ITS COMMING TO YOU OH SO LUCKY AND FREE AUSTRALIAN ADVISER IN 2012
FP (investments / super) is very different to INS.
There are alot of INS only advisers.
Trying to convince people to pay the premiums (every year).
People would not also pay a fee for all our services (advice/meetings/research/implementation/claims management/reviews).
Dont shoot the messenger. Dan a canadian, is one of the worlds greatest thought leaders ,he comands a Fee in excess of $25000 just to talk with him and the waiting list is a mile long.
Could you command a fee like that for your intelectial knowledge?Insurance is a commodity!
Distribution thru intermedieres is just one way product manufactures get their product to market .Direct on line offerings are popping up on TV everywhere and group life premiums are very competative,so Dan is asking you to consider what your business model may look in the future post FOFA will you go back to the way it’s always been?Is that progress?
I’m up for progress, but the current progress is less income or income earning avenues for the adviser, more overheads.
do you think that if the client opts out of paying for the financial advisers services that their fee will reduce NO the companies will likely keep charging it and keep it. It is also true that online insurances are their BUT they dont’t go through the process we do. further they dont all do underwriting at application so many clients may not get cover if some preexisiting condition is found.
If we are to be a completely fair system for clients, adviser, and product providers then the product providers of INVESTMENTS AND SUPER should be paying us for selling any of their products.
the new system is going to ensure that clients pay the adviser a fee and the product provider fees and the product provider pays no one…
If you sell something in any arena of the business world for a company that company has to pay you for your service and earning them money. Guess what Like is already said the companies DO NOT PAY THE ADVISER. the Trail Commision, Services commision, service fee what ever you call it was our payment for giving client the correct adviser that lead to the company paying us for INCREASING THEIR BOTTOM LINE AND PROFIT MARGINS. Now we will get nothing and I cant understand how anyone could say that don’t see the missing link in the chanin here….
Im all for good reforms that make the system fairer for EVERYONE. This system is advantagious to industry funds, Investment providers, superannuation providers and detrimental to the Adviser….. and as an adviser I DESERVE to be paid by an investment company or superannuation company for advising my client to use a companies product to invest their money that the company is now going to profit from while I have done the work…not being paid IS slave labour….the companies know this cap will be there but they dont care coz its money in their pockets for no effort at all now thats a Brilliant INVESTMENT
Venesa it was Mark Twain who said “I’m all for progress it’s change I object to”if you had the chance and now I suspect you do what would you do to make your offer to clients so compeling they would by pass every other adviser and only deal with you?The answer is Advice.
Your right Brian and I succeed at getting that across….
Nothing ever stays the same in this industry and I am certain that in another few years more changes WILL occur and I will accept them I love this industry I’m in but as a young adviser I see the industry trying to remove us and our advise from the equation and this will do nothing but put Australians in a worse position in the future
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