Call to Allow Risk Commissions on all Advised Services


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The recent call for the Government to reconsider its position on banning risk commissions on group and default insurance policies is re-shaping the broader debate on banning risk commissions.

The argument is that the Government should not be making a distinction between individual and group risk, but should instead be distinguishing between advised and unadvised insurance.

Our latest poll question asks:

Should the Government reconsider banning risk commissions along the lines of advised and unadvised insurance, rather than individual and group insurance?

The argument in favour of this question comes from CSSA President, Douglas Latto, who recently commented: “There is an assumption that all group insurance is unadvised.  In fact, a lot of group insurance is advised. The distinction that should be made is not between group insurance and personal insurance but between advised insurance and non-advised insurance; that is the more important distinction.”

If this position was adopted by the Government it would still mean that no commissions would be payable on group insurances placed for default and other group insurance schemes where no advice has been provided to the superannuation fund, but it would allow commissions to be paid to specialist advisers who have provided their advice services to the fund administrators and decision makers.

The view against this proposition is that risk commissions on group superannuation schemes reduce the accumulation value of member investments, leading to lower retirement incomes and that they are also considered to be an example of a conflicted remuneration structure the Government is seeking to abolish.

We are interested in your views on this question.  Let us know what you think…

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  1. If there are extra costs to impact the retirement benefits later on then surely that is up to the client to consider, not the regulator. The benefits being advised on are closely aligned to a condition of release of superannuation anyway. So the superannuation balance is only one consideration when creating retirement benefits as we don’t live in an ideal world and a lot of us will require protection benefits. These benefits I suggest will be superior in amount and quality via “advised” channels to those of “unadvised” cover, making the extra cost well worth while.

  2. It is unfair to the advisers who assist those group risk clients with their claims.
    It is at this point that these dedicated advisers step in and assist those who are most vulnerable and who most need assistance that is always so forthcoming after the fact; i.e. on claim.
    Those advisers assist their clients when they are terminal illness claims, at a time when the client has no money to pay a fee. It also those advisers who assist the widows and and orphans to choose a pension in suitable cases, rather than to simply take cash, so the beneficiaries can achieve tax advantages and tax splitting for minors.
    I have said many times: “Go down to the cemeteries an talk to the dead and ask them what they would pay for the assistance that has been given to their loved ones. Go to the hospitals and ask the disabled what they would have done without their disability benefits.”
    If these advisers are forced out of their jobs by those who do not know the business end of this industry then all will lose.

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