Almost three quarters of financial advisers say their business will suffer if they are banned from sharing commissions with accountants for client risk advice referrals.
This is the clear message being delivered to the industry by advisers who have responded to our latest poll question, which asks:
By how much would your practices’ risk advice revenue be impacted if accountants were banned from receiving payments for referring their insurance clients to you?
As we publish this story, 26 per cent of advisers say the proposed commission ban will have no impact on their risk advice revenue, while 72 per cent believe it will. One in five advisers have said their risk advice revenue will be reduced by more than 50%, while more than a third of all advisers (36 per cent) have indicated their revenue will reduce by between 10% and 50%.
In their rejection of the proposed commission ban within the APES 230 policy paper, advisers have pointed out that there appears to be no evidence of any substantive complaints received by consumers regarding accountants receiving risk commissions for referrals, and that the APES Board should allow free market forces to prevail. And one accountant has simply stated that her integrity is not compromised by receiving referral commissions:
I would prefer to know that they are seeking advice from a professional adviser rather than seeking cover from an ad on TV…
“As a referring accountant, I do not believe that I am compromising my professional standards by accepting remuneration by way of commission for risk referrals. If I have identified the need and referred the client on to our risk adviser and they are now covered, my conscious is clear that I have done the right thing by my client. We have never had an instance where once disclosed to the client, they had an objection to us being remunerated. I would prefer to know that they are seeking advice from a professional adviser rather than seeking cover from an ad on TV, telemarketer or a bank adviser who is going to offer little choice by way of cover.”
Other comments have pointed out that ‘arms length’ client referrals can work both ways between financial advisers and accountants without referral payments:
“Most won’t take the commissions anyway. Cross referral allows for both parties to benefit.”
“Arms length referrals – we don’t take or offer referral payments, clean referrals work both ways.”
Another adviser has made the important point that:
“It would be very sad to think that accountants wouldn’t recommend insurance to their clients if there wasn’t an earn in it for them.”
Meanwhile, TAL’s CEO Retail Life, Brett Clark, has commented to riskinfo that under this proposed new standard, accountants will find it very difficult to refer customers to risk advisers under any form of commission share, or joint venture arrangement:
… less Australians will end up with the life insurance coverage they need
“If these referrals were to stop, not only would adviser revenues drop, but less Australians will end up with the life insurance coverage they need: the chronic under-insurance problem will be made worse,” said Mr Clark, who added, “This would be a perverse outcome from a public policy perspective, and one which we don’t think the Accounting Professional and Ethical Standards Board may have properly considered.”
Where do you stand on this issue? Should it be ok for accountants and financial advisers to share commission revenue for referral clients? Or does this represent conflicted remuneration that is ultimately not in the best interest of the client? Tell us what you think. Make your voice heard…
My accountant has referred clients to me on an adhoc basis in the past. It has been a hit and miss system without the accountant being fully committed to the process. last year I formed a joint venture with my account, and the accountant has introduced a robuts referral process with all of her staff. As my accountant is now helping build an insurance agency, and receiving commission for successful referrals, the quality of referrals has improved immeasurably, and the no of referrals has increased dramatically. the accountant and staff are now committed to identifying insurance needs for their clients. I have been able to assist with an education programme for the accountant’s staff to help identify client’s shortfalls in cover.
The end result is that the clients are now receiving a professional insurance review, and are getting the insurance they need. I make money by commission and share this commission with my accountant. Without this joint venture, insuarnce would not be a priority for the accountant.
Perhaps someone could explain to me why it is immoral for my accountant to earn income, by helping her clients get better insurance cover. It is all very well to have a mutual unpaid referral source, but when money is involved the process becomes a priority. The joint venture does not cost the client a penny other than the standard insurance premium.
My practice will certainly suffer a loss of revenue if I am not able to continue to pay my accountant a commission for referrals.
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