Consumer advocacy firm, Adviser Ratings, has welcomed the Trowbridge recommendations, calling them ‘… balanced, considered and long-overdue.’
Adviser Rating’s Christopher Zinn, said “Consumers have known for years that life insurance, though an essential financial service, was seemingly run for the benefit of the industry and advisers through cosy commissions.”
In a statement following the release of the Trowbridge Report, Mr Zinn urged speed with any further consultations, adding that “Capping upfront commissions in a way which ensures we can get transparent access to the kind of policies and advice, satisfying our best interests as consumers, is surely paramount.”
In referring to issues including: fast-rising premiums, issues of affordability, low coverage and complexity along with a great deal of difficulty in comparing life insurance products, in and out of superannuation, the Adviser Ratings statement concluded that the Trowbridge and ASIC reports (see: ASIC Life Insurance Review…) show what needs to be done and how it can be achieved. The statement continued, ‘Adviser Ratings believes it is ironic that the sales-driven culture from the early days of life insurance, helped the conflicted remuneration business models evolve, damaging the wider financial advice sector.’
Support for the Trowbridge recommendations has also been voiced by advisory firm, William Buck, which characterised the Trowbridge Report as a positive step for the insurance industry.
… the Trowbridge Report “… is a step in the right direction for the insurance industry”
The firm’s Insurance Specialist, Sam Kitchen, said upfront commissions have been an issue in the insurance industry for a long time, and that the Trowbridge Report “… is a step in the right direction for the insurance industry.” Mr Kitchen added, “The recommendations will ensure the consumer and advisor’s interests are more closely aligned with a focus on the client’s needs not product. Everyone will be on a level playing field,” he said.
Mr Kitchen added, “The consumer has always come first at William Buck. About five years ago, the company introduced an ongoing service model involving regular progress meetings with clients to ensure the client comes first in all of the decisions that are made. This structure has also helped William Buck create a more sustainable insurance business model that is not reliant on transactional sales.
“The Trowbridge report provides an excellent platform for the industry to work from, however the management component of claims and the [associated] costs need more careful consideration,” he concluded.
Meanwhile, in renewing its call for a total ban on commissions, Industry Super Australia (ISA) has criticised the Trowbridge recommendations because it believes they don’t go far enough. The superannuation giant’s release states: ‘The Trowbridge Report into the abysmal state of the retail life insurance industry is disappointing in its failure to consider removal of commission-based remuneration structures from life insurance.’
Conflicted remuneration structures are the primary cause of poor advice in Australia…
ISA Deputy CEO, Robbie Campo, said “While the report’s proposals may deal with the most egregious situations of churn, it fails to tackle the fundamental conflict caused by the existence of commissions, even if capped.” Ms Campo added, “Conflicted remuneration structures are the primary cause of poor advice in Australia, featuring in every major advice scandal of the past decade. If allowed to remain, they will continue to undermine the quality of advice and insurance outcomes for clients.“
The ISA statement continues ‘Furthermore, last year’s ASIC report pointed to advisers showing preference for personal life policies which can attract commissions, over group life policies inside super from which commissions are banned. The proposals in the Trowbridge report fail to address this issue which has led to inappropriate use of super savings to pay for costly personal insurance.’
“A transition towards phasing out commission-based remuneration is the only long term sustainable solution compatible with a professional financial advice industry. Other options, such as allowing capped commissions only up to the value of advice provided, do not seem to have been seriously considered,” said Ms Campo.
When Adviser Ratings was established without the consent of the advisers whose details were automatically included on their site, it was deemed to be a resource where consumers could access to information about individual advisers qualifications, experience and area’s of expertise to assist them in choosing which adviser they may want to work with.
Now Adviser Ratings is being labelled as a consumer advocacy firm with Christopher Zinn providing an opinion of how legislation should be structured.
So, in effect, Adviser Ratings is developing into another aggressive pro-consumer business akin to Choice from where Zinn came from, except this time they already have all the adviser details in their system unless advisers have formally elected to be removed from their data base.
Why is it that I can source better coverage (ie: good TPD definitions that WILL allow my clients to claim) at a cheaper price than some Union Super Funds and still get paid a commission as the means for providing service and advice for my client?
I don’t know how the Trustees of these Union Super Funds can look themselves in the mirror. To universally change the definition of TPD in the way that they have is appalling. Obviously their is no Best Interests Test at play for these people, just for those evil financial planners…. Hopefully they might feel the heat from a class action when their members continue to have their claims denied by changes that haven’t been widely broadcast to members.
Perhaps Ms Campo is the one providing “conflicted advice” as she’s promoting higher premiums with inferior product definitions. But she’s from the Union Super Funds, so we know she can be trusted….no bias there.
It was OK for Christopher Zinn and Choice to receive comms from One Big Switch because they were disclosed…..but then they were doing it for a noble cause….to help their clients…..unlike those nasty financial planners who aren’t interested in protecting clients from the financial impacts of premature death, sickness or accidents….
Mr Kitchen, you may well voice your opinion since you’re probably on a wage and the firm you work for ostensibly works in the Self Managed Superannuation Fund area.
The cost of commission has never been a problem with consumers.
It’s a nonsence to suggest otherwise.
It’s been mandatory since the implementation of FSR in 2000 for all members of the FPA to disclose initial and ongoing commissions to clients.
It’s been mandatory for life insurance advisers for a number of years to do the same.
I have a great idea, since the cost of SMSF set up and administration varies with different providers.
Lets limit the current charge by your organisation by 50.0% of what it currently receives and lets see if you and some others still have a job.
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