- Agree (82%)
- Disagree (12%)
- Not sure (6%)
Our latest ‘Trowbridge’ poll question follows the huge response to our previous poll, which delivered a strong ‘no’ vote from advisers to the remuneration model proposed by Mr Trowbridge in his Final Report.
Given the majority view that Mr Trowbridge’s proposed model would not support a viable advice business, we’re now asking whether you believe a hybrid commission model either is, or could be, a sustainable option for your business.
A growing proportion of advice businesses already operate under a hybrid commission structure. But as pointed out by Mr Trowbridge, around 80% of life insurance commissions are taken upfront, rather via the hybrid or level commission options currently available.
Many different stakeholders will also argue that any future adviser remuneration model, other than ‘fee for service’ or level commission, would immediately raise the spectre of conflicted advice, which would not reflect the best interests of the client. But if remuneration options under a hybrid model could be structured so that the client’s best interests were always respected and observed, would hybrid commission (eg 80% upfront and 20% ongoing) be an option for you?
While the Government and its regulators may consider other submissions from the industry together with that of Mr Trowbridge’s, its primary aim will be to deliver an outcome that best serves the interests of the consumer, addresses issues raised by ASIC, but also ensures the sustainability of the retail life insurance advice sector. You have said the proposed Trowbridge model wouldn’t sustain your business, but can you see a future for your practice under hybrid, as long as client best interests are set in stone?
…And while we’re on the point of client best interests, we should note Mr Trowbridge’s view that any hybrid commission structure doesn’t adequately address the primary problem associated with ‘misaligned incentives’. He maintains hybrid commissions would fail to adequately address consumer trust issues by retaining both the perception and the reality of significant conflicts of interest.
So, we’re not suggesting that hybrid represents the best or the ideal remuneration option, and we sense the Government, like Mr Trowbridge, won’t be considering any future remuneration model that exposes consumers to even a hint of conflicted advice. Rather, we’re hoping you will continue to make your voice heard as the debate itself progresses…
I acknowledge the fact that change is well overdue in our industry and excessively high up-front commissions do not serve my clients’ best interests.
My business has been built on the provision of proper advice over many years – determining the right risk insurance solution at the appropriate price with my clients’ long-term best interests at the forefront of my recommendations. By using hybrid and level commission structures, thus avoiding the upfront commission model, I believe I have always been justly compensated for the quality of advice I deliver.
Furthermore, by taking a long-term approach I continue to be able to provide ongoing assistance to my clients in reviewing their cover on a regular basis as well as fulfilling what I view to be our most crucial role – supporting my clients at claim time.
It is universally accepted that under-insurance in Australia is a massive issue. I contend that a major reason for this is that the industry is perceived as having a questionable reputation with high commissions potentially driving ‘bad advice’.
The above said, professional advisers providing quality advice, that’s worth the remuneration they rightfully earn, will continue to thrive during these times of change.
If the issue is around policies being replaced, why don’t they consider this model :
Replacing a policy ie. life insurance to another life insurance policy – level.
New policy, new premium ie. not replacing another policy eg. a new life insurance or new trauma policy that the client does not have in place – hybrid.
The issue with Hybrid and Level commissions is clients signing over commission rights (often not realizing what they have signed). Too often this is done by accountants, banks or as a family group- no problem with service levels and nothing personal!
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