- Yes (65%)
- No (30%)
- Not sure (5%)
Our latest poll moves from Trowbridge ‘theory’ into working reality, as we seek your opinion about the transition to hybrid commissions, recently announced by both AMP and Centrepoint Alliance.
We have reported in detail on the Trowbridge recommendations and the subsequent reactions from advisers and other industry contributors. But we’re now asking for your verdict on these two ‘working’ examples of a future adviser remuneration structure for life insurance advice.
The question we’re asking is a simple one, namely whether you support these ‘hybrid’ initiatives. But we also appreciate the devil can often be in the detail, including the treatment of remuneration for replacement business occurring inside five years of the policy commencement. We’re keen, however, to gauge the general ‘mood of the meeting’ in relation to these initiatives.
The announcement from Centrepoint (see: Centrepoint Announces Move to Hybrid) contained two key messages. The first was that the move was overwhelmingly supported by its advisers, with nine in ten voting in favour.
The second key message, as outlined by Centrepoint chief, John de Zwart, seems to encapsulate one of the challenges in this remuneration debate, namely balancing (or aligning) the interests of the consumer with the ability for the adviser to be appropriately remunerated for the value of the advice they deliver. Mr de Zwart said the move to hybrid “… will remove any perception of conflict of interest in advising clients while ensuring they can access the quality advice they need”.
On the adviser side of this equation, Mr de Zwart noted three key points:
- The hybrid model will ensure that advisers (and advice practices) remain viable
- It will ensure advisers are appropriately rewarded for their valuable advice
- It will also encourage new advisers into the industry
Following our report on AMP’s hybrid announcement, we received a huge response from advisers, which ranged from strong support to strong opposition (see: AMP First to Mandate Commission Reduction). And there was much attention paid to the replacement policy rules. There was also a general sense that, if the industry deferred to Government intervention, then the outcome of that intervention would more likely align with the Trowbridge Reform model than the hybrid commission vision.
As always, we will welcome and value your contribution to this conversation…
What began as an investigation into poor advice in the Risk Insurance sector , is now centred around remuneration.
A lot depends on the percentages of hybrid commission paid. If upfront is reduced and trail increased then book values are enhanced.
Regarding irregularities, licencees need to make use of practical compliance which monitors particularly advice replacements and reviews and does not resort to lengthy and garbled legalese .
Has anybody asked the consumer if they care about the way commission is paid? Have they been asked if they would prefer to pay risk advisers on an hourly rate? I am sure the answer would be no, as it will cost them more, and can’t be justified unless we can see real evidence of the benefit to consumers. To date these savings are just pie in the sky claims.
We currently need to disclose the commission earned when placing risk products, and there has been no issue with clients. When low net wealth clients particularly understand that it would cost them more if they were changed an hourly rate they are delighted to not have to pay the upfront fees and have no qualms with commission payments.
Maybe a sliding commission scale for larger premiums would help.
But then, I thought the whole problem being dealt with is churning. Has that been forgotten or are we just trying to crack a peanut with a sledge hammer here?
The FSC and the Trowbridges of this world don’t get it.
For instance we recently placed an existing client’s life cover into super in the “client interest” for no fee and no commission.
We are now being told by the Fund Administrator that the Life company underwriting their group life insurance is, that they are going to increase all existing group life rates @ 1 July by a whopping 85.0%.
We can rewrite the client in a retail product offered by the same Group Life underwriter at a discount to the client for approximately 30.0% less than what his new group life premiums will increase to, @ July 1.
The rhetorical questions are
1. In the “client interest”, do we rewrite him and save him around $450 in the first year.
2. Will we be perceived as “churners” under the FSC definition ?
3. Leave the client’s insurance with his super fund and let the client be plundered by the life company and perhaps run the risk of losing him all together, if some one else points out the deficiencies in what we have set up.
Finally, we will receive 50,0% of the first years premium as initial commission and 50.0% ongoing.
The irony of this is that under the proposed commission responsibility period being suggested, we would have no write back of commission/fee because in the “client interest”…. we received none.!!!!
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