Commission Clawbacks – Poll Results

Our latest poll results suggest the vast majority of advisers believe that commission clawback provisions should not apply in cases where the cancelled contract is in the best interests of the client.

To date, 86% of those taking our poll have voted ‘no’ to our question. However, 11% believe the client best interest test should not be exempted from clawbacks under the proposed Life Insurance Framework reforms and 3% are undecided.

This is an unsurprising overall result when considered from the purely logical perspective that an adviser should not be financially penalised for acting in their clients’ best interests.

Last week, we laid out some of the arguments for and against the proposition (see: Latest Poll – Commission Clawbacks), but one adviser has added another seemingly logical argument in favour of granting a clawback exemption for client best interest, or at least reassessing its severity. He argues that while he may receive a commission to the value of $3,000 for a new business case, expense analysis tells him it will have cost his business $2,500 to have this policy placed on the books:

…it would be nice if the politicians were aware that we “personally” only receive a small fraction of the income received after expenses

If my Business receives $3,000 then I personally have been paid $500 though I am responsible for six times that amount if the policy ceases in the first 12 months.

I cannot ask my staff to repay their salaries, or for the telephone, electricity and the dozens of other charges/expenses to be refunded to me if a client cancels their cover and it would be nice if the politicians were aware that we “personally” only receive a small fraction of the income received after expenses come out…

A point raised by another adviser implies how difficult it would be to consistently define or identify those cancelled policies that would pass the client best interest test.

So, while there appears to exist broad general agreement that it’s unfair to financially penalise advisers for acting in their clients’ best interests, it also seems there might be significant practical hurdles that may prevent such an exemption from being implemented.

As always, it’s over to you as our poll remains open for another week. Make your voice heard…

Note to Advisers:

We welcome your comments and in the interest of fairness, request that you properly identify yourself either in your post ID or at the end of each comment.