- No (50%)
- Yes (41%)
- Not sure (8%)
There’s no clear winner in our latest poll, as advisers appear to be divided as to who should be wearing future clawbacks under the Life Insurance Framework reforms.
As we go to press, exactly half of those voting so far disagree that commission clawbacks should only ever be applied against the current servicing adviser. However, most of the rest (42%) say they do agree with this question, while one adviser in 12 (8%) remain on the fence.
We wonder whether this very evenly-split result has happened in part due to the sometimes complex machinations that accompany policy cancellations and replacements.
One adviser, Jeremy Wright, has pointed out what he sees to be the unfairness where the originating adviser ‘cops’ a write back through no fault of their own in circumstances where a new adviser has emerged; has cancelled the original contract and written it elsewhere. Jeremy’s point is an argument in support of the contention that the new adviser is the one against whom the clawback should apply.
As we noted last week, however, there is a counter point which argues that the new adviser, if they have acted in the best interests of their client in moving them to a policy which better reflects their circumstances, should not bear the financial cost of correcting what may have been an inappropriate solution implemented by the original adviser.
How should the industry progress on this question? Are there other more flexible solutions than that proposed by the AFA (see: AFA Calls for Common-Sense Test on Clawback)? Is there any room for an independent arbitration in situations where the new and former advisers contest who should be made responsible for the clawback? Is there a different or better system that will accommodate individual circumstances? Or is it better to make a consistent call along the lines of the fact that the liability for the new policy, if a clawback applies to a cancelled contract, always attaches to the adviser who writes the new policy?
Tell us what you think, as our policy remains open for another week…
The new adviser may be able to establish “Best Interest”, but surely the originating adviser did that also. Can be a subjective issue!
This is incorrect in my experience. “there is a counter point which argues that the new adviser, if they have acted in the best interests of their client in moving them to a policy which better reflects their circumstances, should not bear the financial cost of correcting what may have been an inappropriate solution implemented by the original adviser”
That is very subjective and we all know there are various ways to “skin the cat” with none being wrong. the new adviser may think he is more correct and had his BI and RBA correct but it may well over look the previous advisers values used in that recommendation. is the new adviser required to read the old SOA so as to prove a better outcome. Clearly the author and many in the industry are unaware of the unintended consequences and may not have their head around the real issues of churn etc. To not pass the responsibility of the claw back to the initiator further exacerbates the so called problem we are attempting to address. Novice work and potentially breeding poorer advice outcomes. Blimey!
The end goal is clients best interest and avoiding churn. Therefore clawback should only apply when the same adviser or practice re-writes within the clawback period. Innovation occurs should the client be penalised because no-one wants a claw-back, that is not in the client best interest
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