- Hybrid commission, retaining the two-year clawback requirement (66%)
- Flat commission only, with no clawbacks (27%)
- Not sure (6%)
Most advisers agree they would prefer access to 80/20 hybrid commission with clawbacks applying, rather than flat commission without clawbacks when it comes to being paid for advising on replacement life insurance business.
As we go to press reporting the results of our latest (hypothetical) poll, almost two thirds (65%) of advisers have opted for 80/20 hybrid commission with clawbacks as their preference, compared with around one in four (26%) who say they prefer the flat commission/no clawback option.
Replacement business is the same work as new business…
There have been some consistent messages stemming from some of the comments made by advisers, which include the fact that there’s as much work involved in implementing replacement business as there is in writing a new business case from scratch, if not more:
“Replacement business is the same work as new business”
“…replacement business is as good as new business – we still need to do the work as if brand new.”
“The work and costs involved are in actual fact higher than a brand new client, as the comparison requirements are more involved.”
Another thread of comment has related to the available options we presented. We accept that an 80/20 hybrid commission model with only a 12-month clawback requirement would clearly be a more palatable solution for advisers, but the nature of this poll speculates on the potential future for risk commissions post ASIC’s 2021 review of the quality of life insurance advice. It’s possible that decision-makers in Canberra, if they’re open to reviewing the commercial viability of risk commission caps – if retained – may be considering a return to 80/20, but retaining the two-year clawback as safeguard against conflicted advice and to ‘better align the interests of financial firms and consumers’, which is a mantra it has been promoting since 2015.
Our poll remains open for another week as we continue to welcome your measured and respectful feedback, irrespective of your point of view…
Replacement business is much more time consuming advice process than not replacement business.
With the amount of work involved in replacing business, that’s the last thing that I want to do. Unfortunately with the way that the insurers are treating their long term legacy policyholders we have no option but to recommend replacement in an ever increasing number of circumstances. We must be rewarded for the work that we do.
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