Our latest poll once again visits the issue of risk commissions, as we seek your view on whether it’s time to review the current LIF commission caps.
It’s been exactly a year since we last had this conversation with Riskinfo readers and it also coincides with news this week that the New Zealand regulator will be placing a renewed focus on conflicted adviser remuneration over the next twelve months due to what it says have been continuing “…reports of misconduct motivated by high upfront commissions” (see: Risk Commissions Under Kiwi Regulator’s Spotlight).
While the NZ regulator is only at the beginning of this review process, the Australian financial advice sector has been grappling with the fallout from ASIC’s Review of Retail Life Insurance Advice (ASIC Report 413) since October 2014, culminating in the capping of risk commissions under the Life Insurance Framework reforms – within a free-market society – to their current hybrid 60/20 levels.
Twelve months ago, this conversation focussed on whether the LIF remuneration model should include a minimum commission payment (as advocated by John Trowbridge) designed to allow more low-middle income Australians to access risk advice (see also: Strong Support for Change to LIF Commission Structure).
…the life insurance industry continues to suffer the consequences of fewer advisers [and] lower levels of new life insurance being written
Today, however, as any other meaningful sector reform initiatives from the Government appear to be tethered to its response to the fallout from the First Guardian and Shield Master Funds advice scandal, the life insurance industry continues to suffer the consequences of fewer advisers, lower levels of new life insurance being written and fewer Australians accessing the life insurance advice needed by so many.
Is it surely past time for the Government to act on risk commissions – to review them at the very least? Tell us what you think and we’ll report back next week…
Most of the older risk specialists, the ones actually interested and passionate about risk advice, have left the building. This was due to the idiot regulations around higher education that wanted to see them all study and qualify at AQF8 level, the same a full financial planners/investment advisers. 90%+ of those older ones left. THEN, after they realised their stupidity, the pathetic politicians changed the rules to make it easier for them to stay – AFTER they'd left! Ask me how I know! Go figure. Net effect: nobody left to mentor newbies and pay them through their apprenticeship. Oh and remember the commissions were cut so even if the oldies were there to mentor them there was not enough money in the equation to pay everyone due to the ineffectual life companies NOT being the advocate for THEIR adviser and happily acquiescing to a crowd-please effort by special interest groups and govt to reduce commissions.
Incidentally, even IF upfronts increase back to 80% or 100% it will be far too late. Dedicated risk writers are, largely, no more. The 'investment planners' or so-called 'full financial planners', well, there aren't many of them passionate about risk or truly understand. There are few who can properly 'sell' the need for risk protection as they don't 'feel' or truly understand the need or value of insurance – for the client or themselves, sadly. Oh and it doesn't pay enough for the PI risk & hassle. No meaningful support from that quarter then . . .
So, then we have the new entrants into the industry trying to make a new business on 60% upfront and 2 years claw-back – 99% of these poor newbies are destined to fail. No mentorship (the REAL sales training) remember. Make no mistake, the vast majority of risk sales still follow the old tenet: 'It needs to be sold as it isn't bought'. If you don't know what this really means then you're part of the problem not the solution.
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