- No (74%)
- Yes (21%)
- Not sure (5%)
The majority of advisers have rejected the notion that sales-based incentives are the main reason for consumer mistrust of financial advisers.
The results of our latest poll tell us that almost three quarters of advisers (74% as we go to press) disagree with the contention outlined in the ‘And the Walls came tumbling down…‘ white paper, which is that sales and other incentives are the key issue impacting consumer trust in financial advice and advisers.
However, one in five (21%) agree that these incentives are indeed the main reason for consumer mistrust, with the remaining 5% of those who voted being unsure on this question.
Responding to this poll and to the white paper, some advisers commented that commissions (sales incentives) have never been an issue for their clients:
“I am yet to hear of any client complaints about commissions paid to advisers.”
And:
“(No) client has raised any concern about a commission being paid…”
Despite examples of advisers charging fees for life insurance advice, which is effectively what the white paper advocates, most advisers who have ‘runs on the board’ in the sector remain unconvinced this is a viable business option:
“I don’t believe that the majority of people who need this cover are prepared to pay an adequate fee for this advice.”
Also this comment in relation to the offer of fee-based life insurance advice:
“… when asked would they instead prefer an out of pocket fee I am advised they would likely not proceed…”
On the other side of the coin, commenting that fee for service insurance advice will only cater to the best interests of high net worth clients, another adviser suggests that:
“… fee for service insurance advice creates it’s own conflicts and will alienate those most in need of quality insurance advice.”
The ultimate problem is unethical behaviour by some unethical people…
The sense we have from advisers on this question is that removing incentives (which includes banning risk commissions) will not solve the image and perception problems currently facing financial advisers and the advice sector. Instead, they believe cultural issues, including individual behaviours, must be addressed, and they also point out that there will always be those who will short circuit any system in any industry:
“The ultimate problem is unethical behaviour by some unethical people. This happens in every human undertaking,” commented one adviser.
The white paper authors point not just to the reality of incentives, but also the perception this creates in the mind of the public. If it is acknowledged that, for the vast majority of the adviser community, the fact that they receive commission payments has no impact on the nature or quality of advice they deliver to their clients, does this nonetheless have an adverse impact on the public perception of advisers? Most advisers will answer no to this question, because they will come back again to the argument that their clients have never had an issue with the fact that they are paid by way of commissions.
Is the white paper right? Should all risk commissions ultimately be banned? Or is there a workable industry solution that will see risk commissions remain an integral component of any future life insurance advice landscape, but a landscape that can also be perceived in a positive manner by the consumer?
Our poll remains open for another week and we welcome your thoughts…
The reality is easily summed up
When was the last time that you overheard a conversation from Joe Public about that it turned to how the commission structure of the FP profession was the root of all evil/the reason they didn’t have life insurance/why they didn’t get advice/why they……… you get the gist of it.
You don’t hear a single thing about this anywhere expect for in FP specific forums (and even then it’s usually as arguments between advisers), or as comments/blogs/articles designed to raise revenue for the publisher/writer, or as a debate between regulators and industry heavyweights that are commentated on publicly……
The real problem with any job is how the individual professional’s moral code or ethics guides them in the best way to do the job for the client. End of Story.
Doctors steal drugs, Accountants embezzle funds, FPs churn products, Police take bribes, Senators approve a cronies request……
Just put a rule in place that says you can’t do XYZ as it isn’t in the public/clients interest and then police it.
Start by recording all client contact instead of having massive files of one-sided file notes to “defend” us.
An easy solution here. Keep commission payments as they are with a mandatory level imposed across the board for all insurers. Product quality will then win out. As for churning, limit commission on any replaced policy, regardless of the reason, to what it was prior to the replacement. Good advisers will then make changes where necessary based on product quality, and the churners won’t bother any more.
Leighroy, You’ve just proposed what I have been suggesting for a long time. It would be the ideal answer – truly ideal. The life companies will simply not hear about it as it would mean no future mechanism for reducing adviser commissions. My suggestion and yours is, make no mistake, the true real answer to all of this. However each time I say it in front of a life company exec I am told ASIC would have them for “market collusion” or “market fixing” or “market manipulation”. Can you believe it!!? I don’t say it in mixed company anymore. I find it easier just to say a lot less about most things these days – never gets you anywhere and makes enemies for you. Too hard now, no fun anymore. Life companies and banks have it sewn up – witness 2 year responsibility periods and cut commissions – only one entity – ONLY ONE – benefits from that and it isn’t clients or advisers. . . . . makes me sick.
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Pity the poor new advisers entering our once strong industry. They’ll never know how wonderful, powerful and rewarding a good honest adviser can find our industry, they’ll just never know thanks to meddling industry ‘consultants, greedy life companies and politically correct milk-sopping government officials ‘looking out’ for consumers. They all should be absolutely ashamed of their behaviour in this time of industry adjustment. so much for ‘client’s best interest’ – it hasn’t come from ANYWHERE except good hard working risk advisers.
Incentives are defiantly not the issue. It is the insurers with their tied agents or direct policies and their no advise sales process.
No independent risk adviser who knew what he/she was doing would ever have recommended a C****Insure, M*C or A*P policy unless there were no other alternatives. We know they are rubbish policies/insurers and don’t pay claims. We act in the best interests of clients.
http://www.abc.net.au/news/2016-03-05/comminsure-denying-heart-attack-claims/7218818
These claims happen because there is no advice at application time and people get stuck with rubbish policies which wont pay. How can clients be expected to read through and understand all the ins and outs of these policies.
Removing specialist risk advisers or making us branch out to investment/retirement will increase the mistrust of advisers. We get the blame when these things happen and if we cannot focus and specalise then rubbish policies will slip into our advice process and clients will be left with nothing.
Although, as we all know these banks were behind these commission changes so that they could keep peddling these policies through their direct marketing and tied sales “advisers” without worrying about best interests duty as they are only giving general advice.
Insurance commissions should be increased to 200% upfront and 50% ongoing. Advisers are the ones who look after the client and get the claims paid. Let the insurers sort out the churners themselves. Oh thats right, they dont want to because most of them are licensed by the very insurers whos products they are churning.
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