{"id":28347,"date":"2014-12-17T10:36:51","date_gmt":"2014-12-16T23:36:51","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=28347"},"modified":"2014-12-17T10:58:28","modified_gmt":"2014-12-16T23:58:28","slug":"high-upfront-commissions-to-go-trowbridge","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2014\/12\/17\/high-upfront-commissions-to-go-trowbridge\/","title":{"rendered":"High Upfront Commissions To Go \u2013 Trowbridge"},"content":{"rendered":"<p><span style=\"font-size: 14px;line-height: 1.5em\">The life insurance advice sector needs to do away with high upfront commissions if it wants to address the issues raised by recent inquiries into the quality of life risk advice.<\/span><\/p>\n<p><!--more--><\/p>\n<figure id=\"attachment_28357\" aria-describedby=\"caption-attachment-28357\" style=\"width: 150px\" class=\"wp-caption alignright\"><a href=\"https:\/\/riskinfo.com.au\/news\/files\/2014\/12\/John-Trowbridge.jpg\"><img loading=\"lazy\" decoding=\"async\" class=\"size-full wp-image-28357\" alt=\"John Trowbridge, Independent Chair of the joint FSC-AFA Life Insurance Advice Working Group\" src=\"https:\/\/riskinfo.com.au\/news\/files\/2014\/12\/John-Trowbridge.jpg\" width=\"150\" height=\"180\" \/><\/a><figcaption id=\"caption-attachment-28357\" class=\"wp-caption-text\">John Trowbridge, Independent Chair of the joint FSC-AFA Life Insurance Advice Working Group<\/figcaption><\/figure>\n<p>This is the viewpoint of <strong>John Trowbridge<\/strong>, independent chairman of the joint FSC-AFA Life Insurance and Advice Working Group (LIAWG), who today released an <a href=\"http:\/\/www.fsc.org.au\/downloads\/file\/PublicationsFile\/TrowbridgeInterimReportonRetailLifeInsuranceAdvice_2014_1217.pdf\" target=\"_blank\">interim report<\/a> into retail life insurance advice.<\/p>\n<p>Mr Trowbridge said while he was not yet in a position to recommend a specific adviser remuneration model for life insurance advice, he believes the industry should rule out a high, upfront commission model in future.<\/p>\n<p>He highlighted that the AFA and the FSC have accepted at face value the primary concerns of the Australian Securities and Investments Commission, which relate to quality of advice and correlation of up-front commissions with poor advice.<\/p>\n<p>\u201cThere is sufficient\u00a0dissatisfaction with these arrangements to dictate that the \u2018no change\u2019 option is not acceptable,&#8221; Mr Trowbridge said.<\/p>\n<p><span style=\"font-size: 14px;line-height: 1.5em\">Similarly, Mr Trowbridge has argued that a nil-commission model should also be taken off the table, as\u00a0remuneration for insurance advice needs to be different from investment advice and that it is important to retain some form of commissions rather than ban them, as has occurred with investment products.<\/span><\/p>\n<p>In place of an upfront commission model, the LIAWG Interim Report lists five alternative remuneration approaches, each of which contain an element of ongoing commission:<\/p>\n<ul>\n<li>Level commissions only \u2013 rate would be set between 20-30%<\/li>\n<li>Hybrid commissions \u2013 maximum commission rate for first year of 80%, level commission thereafter<\/li>\n<li>Modified hybrid &#8211; comprising initial remuneration of a combination of commission at a level less than the current hybrid plus a fixed dollar payment, renewal commissions could be as per current hybrid arrangements<\/li>\n<li>Level plus fees \u2013 level commissions, at a rate to be considered, supplemented with an initial payment (fee) from the insurer to adviser<\/li>\n<li>Level funded \u2013 variation on level where commissions are level but to offset initial costs, on each policy inception the insurer lends the adviser funds that are repayable over 3-5 years from renewal commissions<\/li>\n<\/ul>\n<p>The LIAWG is seeking industry submissions on these approaches, along with three other key discussion areas:<\/p>\n<ul>\n<li>Quality of advice<\/li>\n<li>Insurer practices and product offerings<\/li>\n<li>Industry productivity<\/li>\n<\/ul>\n<p>\u201cThis review has been put together a little bit like a government review,\u201d Mr Trowbride explained, saying the working group would not make any recommendations until submissions had been sought from the wider industry.<\/p>\n<p>\u201cThe interim report that has been released today is an issues and options paper. It puts many questions on the table; it doesn\u2019t make recommendations \u2013 it simply airs all the issues. Submissions will be open until the end of January. We will then look at all those submissions, the working group will reconvene, and then ultimately I will produce a final report which will contain recommendations for the way forward.\u201d<\/p>\n<p>Asked why this approach would succeed when other industry attempts at self-regulation have not, Mr Trowbridge said the process that had been undertaken to date by the AFA and FSC was very different from previous approaches.<\/p>\n<p>\u201cI think this is a very impressive initiative from the two associations concerned. It has brought advisers together with insurers, which is clearly something that is needed.<\/p>\n<h6>This is a very well structured and committed approach that I haven&#8217;t seen before in the private sector<\/h6>\n<p>\u201cThis is a very well structured and committed approach that I haven&#8217;t seen before in the private sector.<\/p>\n<p>&#8220;Everybody is committed to the process, and we will see how that unfolds. Part of the challenge is to try and get an industry-wide commitment to some kind of self-regulatory model, so nothing&#8217;s guaranteed. But because this was initiated by the organisations themselves, rather than the government, there has already been some cooperation between the sectors.<\/p>\n<p>&#8220;I believe this is the best approach to a very complex range of issues.&#8221;<\/p>\n<p>Mr Trowbridge will be accepting submissions on the areas identified in his interim report until 30 January 2015. The final report, which will include recommendations, will be handed down at the end of March 2015.<\/p>\n<p><a href=\"http:\/\/www.fsc.org.au\/downloads\/file\/PublicationsFile\/TrowbridgeInterimReportonRetailLifeInsuranceAdvice_2014_1217.pdf\" target=\"_blank\">Click here<\/a> to view a copy of the Interim Report on Retail Life Insurance Advice.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The life insurance advice sector needs to do away with high upfront commissions if it wants to address the issues raised by recent inquiries into the quality of life risk advice.<\/p>\n","protected":false},"author":7,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[282,259,8,270],"tags":[],"class_list":["post-28347","post","type-post","status-publish","format-standard","category-associations","category-breaking","category-compliance-regulation","category-remuneration"],"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/28347","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/comments?post=28347"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/28347\/revisions"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=28347"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=28347"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=28347"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}