{"id":30454,"date":"2015-08-04T19:41:46","date_gmt":"2015-08-04T09:41:46","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=30454"},"modified":"2025-07-30T12:16:35","modified_gmt":"2025-07-30T02:16:35","slug":"new-hybrid-or-old-level","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2015\/08\/04\/new-hybrid-or-old-level\/","title":{"rendered":"New Hybrid or Old Level?"},"content":{"rendered":"<div id=\"polls-147\" class=\"wp-polls\">\n\t\t<div class=\"pollHeader\"><strong>Which of these options, currently proposed under the new Life Insurance Framework, would best suit your advice business?<\/strong><\/div><div id=\"polls-147-ans\" class=\"wp-polls-ans\"><ul class=\"wp-polls-ul\">\n\t\t<li>Combination of hybrid and level options - depends on individual case <small>(29%)<\/small><div class=\"pollbar\" style=\"width: 29%\" title=\"Combination of hybrid and level options - depends on individual case (29% | 79 Votes)\"><\/div><\/li>\n\t\t<li>New hybrid commission model - 60%\/20%, plus client advice fee <small>(28%)<\/small><div class=\"pollbar\" style=\"width: 28%\" title=\"New hybrid commission model - 60%\/20%, plus client advice fee (28% | 75 Votes)\"><\/div><\/li>\n\t\t<li>New hybrid commission model - 60%\/20% <small>(12%)<\/small><div class=\"pollbar\" style=\"width: 12%\" title=\"New hybrid commission model - 60%\/20% (12% | 31 Votes)\"><\/div><\/li>\n\t\t<li>Other combination <small>(12%)<\/small><div class=\"pollbar\" style=\"width: 12%\" title=\"Other combination (12% | 31 Votes)\"><\/div><\/li>\n\t\t<li>Existing level commission model - 30%, plus client advice fee <small>(7%)<\/small><div class=\"pollbar\" style=\"width: 7%\" title=\"Existing level commission model - 30%, plus client advice fee (7% | 19 Votes)\"><\/div><\/li>\n\t\t<li>Not sure yet <small>(6%)<\/small><div class=\"pollbar\" style=\"width: 6%\" title=\"Not sure yet (6% | 15 Votes)\"><\/div><\/li>\n\t\t<li>Existing level commission model - 30% <small>(4%)<\/small><div class=\"pollbar\" style=\"width: 4%\" title=\"Existing level commission model - 30% (4% | 11 Votes)\"><\/div><\/li>\n\t\t<li>Client advice fee only <small>(3%)<\/small><div class=\"pollbar\" style=\"width: 3%\" title=\"Client advice fee only (3% | 7 Votes)\"><\/div><\/li>\n\t\t<\/ul><div style=\"text-align: center\"><\/div><\/div>\n\t\t<input type=\"hidden\" id=\"poll_147_nonce\" name=\"wp-polls-nonce\" value=\"35666b2cc2\" \/>\n<\/div>\n\n<p>Our latest poll draws on the the <a href=\"https:\/\/riskinfo.com.au\/news\/2015\/07\/28\/current-level-commissions-should-remain-afa\/\">AFA&#8217;s recent statements<\/a> that it will seek to ensure existing level commission arrangements remain a part of the new Life Insurance Framework.<\/p>\n<p><!--more-->As the industry awaits the Government&#8217;s response to David Murray&#8217;s Financial System Inquiry recommendations, which we understand will include further clarity on the implementation of the Life Insurance Framework proposals, we&#8217;re interested to receive your insights into what may well become a future choice for you, between existing level commission arrangements and the proposed 60\/20 hybrid model.<\/p>\n<p>We appreciate there exists a significant number of risk-focused advisers, in particular, who reject both of these remuneration structures, and therefore the premise of this poll. In an <a href=\"https:\/\/riskinfo.com.au\/news\/2015\/07\/07\/adviser-opinion-split-on-new-life-insurance-framework\/\">earlier riskinfo poll<\/a> on the Life Insurance Framework, 49 per cent of advisers said their business could successfully operate under the new remuneration proposals, regardless of whether they supported them. 36 percent said they could not survive, while the rest remained undecided.<\/p>\n<blockquote><p>&#8230;life companies, licensees and individual advice practices have commenced gearing themselves for the transition period to the new Life Insurance Framework<\/p><\/blockquote>\n<p>While there may yet be further developments in this critical remuneration debate, we note that life companies, licensees and individual advice practices have commenced gearing themselves for the transition period to the new Life Insurance Framework, slated to commence from 1 January 2016. As the situation currently rests, this means advisers will be required to choose between an eventual 60\/20 hybrid structure, a level commission model of approximately 30 per cent, an advice fee, or a combination.<\/p>\n<p>If this situation does not change, we&#8217;re keen to know how you are considering the future life insurance remuneration options that will best suit you in your business.<\/p>\n<p>The major benefit delivered by the 60\/20 hybrid model (irrespective of whether you support this option!) relates to cash flow.\u00a0 Accessing a higher level of income at the commencement of the contract, which corresponds with the time when most of the costs associated with placing the policy &#8216;on the books&#8217; must be paid, can and will, make all the difference to the future viability of many risk-focused advice businesses, as they are presently structured.<\/p>\n<p>As most advisers will have already &#8216;done the math&#8217; you will appreciate that a 30 per cent level commission option will break even after year four, when compared with the hybrid option (ie 60\/20\/20\/20 v 30\/30\/30\/30). But we also note this is a simplified equation that doesn&#8217;t take into account issues such as average policy duration, GST and the proposed clawback provisions.<\/p>\n<p>After year four, a 30 per cent level commission arrangement will deliver higher income and, all other things being equal, increase the value of the business, due to the higher annual renewal income stream.<\/p>\n<p>Some advisers may determine they heavily favour one of these commission options because it will best serve their particular business model. Influencing factors may include how long the practice has been operating (and therefore the current level of annual renewal income), and its existing remuneration preferences.<\/p>\n<p>There is no &#8216;one size fits all&#8217; answer, because every advice practice has its own unique &#8216;DNA&#8217; structure. And as we&#8217;ve already mentioned, there may be many advisers who reject the poll question itself, because you strongly oppose what you see as a move to a new structure that effectively rejects the current model, under which you have successfully delivered objective, meaningful and ethical advice solutions in serving the best interests of your clients, over many years.<\/p>\n<p>As always, we welcome your votes and your measured comments in this game-changing debate.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Our latest poll draws on the the AFA&#8217;s recent statements that it will seek to ensure existing level commission arrangements remain a part of the new Life Insurance Framework.<\/p>\n","protected":false},"author":3,"featured_media":30478,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,49,270],"tags":[4247],"class_list":["post-30454","post","type-post","status-publish","format-standard","has-post-thumbnail","category-compliance-regulation","category-polls","category-remuneration","tag-feature","headers-new"],"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/30454","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\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/comments?post=30454"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/30454\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media\/30478"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=30454"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=30454"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=30454"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}