{"id":32474,"date":"2016-02-23T12:37:43","date_gmt":"2016-02-23T01:37:43","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=32474"},"modified":"2026-02-18T15:50:37","modified_gmt":"2026-02-18T04:50:37","slug":"insurance-commissions-leading-to-mistrust-of-advice","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2016\/02\/23\/insurance-commissions-leading-to-mistrust-of-advice\/","title":{"rendered":"Insurance Commissions Leading to Mistrust of Advice"},"content":{"rendered":"

Commission based models for life insurance have not been able to address the issue of under-insurance and have added to the mistrust of financial advisers according to a whitepaper released by three financial services professionals.<\/p>\n

\"Fortnum<\/a>
Fortnum Financial Group’s Ray Miles<\/figcaption><\/figure>\n

The paper, And the walls came tumbling down<\/a><\/em>, released by Fortnum Financial Group, executive chair, Ray Miles<\/strong>; Innova Asset Management, managing director, Dan Miles<\/strong>; and Certainty Advice Group, managing director, Jim Stackpool<\/strong>, also states that any person who receives payment from the sale of a product should not be called a \u2018financial adviser\u2019 but rather \u2018product providers\u2019.<\/p>\n

In the paper the three authors claim incentives are the single biggest problem and main cause of mistrust in financial advice by consumers but yet remain inherent since most advice is provided by financial institutions which benefit from the sale of financial products.<\/p>\n

“Australian investors don\u2019t trust financial advisers to act in their best interests, even if it is the law…”<\/p><\/blockquote>\n

\u201cUnfortunately, financial planning has become inextricably linked to product selling and conflicted remuneration. Australian investors don\u2019t trust financial advisers to act in their best interests, even if it is the law. If the industry is to earn the trust of investors, it must separate financial product and advice,\u201d the paper stated.<\/p>\n

\u201cThe majority of advisers aligned to an institution don\u2019t actually sell advice. They sell product although they\u2019ve done a superb job of passing product off as advice and persuading consumers that their \u2018advice\u2019 is trustworthy and will deliver confidence, peace of mind and security.\u201d<\/p>\n

However, the paper also highlighted that life insurance advice was primarily driven by commission sales with incentive-based commissions accounting for 82 per cent of transactions, but this model had not reduced the level of under-insurance despite it being in place for many decades.<\/p>\n

\u201cIt\u2019s concerning that life insurers continue to lobby against changes to adviser remuneration by claiming such reforms would exacerbate Australia\u2019s underinsurance problem,\u201d the paper stated.<\/p>\n

“…almost 100 years of a commission laden approach to insurance sales hasn\u2019t improved the underinsurance problem…”<\/p><\/blockquote>\n

\u201cNotwithstanding that almost 100 years of a commission laden approach to insurance sales hasn\u2019t improved the underinsurance problem, a recent review of life insurance\u00a0 files by the Australian Securities and Investments Commission found many consumers of life insurance\u00a0 from a financial adviser would\u2019ve been better off without it.\u201d<\/p>\n

\u201cASIC\u2019s study concluded that more than one third of advice was inappropriate and failed to comply with the law.\u201d<\/p>\n

The paper also set a tighter framework for who should be called a financial adviser stating the definition should be separate from any form of product promotion or sales.<\/p>\n

It stated that any person who received payment from a product or tied the value of their business to a product manufacturer\u2019s Buyer of Last Resort arrangements should be called product providers where as financial advisers have no product bias \u201cso there\u2019s no question about the integrity of their valuable advice\u201d.<\/p>\n

The paper also doubted the effectiveness of past and current regulatory changes claiming they were built on a foundation of conflicted interest and product based remuneration would make it difficult to successfully build a new advice model separate from those past behaviours.<\/p>\n

\u201cThe latest round of proposed changes\u2026may ensure that future advisers are tertiary qualified and abide by a code of professional standards overseen by a new professional membership body but they won\u2019t propel the industry forward or lead to better client outcomes.\u201d<\/p>\n

\u201cThe current approach bears a striking resemblance to the many failed past attempts. Despite numerous inquiries and reforms in the last two decades, there has been no fundamental change or improvement. The majority of advisers are still distributors of financial \u2018advice\u2019.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Commission based models for life insurance have not been able to address the issue of under-insurance and have added to the mistrust of financial advisers according to a whitepaper released by three financial services professionals.<\/p>\n","protected":false},"author":3,"featured_media":32523,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,3,4,270],"tags":[4247],"class_list":{"0":"post-32474","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-compliance-regulation","8":"category-general","9":"category-products","10":"category-remuneration","11":"tag-feature","12":"headers-new"},"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/32474","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=32474"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/32474\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media\/32523"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=32474"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=32474"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=32474"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}