{"id":32575,"date":"2016-03-01T16:22:41","date_gmt":"2016-03-01T05:22:41","guid":{"rendered":"https:\/\/riskinfo.com.au\/news\/?p=32575"},"modified":"2016-03-02T07:52:27","modified_gmt":"2016-03-01T20:52:27","slug":"advisers-reject-commissions-as-cause-of-under-insurance","status":"publish","type":"post","link":"https:\/\/riskinfo.com.au\/news\/2016\/03\/01\/advisers-reject-commissions-as-cause-of-under-insurance\/","title":{"rendered":"Advisers Reject Commissions as Cause of Under-Insurance"},"content":{"rendered":"

Financial advisers have rejected suggestions that commissions are responsible for under-insurance and have instead stated they are the best way to ensure consumers can purchase adequate insurance coverage.<\/p>\n

At the same time, they have also claimed under-insurance is due to the rising cost of premiums and consumers were unlikely to pay fees for insurance advice alongside the costs of premiums.<\/p>\n

The reaction of advisers follows comments made in a whitepaper released recently by three industry commentators – 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>, and reported by riskinfo last week<\/a>.<\/p>\n

Riskinfo readers rejected the proposition that commissions were the cause of under-insurance as well as the mistrust of advisers claiming that all professions receive payment for their services and commissions were often the only way of guaranteeing a consumer would be able to afford life insurance.<\/p>\n

“Making insurance fee for service will just increase the under-insurance problem as it will make insurance even more expensive at the implementation stage.<\/h6>\n

“Commenting on the statements in the whitepaper Paul Underwood<\/strong> said \u201cthe real reason there is an under-insurance problem has more to do with premium costs and the \u2018she\u2019ll be right\u2019 mentality of the average Australian. Making insurance fee for service will just increase the under-insurance problem as it will make insurance even more expensive at the implementation stage.\u201d<\/p>\n

A number of readers said a move to fee for service was acceptable in some parts of the advice sector but was not suitable in all cases with Christoph Schnelle<\/strong> stating \u201cit is an excellent way but not the only way.\u201d<\/p>\n

\u201cI find commissions perfectly acceptable provided I am not conflicted as otherwise most clients simply wouldn’t buy high quality insurance. It is alien to all but the wealthy to pay for insurance advice as much as it costs.\u201d<\/p>\n

Others believed the low levels of under-insurance and mistrust cited in the whitepaper were a result of licensing and regulation with Tony Cafarella<\/strong>\u00a0stating the licensing system was flawed and \u201chow was it possible to have confidence in a system when we use the same licence to allow product provision and advice?\u201d.<\/p>\n

Robert Coyte<\/strong>\u00a0pointed out that financial advisers were subject to one of the toughest disclosure regimes in Australia and \u201cthe real issue is that licensees and regulators need to take appropriate action against financial advisers that don’t follow the existing law and act in the clients best interest\u201d.<\/p>\n

However Wayne Leggett<\/strong>, a board member of Fortnum, stated advisers needed to move past commissions to be seen as professionals in the eyes of consumers.<\/p>\n

\u201cBecause we have been calling for recognition as professionals, we have to accept that a \u2018professional\u2019 should not be remunerated by third parties. It will take a long time before this is the accepted practice, largely because it will take some time for people to understand and come to terms with a “user pays” framework.\u201d<\/p>\n

“Because we have been calling for recognition as professionals, we have to accept that a \u2018professional\u2019 should not be remunerated by third parties…”<\/h6>\n

Riskinfo readers also responded strongly to particular statements made by Stackpool in the first section of the paper.<\/p>\n

Under the section titled \u201cQuality financial advice: Is it a myth?\u201d Stackpool stated \u201ca recent review of life insurance files by the Australian Securities and Investments Commission found many consumers of life insurance from a financial adviser would\u2019ve been better off without it\u201d.<\/p>\n

A number of readers challenged the statement claiming that ASIC\u2019s Report 413 did not make such a claim, with some questioning the reliance on a limited, targeted survey of advisers conducted by ASIC.<\/p>\n

When contacted by riskinfo, Stackpool said his comment was based on ASIC\u2019s own statement in Report 413 that \u201c\u2026we found that 63% of consumers received advice that met the standard for compliance with the law, while 37% of consumers received advice that failed to meet the relevant legal standard that applied when the advice was given\u201d.<\/p>\n

He further commented stating \u201cReport 413 found that\u00a0one in three advisers fail to comply with the law when it came to giving advice on life insurance. I conclude that most people would be better off without illegal advice which is the basis of my statement.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Financial advisers have rejected suggestions that commissions are responsible for under-insurance and have instead stated they are the best way to ensure consumers can purchase adequate insurance coverage.<\/p>\n","protected":false},"author":3,"featured_media":32582,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,270],"tags":[4247],"class_list":["post-32575","post","type-post","status-publish","format-standard","has-post-thumbnail","category-compliance-regulation","category-remuneration","tag-feature"],"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/32575","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=32575"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/32575\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media\/32582"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=32575"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=32575"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=32575"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}