Speaking at the parliamentary joint committee on corporations and financial services life insurance inquiry in Sydney last week, ClearView Wealth managing director Simon Swanson outlined the major conflicts of interest surrounding approved product lists, such as shelf space fees, volume based bonuses and consistency bonuses.
“Well basically you go along and you pitch to a company your credentials as a product provider, and they will say, in some cases, the fees are up to $650,000 per annum, in some cases, $80,000 per annum, and so on. It’s just a straight bribe,” Mr Swanson said.
“It should be neutral where the product is placed based on the needs of the customer.”
Mr Swanson said that ClearView — which also has an insurance arm — has 100 per cent open product lists, conceding that its products won’t be the best for every customer’s circumstance.
But that does not mean other dealer groups are doing the same, he said.
“We pay no bonuses to anyone for volumes or consistencies and we pay no shelf space fees and that is why we have been excluded from a number of companies’ approved product lists,” he said.
“I made the observation in the results we announced to the ASX yesterday, we’re now on 293 boutique licensees’ or dealer groups’ approved product lists but we can’t get onto the big ones because we refuse to pay shelf space fees.”
Mr Swanson also reiterated his criticism of FSC around the issue of APLs, saying it had made no progress in the last 18 months.
He also noted how the Trowbridge Report recommended half of the insurers should be on APLs.
“I have no idea how Mr Trowbridge came to that conclusion,” Mr Swanson said.
A bit rich coming from a business that dangled whooping big share incentives in front of a certain group of advisers to come and join, targeted advisers with significant Comminsure books, encouraged takeover business on mass.. Would love to know how much uptake outside of house product comes from the ‘open APL’
Institutional Disclosure ? Where is it ?
Imagine if an adviser charged shelf space to advice on a product, they’d be banned from doing it or full disclosure of the extra payments to induce certain products to be sold.
Why don’t the institutions and admin platforms have the same disclosure requirements ?
Answer: Because the FSC and the government are so in cahoots they simply get away with this misguided market manipulation.
Interesting comments. Gosh, I wonder why all the political parties have in recent years been insisting on greater regulation of the industry. Are these comments an example of the increased professionalism in the industry?
You’re pretty much negating your comment completely by hiding behind the anonymous tag aren’t you? All high and mighty with your sarcastic barbs and you won’t even disclose your identity.[b] So much for you suggesting that others give full disclosure[/b], comply with regulation and produce professionalism. [b]Typical of the bullies in our industry – the cowards that hide in the shadows [/b]with the special (self) interest groups.
I love the ClearView product and have a number of clients with them. However, my dealer group does not sell shelf space, they make revenue from other means. That is not what all dealer groups do though and whilst Dover is growing, there are bigger dealer groups in terms of adviser numbers. Facts are, some of these make you pay to have them on the list of insurers on the APL. If you want to miss out on a large number of advisers, don’t pay, but don’t whinge.
No real sympathy Swanson, it is a harsh world of commercialism, but that is what market forces and capitalism is all about. Get over it and stop bleating to the nanny state idiots.
Let’s imagine your name is Mr Coles…you started with one store competing with every other grocer and corner store, but then you figured out a new business model, proved it, then replicated it. Today you have a national network of stores that are extremely successful and everyone wants to sell through your stores because they know if they do, they’ll sell tonnes and tonnes of their stuff and make a fortune. You know this too. ‘Shelf space’ is at a premium. As big as your stores are and as vast as your network is, it’s just not physically possible to stock all the products that everyone would like to sell through your distribution network. You know the value of what you’ve built. You know the value is in its reach…it’s ‘distribution’ and because this is why you’re successful, this is what you charge for. Then a Mr Clearview comes along and he says he doesn’t want to pay for what you’ve built, but he still wants what you’ve got. My Clearview decides he will try to force you to give him what he wants without paying for it. He goes to the only entity that can use its powers of violence and coercion, and puts his case. He claims it is unfair to him and Mr Coles should be forced to distribute his products without him paying ‘a bribe’ for ‘distribution’ because his products are very, very good for consumers and the horrible Mr Coles is denying the hapless consumers from accessing his very, very good products. You get the point (I hope)…In economics we call this type of immoral behaviour ‘rent seeking’ – where an individual or business spends its resources not on improving its products and services, or its business operations, (i.e. making a productive contribution to the economy), but instead on efforts to obtain benefits for themselves (seeking ‘rents’ – returns that are not possible through ordinary free-market activities) by manipulating the political environment (i.e. co-opting the power of the state to force arrangements that are non-voluntary). It’s an abhorrent and immoral practice, and yet perfectly understandable. It serves to remind us all just what we’ve now got after a decade or so of government manipulation of the industry…the supposed ‘protection’ of consumers has been turned into the intimidation of practitioners, cooperation has become exploitation, education is now indoctrination, entrepreneurship is being replaced by rent-seeking and loyalty has become submission.
It seems that you are you saying that Clearview is the “rent seeker” in your analogy, but isnt it in fact ‘Coles’ (aka the big 5) that is unnecessarily increasing the costs of insurance by forcing insurers to pony up cash? Seems that it’s a manipulation of market power that sees all those bank-aligned licensees restricting access to a small range of in-house products. This is an interesting view from someone who normally seems so free market….
Rent seeking is spending your money and resources attempting to co-opt the state into forcing others into an arrangement they would not willingly or voluntarily enter into of their own accord. That’s a very different thing to ‘manipulating market power’, but let’s explore that nonetheless. What is ‘market power’? If ‘the big 5’ is your example, then plainly the power they have is on accord of the special ‘privilege’ granted them by the government – the 4 pillars policy that limits competition has allowed ‘the big 5’ to become of a size and to enjoy profits that would not exist in a free market, and they now use their size to the detriment of competitors. The root cause of the very thing I lament and the very thing you lament is one and the same – state sanctioned privilege granted to some, but not othjers. We should be very careful of cheering such a thing because it signals that it is better to abandon productive efforts because the easier payoff is instead to live coercively off the production of others. That is Clearview’s situation. If we don’t ‘call’ this behaviour when we see it…the risk is that we will create a world where energy is diverted from actual innovation and production, to politics because it becomes apparent that it is easier to generate wealth not by being productive ourselves, but instead through securing State-sanctioned privileges co-opting the success of others. In such an environment, production would dwindle – the incentive to be successful would be removed – and all the things that come with increased production (more choice, lower prices, better products, superior service) would also dwindle.
Your point is acceptable if you work for AMP and call yourself and your advice firm AMP, but that’s not the case for a lot of advisers in Australia. Maybe you could explain to your clients that your choice of tinned pineapple (insurance products) are the Coles Home brand product selling for $1.80 and made in Thailand to Thai safety standards, or another Brand made in the Philippines for $2, where the fertilizer used is linked to the farmers toilet. Unfortunately the locally owned, employing Australian workers and subject to Australian Laws, North Queensland grown pineapple (Golden Circle/Clearview) is selling for $2.20, slightly more expensive and is not on our shelves because Coles is limiting it’s product line and also upped it’s shelf space fees to a point that forced out Golden Circle. You’ll need to go to IGA or Coles if you want to buy locally made sliced pineapple. Does not Golden Circle have an valid point to raise is this example. Would not Golden Circle also have a point to make if the check operators were claiming they were independent and could utilize a wide range of pineapple.
Give me a break Scott. Do you really think dealer group ‘shelf space’ is so limited we can’t fit all retail insurance providers on them? Your coles shelf space vs APL shelf space comparison is apples and oranges.
Yes it is “limited” because the owner of the property chooses to limit it. Anything that is ‘valuable’ has scarcity as a feature, and the owner of the property has every right to protect and enhance the value of his property including limiting its access using the mechanism of price. You choose to protect the value of your own property (perhaps your home) by limiting others access to it, don’t you? You don’t let people into your backyard or home uninvited, you don’t let people scrawl their thoughts all over your own website or blog. You even set your own prices for your financial services which limits some people’s ‘access’ to your value. Would you rather the government knock on your door and tell you that you must now provide your services to Clearview customers for nothing?
Scott, if I go to Coles I’m buying directly from Coles, I have a choice to go to WOW if I’m not happy. In the advice market there is a third party, the adviser, often in the middle, whom often unaware of how much Coles received in Shelf space fees. Often the adviser is unaware of these dealings, saying to the consumer whilst my business is owned by Coles I’m free to chose a wide range of products, or these products were selected due to our in house research team. In addition the advisor has Coles Management above his head now purposely making Product XYZ look better than the Clearview product because they know product XYZ pays shelf space. Fair enough for Coles to receive the shelf space fees, just change your name to Coles Advice World.
Bribe ? If the insurance company wants to leverage off the distribution of a platform provider why shouldn’t they contribute towards the cost ?
Mate – so when you left comminsure your telling me you never accepted VB – please your worse then your man Daley
Can you please go back and spell check your post? Use full stops, and commas.
and it’s You’re not Your !!