The Financial Services Council has softened its rhetoric on the issue in recent weeks, after backing down on its original proposal to self-regulate.
Discussing the minutes of a recent AFA board meeting, AFA president Michael Nowak told ifa that it was important to get an outcome “everybody is happy with” – especially given the time pressures and changes advisers have had to cope with under the Future of Financial Advice reforms.
“I think it’s sub-optimal to have a discussion that is to-ing and fro-ing in the media on this. Ideally we should be able to all sit down and talk and come up with a resolution,” said Mr Nowak.
But first, there must be some evidence produced to show there is a problem, he said.
“If things do need to change, then let’s have a discussion about it, but before we can do anything we need to see that there are issues,” he said.
Advisers were justifiably upset when the issue was initially portrayed as a ‘churn’ issue, Mr Nowak, added.
“Advisers are upset, and rightly so,” he said. “They need to see some evidence. They just want to be heard, and to make sure they’re in this discussion.”
ozwire i agree with your comments, however quite a bit more work goes into implementing a life policy and for that matter even increasing it.
The data from what i have herd, is even if a client cancels a life policy because they dont want it or cant afford it, or even have to restructure the ownership at the same life company, they call it a churn
continued
THAT was the change that leads to the idea of churn. Why is churn not an issue for general insurance (cars home and contents etc)?? Simple- they have always operated on level commissions. Policyholders are EXPECTED to shop around. Why should term life (especially) be any different?
Unfortunately the first company to abolish up front commissions will lose heaps of the new business to the rest- hence no big player is prepared to go first…….
Go back 30 years and risk commissions were “highish” (75%) and advisers were handcuffed with persistency linked volume bonuses and over-riders to keep business “on the books” long enough for the insurer to turn a profit. Come FSRA the industry threw its arms in the air and said- “forget all that” no more bonuses just toss it all in together and pay 110% commission and be done with it.
But the baby was thrown out with the bathwater because instead of linking policy duration to commissions (i.e. instituting writebacks) advisers were allowed to earn 110% commission with NO RESPONSIBILITY to ensure ANY renewals occur.
Matthew, It is not a distraction it is a Fact, the only distraction is ill-informed comments.
To Michael & his team at AFA, keep up the good work, we appreciate your efforts on behalf of all those adviser who take risk insurance seriously.
All the life companies know who the churners are. They just need to grow some and confront these advisers and have a reality chat. But I suspect this will not happen and we will be paid level commission and the insurance companies will be happy.
Mark,
that is a good idea, if an adviser is perceived to be a churner, then companies should make them go level commisions. Problem solved, then the rest of the industry doesnt have to suffer like with all this FOFA crap.
No, not a major problem at all. The insurance companies include lfe, TPD & trauma claims, lapses for whatever reason (unemployment)and state these as being “churned”. The FSC as the bank & insurance company lap dog are simply trying to make more money by creating the lie that the industry is full of churners. If a large company cannot stop a serial churner by only paying them level premiums, then they deserve to be out of business. It is yet another con job to try and wipe out those advisers who work as independants.
This is being brought on by uncompetitve life companies.
These life companies need to realise our boss is the client and in a tough enviroment like we are in at present clients circumstances change.
i dont believe this churn garbage. Ask clients what they expect of their adviser after they have purchased a policy. I dought they will say, never review it.
“But first, there must be some evidence produced to show there is a problem, he said.”
I’ve heard this argument many times before and frankly I believe it is a distraction…a little like cigarette companies arguing that there is/was no evidence that smoking causes cancer. The FSC seams convinced that evidence exists that it is occurring and, based on the speed and focus by which they have pursued this issue, clearly they believe it is a significant problem.