In a statement, Mr Trapnell said there is a notion that to be more professional, advisers should charge a fee, either via fee-for-service or a fee to supplement a reduction in commissions.
“For the life of me, I can’t understand how charging a fee is viewed by some as a hallmark of professionalism and I can’t understand the argument that says receiving a commission translates to being less professional,” he said.
Mr Trapnell added that those who charge commissions may actually be more professional, since they only get paid when they receive a result for the client.
“Would clients be happy to pay a fee-for-service then find out they don’t actually get insurance cover because they haven’t been accepted? Or because the premiums were too high and they couldn’t afford to pay them?” he said.
“In a fee-for-service world, the adviser would still have to be paid for the work done trying to get cover, whereas under a commission model the adviser would only get paid if the client was successful in getting cover and the policy stays on the books.
“There is merit to both approaches, but let’s not hold out fee-for-service as though it is the Holy Grail.”
There is also international proof that fee-for-service only risk advice “does not work”, Mr Trapnell said.
In the UK, for example, there is recognition that life insurance is a “grudge purchase”, and therefore only removed commissions on investment products, he said.
Mr Trapnell noted that he is not suggesting it is time to lobby for changes to the Life Insurance Framework (LIF).
“Let’s get the legislation bedded down first,” he said.
“It is four years before the 60 per cent cap on upfront commissions comes in. If we can get the legislation bedded down now, we will be able to refine it and maybe then we can look at reviewing the cap in line with what it actually costs to run a risk advice.”
if all things are equal (Fee = Commission) then we’re actual debating a payment methodology not a conflict. The shame is that it’s rarely if ever equal, hence almost always a conflict. Therefore the Gov’t and all stakeholders have forever been able to challenge our industry. Time to change or time to move on, the choice is yours?
True… The LIF is quite ridiculous considering most feel it will lead to less Australian’s taking up risk advice and every insurer knows who the ‘churners’ are anyways… However, one needs to either adapt or leave.
Here we go again…Anonymous who works for an employer that doesn’t want to show his real name even though his name should be “Look at Me, Look at Me” making his righteous statements again!
Interesting, you said the same thing to me the other day. We’re not the same person. I offer both fee for service and commission based risk advice. Fee for service is rarely chosen by lower net worth clients.
Still, if you spent less time complaining and more time adapting your business the sky could be the limit for you!
You might need to change your name! And by the way I’m not complaining sunshine! I’ve been around long enough to see changes happening unlike some self righteous people in our industry. Having said that I’ll be around for a long time yet! It’s when I read posts from self righteous people who come from a political, self vested interests that profess to be making comments for other reasons that I question! AS I said previously, if it smells like a pig and it looks like a pig, then its gotta be a pig! Oink Oink!
I agree as i said yesterday in another comment commissions paid from insurers affected premiums in a very small way and in a lot of cases I dealt with I reduced my commissions anyway to give the client a better cover at a small discount. The commissions in no way altered my advice or the level of cover recommended. The real problem with commissions was from the churners and that should have been stopped at the insurer level. BUT no one wants to hear from the very people who it affects because there was a political, union, industry funds and personal agenda to be considered !!
It’s professional because the product guys are not paying the adviser…it’s called a conflict of interest
Crap. It’s a conflict if I only use one provider that’s associated with my AFSL. However, if i’m quoting from the full array of insurers in the marketplace and i’m writing hybrid comms which are all so similar in amount that it makes next to no difference, then how is that conflicted? If i give my clients the option of paying premiums with comms or premiums without comms PLUS a fee, and they chose ‘with comms’ how is that conflicted?
Exactly, Jimmy. Perhaps those who created the LIF could have ran some case studies on providing consumers with the option of commission or fee for service and see what they prefer. Sounds like we do that everyday…