Responding to the notion that risk advice without commissions won’t work, Mr Brammall said in a report aired on ABC 24 that advisers like himself have “innovated” and moved on from “outdated models” of remuneration when charging clients for advice inside life insurance.
“The fact that we exist and have done so for years now proves that it is possible,” Mr Brammall said.
Mr Brammall also said life insurance salesmen are remunerated by “shifting product” but an adviser should be remunerated by the advice they give, not the product they recommend.
“If you are talking about providing advice on the client’s options in relation to insurance, what the structure should be and your policies available, the sorts of cover that they need, then that is an event that is divorced from product,” Mr Brammall said.
Financial advice practice Informed Decisions principal Doug Scriven told ABC 24 that if commissions were to be taken out of the equation clients will end up paying more for insurance.
“Clients are going to be finding a premium that is a little less expensive but they are going to be paying for ongoing advice to maintain the policies and the upfront advice to provide the policy and implement it,” Mr Scriven said.
Also commenting on the presence of churning so that advisers can earn more upfront commissions, Mr Scriven pointed out that the practice doesn’t actually add any benefit to an adviser’s business.
“If you are taking a policy and simply rewriting it every two years so you can get new upfront commission, you are basically chewing your own leg,” Mr Scriven said.
“You’re not actually growing your business. You’re just earning another dollar,” he said.
To Ben Liddicoat:
Your response is not unexpected by myself or no doubt other respondents over the last 12 months.
It appears that when anyone makes a comment in contrast to Daniel Brammall or the IFAAA philosophy or asks why the consumer should not be provided the option of fee for service or commission based remuneration models for Risk Insurance advice, your response is “interesting”.
Most interesting is that you actually offer your own clients a choice!
As stated previously, your current BBK Financial Planning FSG dated 10/03/2014, clearly states on page 5…”If you do not wish to pay a fee for our services we may be willing to work on a COMMISSION basis or negotiate some other arrangement with you”.
It appears that if your client is unwilling to opt for a fee for service basis that you are in fact prepared to accept commissions as a form of remuneration if the clients elects that option!
Or is this statement incorrect?
Every client is different and every adviser is different. If you are an adviser that has a fee based risk pricing model, that is great, and good for you! That is your value proposition and you are going to attract clients that appreciate the way you do business. But what about the client that does not/cannot pay an upfront fee for quality advice. This whole insurance debate about the way advisers are paid is counter productive and should really be about how we can get insurance advice in front more Australians that need it. Melinda Houghton wrote for us recently and sums this up perfectly.
http://www.proadviser.com.au/b…
Why do these guys feel compelled to preach to the rest of us, as if they have the one true answer? Insane. There is no one right way for everyone, and anyone who tries to force other professionals is a narrow minded bigot.
Like saying they have written the perfect SoA; no such thing exists, unless Daniel, Ben and Philip you believe in the tooth fairy as well? In that case I have a perfectly good unicorn to sell you.
Craig, innovators are always in the minority at first. That’s why they are innovators. The preeminent mode of transport used to be the horse and cart. Ride ’em cowboy!
How utterly ridiculous does Daniel Brammall sound when he says… “what the structure should be and your POLICIES available, the SORTS OF COVER that they need, then that is an event that is DIVORCED from product”.
That conversation may refer to the types of insurance products available, but may not refer to a specific product recommendation until much later in the planning process.
This conversation in fact IS about product type in probably 95% of cases and how a specific product type (not actual product) may or may not be suitable to a clients needs.
In fact, I don’t quite see how Daniel Brammall can refer to the commission model as “outdated” as it is the pre-eminent form of remuneration for the vast majority of advisers throughout Australia.The advisers operating such as Daniel make up a minuscule percentage of total adviser numbers….that’s a very small number of so called “innovators”.
Just don’t tell the vast majority that they are wrong and it doesn’t work.
Fee for service and risk fits very well. It opens up the advice discussion to more protection possibilities, as every path won’t automatically lead down to a commission paying insurer. Rather than narrowing choice, one could argue that it opens up a whole world of possibilities.
What is tiring out of this discussion is the IFAAA and some of it’s vocal members have repetitively called for the banning of the commission remuneration model for risk insurance whereas advisers who are remunerated via the commission based model appear comfortable with the fact that the client should be able to choose which model suits them best and their ability to fund the cost.
There should be the ability for any adviser to place risk insurance business on a fee for service or commission based model dependent on which option is in the client’s best interest.
It is not appropriate for the IFAAA to seek media attention and to then use that exposure to push for narrow and limited choice for clients by advocating that a fee for service model would be best for all consumers because it is self serving.
The client should always have a range of payment options available to them to allow more flexibility in accessing advice.
To dictate otherwise is wrong.
Actually, Mr Scriven, You’d be “chewing on the leg” of the client as well as your own!
I’ve been charging fee for service for years and it’s the only way to remove bias as well as self-interest and bring transparency to all dealings.
Risk advice must be divorced from product providers and must also be aligned with your skill-set (i.e. refer business to others if your skills are not up to scratch in a particular area).
The fact that we exist and have done so for years now proves that it is possible,.
By the same token, the fact that so few advisers exist that are doing it this way (as Brammall repeatedly points out) proves there are very few consumers prepared to actually pay an unbundled insurance advice fee.
If insurance comms were banned, 1% of people would pay Brammall and co for advice, the other 99% would get no advice, and end up underinsured or in dodgy products with built in exclusions. A very bad outcome for the 99%.