There’s no point fighting it. It’s inevitable, not least due to the inappropriate advice practices of the past.
The real risk to life advisers is not the change from upfront to level or hybrid commissions. The real threat is the complete abolition of commissions for life advice.
The industry should see the opportunity to move to level and/or hybrid commissions as an olive branch and a chance to assist in cleaning up the churning practices that have so bedevilled the industry in the past. It’s the chance to ‘encourage’ life risk advice practices that have a shot of universally being in clients’ best interests, without throwing the commission-based remuneration baby out with the bath water.
Anyone who thinks otherwise is living in a parallel universe that ignores the evidence of widespread misconduct that have so conclusively been presented through numerous industry studies, FOS determinations and ASIC reviews.
They’re also ignoring the trend towards client-determined remuneration models that are already in place for investment advice and are currently under serious consideration for mortgage broking services.
Not only that, it makes good business sense.
I think advisers whose business models depend on 100-120 per cent upfront commissions and 10-15 per cent trail demonstrate short-term thinking. Recurring income models based on, for example, a 30 per cent ongoing commission will result in much higher overall valuations. After some initial transitional cash flow challenges, the numbers will speak for themselves. And the staged introduction of the changes will assist with the cash flow challenges.
It’s not as if life brokers have to do an awful lot to earn the ongoing commission. Stay in touch with the client, review their insurance needs periodically and only make a change when it’s really needed. Contrast this with general insurance brokers who, at best, earn 22-25 per cent level commission and potentially have to completely re-market their non-automatically renewable policies year on year.
What I say to the opponents of this reform is, be careful what you wish for. Keep the existing regime, allow the existing practices to continue, and you face a very real risk of complete abolition of commissions for life advice.
For those of you who are AFA members, don’t fetter your industry organisation’s ability to effectively represent you with government.
Claire Wivell Plater is the managing director at The Fold Legal.
Yes, Max, a life broker CAN do that! And probably should…
When is the industry going to wake up that while they are paid by a third party to sell that third party’s product they have no independence, no credibility and no leg to stand on – and will get lectured by (yes, of all people) lawyers! Just charge your clients by invoice for working for them and be good value and they will come. Get over it. Move on. The real world looks at you and just blinks in disbelief.
That’s a bit rich coming from you Claire. My question to you is,” If a client asked you what this advice will cost and then upon receipt of that quoted figure gives you instructions to proceed. However, at the end of the process, the client receives a bill for DOUBLE the quoted amount, complains but then gets threatened and bullied by debt collectors into paying the debt. What would you do? As a 30+ year veteran of this once proud industry, I have seen more and more people providing their self opinionated advice where they have no expertise. And from the comments above Claire, I am not alone in these thoughts.
Agree with thw comments above! Dont Layers swear an Oath to the BAR NOT their clients – WHO DO THEY SERVE??? 🙁
A lawyer trying to lecture?! Its the lawyers pushing bad claims that has led to a sharp increase in premiums for all. And of course the lawyers who are happy to take a 40% cut of a claim that would be handled by a risk adviser who was paid commission FOR FREE.
Unbelievable hypocrisy worthy of a lawyer or the FSC!
Compare personal risk and life insurance to general insurance? Claire, what’s your make and model…
A lawyer talking about dodgy practices!!! She’s having a laugh. This article does nothing more than prove you are a puppet. I don’t think there are any advisers that feel or expect things will be kept as they are, certainly not the LICG. Set Commission at 80/20 and leave it there. Clawback left at 1 year. Increase education standards. Insurers and ASIC do their job and weed out the bad eggs. Done. Lets move on. Where has anyone said that advisers are fighting to leave things exactly as they are. Nowhere.
Apart from anything else in this commentary, the author has discredited herself by listening to those who believe risk advisers are trying to maintain upfront commissions. This is not the case.
The fight is for consumer benefits and an understanding of what the review in 2018 is looking for. A hybrid model has been fully accepted. As for “it’s not as if you have to do much to retain…….” I can’t even begin to describe the ignorance of that comment.
As usual…….all talk and no substance. Big statement with no evidence. Just what is churn anyway. And if no one has a definition of what churn is then how can you say it ‘has bedevilled an industry’? If there are advisers out doing things that are not in the clients best interests then its about time the regulators did something about THEM. Whilst they are at it, they should define exactly what churn is, and insurers should have some mechanism for measuring why policies lapse and then defining how many were as a result of a “churn”. Then we can have some meaningful discussions around how to fix the so called problem and find some solutions that actually might be in the best interests of consumers and not just adding extra revenue to the FSC member companies bottom line..
being lectured by a lawyer on how to treat a client…that has to be an all time low.
Funny whilst she knows but doesn’t mention the exiting law under best interests covers the instances of churning and other poor advice practices. If current law is enforced that would be sufficient to cure what ails you.
Another pretentious article from someone who has never sold a life policy-just like all in Canberra with the exception of the LNP member for Forde.The writer also charges an hourly rate from the second her client walks in the door-$350 per hour plus win or lose.
Can a life/risk broker do this?
Woo Hoo! Another advocate for the AFA and the so called “evidence”. Try READING that evidence and you might see, just like those who have, where the real problem is in the life industry…….it’s certainly not with the advisers.
Your understanding of statistics is obviously very poor; either that or you’ve not actually reviewed the data and are merely regurgitating the opinions of particular bodies.
I personally prefer charging a fee for service and taking level ongoings, but that’s beside the point; your claims are unsubstantiated and based on the same type of ‘evidence’ the idea that vaccines cause autism or aspartame causes cancer. I suggest you look up ‘post hoc, ergo propter hoc’, spurious regression, and co-integration for starters. A basic understanding of the terms ‘significant’ and ‘standard deviation’ would be of help also.
These type of opinion pieces and general ‘common sense’ publications and practices are what drag our industry down; there aren’t enough well educated, objective, skeptical, and analytical individuals within our industry.
Spoken like somebody who has never worked within the Financial Industry,,
Obviously being a Lawyer you have not had to hold the hand of a dying client or was the adviser who “Sold” the insurance in the first place. Until you do, you will never understand the value this brings and what is a fare fee for this service. Widows don’t care how much advisers are paid when they receive a claim payment for a deceased husband/partner/child. Banning commissions in the UK just didn’t work, they were quick to realize this mistake and reversed it.So exactly just what is it, you don’t understand? If you need to discuss call me.