Yesterday, AMP announced it will move to a hybrid commission model for advisers aligned to AMP-owned licensees as well as IFAs recommending AMP insurance products.
Upfront commissions will be reduced in favour of a hybrid model in which “year one commissions paid on life insurance policies [will be capped at] 80 per cent and a 20 per cent annual commission payment during the life of the policy”.
In addition, AMP will mandate that its advisers only be able to access the year one commission every five years per policy, “irrespective of the life insurance provider and applies to all insurance policies written since 1 July 2010”.
Approved product lists of financial planning groups under the AMP banner will “move to a similar remuneration model” for all insurance products, including those issued by competitor providers, a statement from AMP explained.
However, speaking at an Australian Financial Review function in Sydney, Mr Frydenberg said the move does not absolve the life insurance industry of its woes.
“This is a move in the right direction but more needs to be done,” the minister said.
The reforms come as AFA chief executive Brad Fox has called on licensees and financial planning companies to pre-empt any government response to the Trowbridge Report by making changes to their risk remuneration modus operandi.
Meanwhile, Quantum Financial principal Tim Mackay has taken to social media to suggest other insurers may follow suit.
“Just [received] email from AMP re no more up front commissions from June 2015. Expect other insurers to follow suit. Hybrids comms cause churn too,” Mr Mackay tweeted.
“Can’t wait to see how other insurers respond to AMP’s move- case study in game theory. Will advisors cry collusion if all follow suit?”
It is totally inappropriate for Frydenberg to make any comment at any stage during this process.
He has stated he wants the industry to sort out the issues and does not wish the government to be involved.
By making comment at any stage he risks influencing the outcome and jeopardises the process by seeking to contribute.
Simply through his position alone, he cannot avoid influence.
By making specific comment on individual company decisions is unacceptable.
It creates an environment of “second guessing” the minister’s next move.
He is effectively seeking to control the process from afar whilst stating he does not wish to be involved…it is contradiction.
Is he going to make comment on every company’s announcement as they do or do not filter through?
The minister should decline to comment on any matter regarding the Trowbridge Report and the Life Insurance Industry at this point.
Wait for things to happen or show leadership and make them happen?
Faced with a choice of level 20% with transition cap of $1,200, or hybrid with a 5 year Single Payment Period and recognition of BID transition? The later appears to be a much better option to address the industry issues. It is also better for the consumer as they will still be able to get advice, better for the adviser as they will still be able to be paid for the advice provided and on-going revenue is higher (than comparable full up-front rates) and even the manufacturer is better off as discourages churn, etc.
While not pickup much in the media, AMP also recognized the need for manufacturers and licensees to improve policies and processes to make it more cost effective and efficient to provide risk advice.
What a pointless debate been going on for the entire 30 years I have been an adviser in Australia.
Politicians are here today and gone tomorrow but wade in for political ends with no idea about what they are talking about.
Instead of letting the free market operate they seek to influence it. When they are gone career financial advisers sort out the debris.
AMP has made a move. Whether that suits the free market or not time will tell. Others may follow suit or compete. That is what makes a free market work. Advisers will sell AMP products or the wont and consumers will buy or they wont.
Remuneration, advice and how to pay for it will sort itself out given time.
Interference is like global warming. We don’t know we have ruined it until its ruined.
Trowbridge,Frydenberg,AMP. I cannot see where the consumer is better off. AMP is ordering self employed advisers not to change providers for a period of 5 years or else new commission will be disallowed. However if another adviser changed provider, it is a different story. AMP, what gives you the right to mandate rules directing self employed advisers how the should be remunerated?
The real disadvantage to clients is the continuous interference by parties who clearly have no idea about the mechanics of risk insurance and real time associated with placing it.
AMP has always had a knee jerk mentality. Did AMP mention the incentives regarding the replacement of old crisis insurance policies? Cost a bundle without the anticipated results.
[quote name=”Steve A”][quote name=”PPierre”]Will AMP be lowering the premiums now that they aren’t paying upfront?[/quote]
Short answer = No.
Long answer = No f_ _ _ ing way.[/quote]
Yeah that would be my expectaion.
And i guess it doesn’t matter when you have a massive grandfathered legacy book of investments at ridiculously high fees.
And a group of advisers that cant go anywhere else and are forced to use only AMP products.
Yeah, thanks for putting our industry first AMP. Said no one ever…
[quote name=”PPierre”]Will AMP be lowering the premiums now that they aren’t paying upfront?[/quote]
Short answer = No.
Long answer = No f_ _ _ ing way.
[quote name=”Mike Kendall”]The only way is to charge a fee with no commission at all. Get real people.[/quote]
Good on you Mike – let’s see how your clients feel about paying F4S when you can no longer reduce their premiums by 40% by giving a full rebate your commission! I can guarantee the insurers will not reduce their premiums by 40% just because they no longer have to pay you any commission.
CHOICE – it’s dead and will be a thing of the past! 🙁
AMP, Banks and corporate giants such as the likes of Coles and Woolworths DO NOT want clients to have choice. They hate choice and provide limited competitive brands to prove it (and soon won’t even have the ‘limited’ alternative options).
Commission is not the enemy – it is the corporate greed squeezing every last cent out of a customer to drive profit.
The insurance companies have always driven their product based on New Business – their systems are not structured to service/amend an existing policy and they certainly do not allow an adviser any ability to provide a hands-on service proposition for clients.
Under-insurance? Please explain how removing commission and adding a fee to insurance premiums is going to all of a sudden make someone not insured decide they want to be insured?!?!
Why don’t you get real Mike and stop playing in the seconds!
I wonder how AMP premiums will change from 1 July?
If all major players follow suit – is that a cartel? Will anyone care except us?
I am writing to the Asst treasurer to explain the real basis behind his desire to disrupt the industry….was he stung by churning or paying in his eyes too much? something got under his bonnet and if AMP move is not enough, what exactly is?
[quote name=”Mike Kendall”]The only way is to charge a fee with no commission at all. Get real people.[/quote]
Who will pay the fee?
10-15 hours of an advisers time? Should we know be a charity?
Will AMP be lowering the premiums now that they aren’t paying upfront?
I assume that the “upfront” commission ban by AMP is step one of AMP’s Managed Transition with more bad news to follow. What was AMP’s submission to LIAWG? What happened to their motto AMICUS CERTUS IN RE INCERTA” (a sure friend in uncertain times)? I see nothing friendly to Advisers in AMP’s knee jerk reaction. The solution to the current problem requires ALL PARTIES to pay a price NOT JUST ADVISERS. Effective immediately L/O’s should increase ALL IN FORCE RENEWALS from 11% to 30%. This will protect this “in force” business. There will be a cost but it’s the L/O’s that want change also. In exchange Advisers with 5+ years service will accept Hybrid commission only (say 80/30) for 12 months then all future business income would be Level at 30%/30%. Advisers of less than 5 years need a 3-5 year Hybrid transition period. I have seen many changes in my 47 years in the Industry. The proposed changes are the most far reaching and will decimate our Industry.
BDM we dont need restraint, we need to give the insurers a good black eye over this uncompetitive behavhiur and ploy to kill off adviserds
It is concerning that Frydenburg is prepared to put out a statement directly after AMP’s announcement stating that more needs to be done. How long to he consider the statement from AMP? AMP is showing leadership and restraint…
So if an adviser gets $800.00 upfront for say six hours work (conservative). Six hours entails fact find, due dillegence, SoA, meeting with client to present SoA, changes to SoA because client wants to make some changes either to the policy or the premium, getting the insurance underwritten and the additional compliance and filing. It will take up to an additional 5 years for the planner to break even (depending on their hourly rate. If the clients circumstances change in the following three years how keen do you think the adviser will be to review this and implement the changes? I cannot see how any of these models can be workable. There will be a scramble to insure high net worth induviduals but once again legislation will affect the average person on the street. The Govt has decreed that financial advice will become cheaper and more accessable, and when its pushed, due to legislation out of the reach of the greater proportion of the population, its the advisers fault???
Just [received] email from AMP re no more up front commissions from June 2015. Expect other insurers to follow suit. Hybrids comms cause churn too, Mr Mackay tweeted.
Not if the 5 year rule gets a look in.
BUT then what do you do if there “needs” to be a change under “Best Interest”?
The need for change is noted however I recall the twisting agreement that was in place between life insurance companies and how it was banned by then TPC as anti-competitive behaviour. It would seem that the suggestions by Trowbridge may also be judged as anti-competitive if all companies were to have the same rate of payment.
The only way is to charge a fee with no commission at all. Get real people.