Independently-owned licensee Fortnum Financial Advisers is the latest company to move pre-emptively to a new remuneration model, outlawing upfront insurance commissions.
A statement from the company, following an email to the Fortnum adviser network from executive chairman Ray Miles last week, reveals it will adopt a fee-for-service model, with hybrid or level risk commissions from July 1.
The statement said the move comes in a bid to “self-regulate and ward off further legislative attack”, following similar decisions by AMP and Centrepoint Alliance in the wake of the Trowbridge Report.
Mr Miles said that while many of the problems in the life insurance industry are not the fault of advisers, the advice industry has no choice but to implement change.
“Advisers are price takers not price makers. We don’t set the terms for upfront, hybrid or level commissions nor do we set the policy terms or premiums yet most of the blame for the industry’s sustainability issues are directed at the minority of advisers who churn,” he said.
“There are advisers who churn and they’re known to the insurance companies who continue to accept business from them so perhaps part of the problem is how executives are incentivised to deliver new business growth.”
Mr Miles, the former boss of Associated Planners, which later became Genesys, said the whole industry needs to move quickly or face legislation that will make it “difficult for advisers to profitably provide insurance advice” thereby exacerbating the underinsurance problem.
He also called for greater regulatory scrutiny of the group insurance market.
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