‘Fee-for-service world’ inevitable: AMP
All risk insurance advice will be remunerated via a fee-for-service model in the near future, says AMP chief executive Craig Meller.
Following AMP’s annual general meeting in Sydney last week, Mr Meller told members of the media that the life insurance advice industry is on a “journey” to implement a fee-for-service remuneration model.
“I think in the long term, it is going to be a fee-for-service world,” Mr Meller said.
“I am not giving a prediction of the timing, but I think in 10, 15 years’ time or whatever, I think you’ll look at financial advice and say it is an entirely fee-for-service world.”
Mr Meller’s comments also follow the recent decision by AMP to mandate a hybrid and level commission structure for all advisers within the AMP network and for advisers who recommend AMP life products.
Elaborating on the company’s decisions to mandate changes to its remuneration structures, Mr Meller said the move is part of the plan to transition advisers to to a fee-for-service model by slowly moving away from upfront commission payments.
“If you look at it in the context of what John Trowbridge recommended, we moved to what he called the interim phase,” Mr Meller said.
“The challenge of going 'cold turkey' [to fee for service] is the upfront commissions in life insurance have been an important source of liquidity for financial advisers.
“The most important stakeholder for us in coming into the decision around moving was our advisers because we are a significantly vertically integrated business, most of our life insurance business comes to us through our advisers,” he said.
“So getting our advisers across the line and getting them to be comfortable with the path we are going is the most critical thing for us,” Mr Meller added.
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