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Ticket-clipping organisations under fire

Dealer groups that “clip the ticket” with over-ride commission payments will soon find their business models under pressure, new AAA Advisers Association chief executive Wayne Smith says.

Friday, November 9th 2012, 6:00AM 6 Comments

by Niko Kloeten

Smith was recruited to the role after doing consulting work with the AAA on its corporate structure, which he recommended be kept as an incorporated society rather than adopting a model used by some dealer groups and becoming a registered company.

His task now is to guide the 62-year-old organisation as it looks to increase its membership of about 250, many of whom are former AXA advisers.

He said a big part of broadening its appeal would be coming up with agreements with other large providers similar to what it recently negotiated with AMP; he indicated one or more agreements could be announced in the next few weeks.

The AAA’s business model offers advantages for both providers and advisers because it doesn’t “clip the ticket”, he said.

“What we know is that historically some of those other business models have historically clipped the ticket with overrider payments.  These have been reducing from the big players,” he said.

“Our starting point as we come out from the exclusive position of AXA/AMP is we’ve never needed an over ride payment and won’t need one in the future.  If there are payments to be made for a product we want all of that to go to our members.

“It’s a tough and highly competitive industry for the providers and they are looking to reduce costs; one of those I suspect is to reduce overrider payments.”

Smith said the AAA has a four-point plan that includes: working with a greater number of business partners; providing a greater range of services to members; growing the membership base and; growing its revenue base.

He said the AAA would investigate whether to offer CPD (continuing professional development) courses and would look to expand its professional indemnity scheme, which he described as one of the best in the market.

But one of the main benefits of AAA membership remains the group’s negotiating clout, he said.

“From an individual adviser’s perspective it would cost them thousands if not tens of thousands of dollars to sit down with their lawyers and develop the sort of agreement we have negotiated on their behalf.”

Niko Kloeten can be contacted at niko@goodreturns.co.nz

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Comments from our readers

On 9 November 2012 at 1:15 pm Giles Thorman said:
Can someone explain to me why it is that anyone "new" to the market tries to differentiate themselves by kicking the hell out of their competition? It always is done with big statements and mostly few facts. If AAA are not going to get paid an override, how are they going to fund themselves? Nothing in this life is free (apart from air and that is only because Hone hasn't worked out how to charge for it; yet). So either AAA will be paid by the Insurers direct, or it will have to charge members direct. I am very happy with Allied Kiwi "clipping the ticket" as Wayne Smith puts it, I think of it as a payment for services provided. Wayne then goes on to claim the PI scheme "is one of the best in the market"; so I take it then he has read the wordings etc of every other policy? Why make such a claim? Does he take us all for fools without the ability to see past hyperbole?? It gets to the stage when half of the announcements made by people get ignored as people are sick of negative grandstanding. Profession? Yeah right!
On 9 November 2012 at 8:54 pm Vincent said:
These types of comments were more valid a few years ago, but dealer groups now provide a lot more value than the used to, and "clipping the ticket" is a sensible way for the system to work in my opinion.
On 10 November 2012 at 2:34 pm Paul Charles said:
Giles - interesting comments, however cannot agree. I myself do not belong to any of the large aggregator groups and I have chosen not to for a number of very specific reasons.
1. I am yet to be convinced beyond reasonable doubt what value add there is in belonging to any of theses groups.
2. Clearly when the 'ticket is clipped' it means there is potential for choice to opt for a product that pays a higher commission, irrespective of whether it is the right product for the client.
3. Because of point number 2, someone ultimately pays - the client.
4. I deal with a number of carriers, and I always remain completely transparent with my clients when I am declaring commissions and ensure my recommendations are made for the right mix of product for client, irrespective of commission, other factors include the carriers longevity, credit ratings and attitude towards claims.

I have been in the financial services industry for nearly 26 years now and against all advice and 'hyperbole' about what would happen to my practice post regulation if I did not join one of the big aggregators, I find my business going from strength to strength without the need to have my 'ticket clipped'.
On 11 November 2012 at 10:38 am Bazza said:
'We've never needed and override payment and won't need one in the future'. So direct funding from one provider has been better than earning an override from many? Which in most cases wouldn't have been paid/earned by the individual anyway, so not sure how that is 'clipping a ticket'. Also it is only 3 years ago the AAA were negotiating with all the large groups for terms to central source and get an override to fund its development, so I guess times have changed? Giles is 100% correct, Stop worrying what everyone else does and actually deliver some value without AXA or AMP doing it for you!
On 12 November 2012 at 10:14 am Dirty Harry said:
Bazza is bang on, but his argument is the wrong way round, when he says "in most cases wouldn't have been paid anyway...".

True. From a providers POV they only paid 160% or 180% for your bits and bobs written with them when on your own, and suddenly just by joining a dealer group you are costing the carrier 220% plus.

Which was Smith's point. The carriers are looking to get rid of those top end commissions, especially to small players who on their own cannot individually qualify for the top rates.

From an adviser's point of view the dealer groups are a great deal for the guys at the top. They have the insurers in their pockets, and feed off the advisers below them. Some have gaff hooks in their adviser's books if you try to leave and most rely heavily on those big overrides to fund the big machine. And their Audis.

I might get a bit more commission from joining one, but I am not quite ready to sell my soul, my independence and my control in order to get it.
On 12 November 2012 at 11:54 am Giles Thorman said:
Hi Paul, glad to see a name to your comments. In response to you:
1/ The value I see from Allied Kiwi (cannot speak for the others)is access to their CRM, quote software, access to QPR etc. Also good quality quarterly meetings.Also have access to a lot of people with knowledge, like Brent McGregor who is one of life's good guys. 2/In fact the opposite is true. It means that what I am paid is virtually the same as to make no difference which company I choose. 3/ Because of point 2 it means a client is more likely to have a product that has been chosen because of what it will do for him and NOT because of what the broker is paid. 4/ I am delighted for you and I wish you all the very best in the future. I do not however think that by my joining Allied Kiwi that ANY of the points you make are not available for everyone of my clients. As I said I do not see it as having my "ticket clipped", I see it as paying for a service that I receive.
As for the remarks made by "Dirty Harry", this is why I dislike Nom De Plumes being used. You can make outrageous accusations without any responsibility. Can you explain where I have lost my independence or control by being a part of Allied Kiwi? Where is the "Gaff Hook" in my book? I very much resent the remark that I have "sold my soul"; how do you POSSIBLY justify such a claim??

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AMP Home Loans 7.24 ▲5.79 ▼6.19 6.65
AMP Home Loans $200k+ 7.14 ▲5.69 ▼6.09 6.55
AMP Home Loans LVR <80% - - ▼5.75 6.19
ANZ 6.74 6.15 6.39 6.49
ANZ Special - 5.69 5.75 6.09
ASB Bank 6.75 6.09 6.40 6.65
ASB Bank Special - 5.70 5.75 6.19
BankDirect 6.75 6.09 6.99 6.65
BankDirect Special - 5.70 5.75 6.19
BNZ - Classic - - 5.75 ▼5.85
BNZ - GlobalPlus 6.74 5.89 6.39 6.59
Lender Flt 1yr 2yr 3yr
BNZ - Mortgage One 7.15 - - -
BNZ - Rapid Repay 6.74 - - -
BNZ - Std, FlyBuys 6.74 5.89 6.39 6.59
BNZ - TotalMoney 6.74 - - -
Credit Union Auckland 6.70 - - -
Credit Union Baywide 6.45 6.05 6.20 -
Credit Union North 6.45 - - -
Credit Union South 5.75 - - -
eMortgage 6.04 6.15 6.69 7.19
Finance Direct 6.10 6.45 6.69 7.10
First Credit Union 6.45 - - -
Lender Flt 1yr 2yr 3yr
General Finance 5.95 6.25 6.50 7.10
HBS Bank 6.65 5.85 5.99 6.19
HBS Special - - - 5.89
Heartland 6.70 7.00 7.25 7.85
Heretaunga Building Society 6.70 6.00 6.50 -
Housing NZ Corp 6.74 5.99 6.39 6.59
HSBC Premier 6.84 5.95 5.95 6.39
HSBC Premier LVR > 80% - 5.75 5.75 5.75
HSBC Special - - - -
ICBC 6.75 5.99 6.39 -
Kiwibank 6.65 5.79 ▼6.19 6.65
Lender Flt 1yr 2yr 3yr
Kiwibank - Capped 5.65 6.50 - -
Kiwibank - Offset 6.55 - - -
Kiwibank LVR > 80% - - ▼5.75 6.19
Liberty - - - -
Napier Building Society 5.80 6.00 6.70 -
Nelson Building Society 6.95 6.15 6.60 -
NZ Home Loans 6.85 6.09 6.40 6.65
Perpetual Trust 7.70 - - -
Resimac 6.59 6.35 6.58 6.77
SBS Bank 6.65 5.85 5.99 6.19
SBS Bank Special - - - 5.89
Lender Flt 1yr 2yr 3yr
Silver Fern 5.95 6.10 6.55 7.05
Sovereign 6.85 6.09 6.40 6.65
Sovereign Special - 5.70 5.75 6.19
The Co-operative Bank 6.70 5.70 ▼5.75 ▼6.09
TSB Bank 6.74 5.95 6.19 6.30
TSB Special - - 5.79 -
Wairarapa Building Society 6.20 5.75 5.95 -
Westpac 6.59 6.09 6.39 6.65
Westpac - Capped rates - 6.74 6.99 -
Westpac - Offset 6.59 - - -
Westpac Special - - 5.75 6.19
Median 6.70 6.00 6.29 6.52

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