Advertising of soft-dollar tempters not a good look
New Zealand’s insurance industry is focusing too much on soft commissions, which will not do anything to improve its standing in the eyes of consumers, it has been claimed.
Thursday, December 17th 2015, 6:00AM
by Susan Edmunds
Graeme Edwards, of AIA, said the recent Kepa conference was dominated by insurance companies advertising the trips they offered to advisers, rather than the products they dealt in.
AIA is taking advisers to Shanghai this year. One Path and Asteron are taking top-performers to Japan and Partners Life is taking them to Rio de Janeiro.
“We’d put up a stand about our health products but everyone else was promoting an overseas trip. They were all competing for who has the most lavish trip,” Edwards said. “Whether partners and kids could come.”
Soft commission components of rewards could significantly alter the overall package given to advisers but were hard to get a clear gauge, on, he said.
While they are regulated in Australia and questions have been asked about them in New Zealand in the past, it is not something that has been signalled as a priority in the review of the Financial Advisers Act.
When all the incentives were taken into account, the insurers' overall remuneration packages on offer were usually very similar despite varying levels of upfront commissions, Edwards said.
How important trip offers were to advisers varied a lot, he said.
AIA chief executive Natalie Cameron agreed: “Ultimately most of them are small-business people and they don’t have the same sort of community you get in a big insurance company so they do appreciate the opportunity for some form of conference or gathering.”
She said there were benefits to both advisers and insurers from well-run adviser trips and other soft-dollar incentives.
Edwards said: “It’s like anything, it starts with something that had its foundation in a good place but that’s distorted by competitive forces.”
He said it was hard to see where the line was crossed but it was something that needed more thought.
“Industry has to take accountability for that, because if a consumer had walked in [and seen the trip advertising] they wouldn’t be impressed. It wouldn’t help them value the industry and advisers.”
Fidelity Life chief executive Milton Jennings agreed there had been a strong emphasis on soft dollar incentives at recent events.
“Maybe people saw it as their last opportunity. But the government is not saying it is looking to get rid of them so there may be a bit of life in them yet.”
He said companies had to promote what was attractive to advisers. “They work pretty hard during the year and deserve some goo benefit.”
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