No chop, but a fine tune for commissions
Wednesday, March 10th 2004, 7:13AM
Promina chief executive Mike Wilkins, in announcing the company’s maiden profit of $A298 million - more than $A100 million over the forecast in its prospectus - said changes have been made to commissions in Australia and the same needs to be done in New Zealand to make the business profitable.
Boucher, general manager sales and marketing for Promina's life business, Asteron, says while commissions will be "fine-tuned" at the regular September review, some fundamental differences between the Australian and NZ businesses means there will not be a dramatic chop in commission rates.
One key difference is Australia's legislation that makes superannuation contributions compulsory.
Boucher says that has highlighted across the Tasman the need for policyholders to better understand the cost of the products they are buying, including the fee structure.
Over the past two years when some people saw negative returns, largely as a result of the decline in international equity markets, they didn't understand why they should still pay a management fee.
"That put a market driven squeeze on Australian asset managers' fees," Boucher says.
While there is no compulsory super in NZ and the level of awareness of the makeup of the costs of a product is less, Boucher warns changes will come to NZ too.
Asteron reviewed its commission levels in September - chewing over upfront rewards, servicing costs, production bonuses and longevity rewards.
Boucher says the company is one of few to recognise the need for flexibility in the way brokers are paid.
"They are at different stages of their business development and this determines their preferred commission structure," he says.
But will Asteron put the squeeze on the bottom line? "There is very, very, little chance of a reduction to the total commission level," Boucher says.
He is also promising to continue to involve advisors and brokers in the annual review.
| « AUT tax loophole could be changed within weeks | Sovereign takes regulation bull by the horns » |
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