by Rob Hosking
Brailey says advisers can’t be blamed for churning business when, for many of them. The incentives are too compelling to do anything else.
“Who loses out in the current structure? I suspect it’s the clients. The distributor isn’t losing. The insurance companies say they are but I’m not so sure that’s always the case.”
Brailey says the dominance of the practice though is “killing the industry”.
“There’s two options for change: either spread commissions, so that instead of advisers receiving 150% up front, they receive 30% for the first year and then 20% every year after that.”
Brailey says most, if not all, insurers have arrangements in place which would allow them to do it now “but they don’t’ encourage it.”
The other option is to increase the period of responsibility, he says, to something like “four to six years.” “I’m not saying advisers are paid too much commission,” says Brailey.
“But they are being paid the wrong way.” He agrees with recent comments from ING Life managing director Naomi Ballantyne that the current high level “churn” is seriously damaging the industry, and that there needs to be a concerted effort to change it.
However he disagrees with Ballantyne’s comments that advisers need to take more responsibility for the situation.
“With the current way most advisers are remunerated,” Brailey says, “why would they do otherwise?”
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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