Adviser commissions dominate discussion

Fees and commissions ended up being the big talking point during a session on the state of the advisory industry at the IFA Conference yesterday.

Friday, July 27th 2007, 7:30AM

The two key issues were the level of upfront commissions being paid to risk advisers, and the public perception about commissions versus fees.

Recently life companies have hiked their upfront commission levels because of competition in the market. It is understood companies are now paying commission of more than 200% of the first year's policy to advisers.

Fidelity Life chief executive Milton Jennings says the commission increases has led him to change his view on disclosure.

"Initially I didn't favour disclosure of risk commissions," he said.

"Commissions are a little bit out of control at the moment and a bit of disclosure to bring them back to reasonable levels (is appropriate).

He said that commission levels need to be around the 150-160% mark to "make it profitable for manufacturers." However there was also a view that the commission debate was a bit of a red herring.

AXA New Zealand chief executive Ralph Stewart indicated he favoured some form of disclosure when he noted that "obscuring revenue" is the wrong thing to be doing in the financial services industry.

At the heart of the issue should be customer value, he said. Advisers and the companies should be focussed on showing the value of the product.

Two of the consumer representatives at the session, Mary Holm and Martin Hawes criticised the practice of commission taking arguing it created a negative public image for advisers and there was the perception advisers were "ripping off" the public.

However, Lower Hutt-based adviser Chris MacKay argued strongly in favour of commissions saying advisers would be "broke by lunchtime" if they had to charge fees.

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