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Opinion: Insurance brokers can hold their heads up high

Time for advisers to hold their head up high – even if the most venal, over the past few years, shunted clients from one insurer to another for higher commissions… the clients' cover has been good and provided they don't plan on suicide, complete at all times.

Thursday, June 5th 2008, 6:03AM

by Russell Hutchinson

By contrast, for a few pennies (compared to those outrageous insurance commissions) investment advisers have sold out thousands of clients to a score of finance companies – that are now broke.

In the meantime, on average two or three in every thousand clients died each year and grateful families gladly received the claims proceeds. Hey in a couple of years' time it'll be the other way around again – but there is serious lesson in this.

If you've been wondering why we haven't seen lots of insurance company failures, it's strongly diversified retail finding. The capital that finance companies rely on is short-term money. Insurance companies on the other hand supplement their shareholders' funds with lots of small premiums from lots of people committed over years, not days or months.

That makes them inherently more stable – and not a bad base from which to build a conservative (that's translated "unlikely to go broke") investment business.

So insurance brokers have proven more successful at protecting clients' money. Since they are in the protection business that's called 'true to label'.

They should probably start advising their clients to invest with the investment arms of those companies. Only you will have to learn to forget those high, high, commissions if you do.

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