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What insurance advisers should be asking for

Wednesday, July 26th 2006, 10:56PM

by Philip Macalister

One of the great things about the Internet is that you never lose touch with people, no matter where they are. The other day the former AIA boss in New Zealand, David Whyte, sent me this in response to an article on the site:

Philip,

Greetings from sunny Melbourne, and from the land of considerable adviser regulation.

I'd like to submit a couple of points of order if I may on your article on the above mentioned items quoting my ex-colleague Michael Hewes and AIA's practice of not offering incentive award programmes for advisers in NZ.


This was a stance I adopted when I was in charge of AIA New Zealand based firstly on the lack of funds to offer anything worthwhile to advisers, and secondly on the lack of any empirical evidence that AIA would receive commensurately more business as a result of providing such incentives.

In Asia and elsewhere in the AIG empire the organisation is a very heavy user of travel incentive award schemes for their agents. While there may be certain territories which have outlawed such incentive programmes, it is nevertheless the case that AIA in New Zealand is the exception rather than the rule.

The industry's annual spend on such incentives is certainly significant in dollar terms, but is limited to no more that 1% to 1.5% of the total commission bill. Therefore any saving achieved by abandoning such incentives would be pretty insignificant. The suggestion that any company would pass on the saving to their policyholders is a little optimistic.

Whatever the appetite or state of preparation advisers may display, full mandatory disclosure is inevitable. Having operated as an authorised IFA in the UK with compulsory disclosure, experience indicates that good advisers need not fear this aspect of regulation. Providing an adviser is seeking to develop a genuine long-term client relationship, and not just pursuing the old-fashioned 'product flogging' exercises which helped to create the need for the Australian Financial Services Reform Act, then disclosure of the cost of access is an important part of building the trust needed to establish a proper relationship.

Indeed, the cost of accessing recommended products should be a relatively minor part of the identifiable value of the adviser/client relationship, and I have no doubt that there is a significant number of NZ based advisers who have already worked this out, as have many of their Australian counterparts.

Far from presenting objections to disclosure, or trying to find clever ways of avoiding same, advisers should be pressing the product manufacturers to automate the compensation explanations in their fact find, needs analysis, and product illustration software suites.
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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.75 7.35 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.74 7.29 6.59
SBS Bank Special - 7.14 6.69 5.99
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 7.89 7.35 7.25
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - 7.29 6.75 6.65
Median 8.64 7.21 7.29 6.65

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