The age old debate about commissions seems to have raised its head again recently, and this time strongly.
While it was the centre of a muddled discussion at the IFA Conference, it has been in the mainstream media over the past fortnight through a series of articles – or a so called special investigation – in the Sunday Star Times.
In addition to that the life insurance side of the industry has been talking to the Minister of Commerce about the subject this week.
Over on the investment side Bridgecorp and commissions are two things have been talked about too.
My take on commissions is that that are fine as long as they are disclosed. In the investment side it would be useful to see the amount disclosed in dollar terms.
I understand one finance company is even planning to write to all its clients and tell them how much commission they had paid the adviser who recommended their product. This disclosure was going to be in dollar terms.
It would be useful to see more advisers move to a fee-based model. My understanding is this is slowly happening and one catalyst for this change has been KiwiSaver.
On the insurance side the debate is raging over whether the commission should be disclosed in dollar terms. It is a die-in-the-ditch issue for leaders in this part of the industry. They oppose dollar disclosure.
I’m leaning towards their side of the argument at the moment.
On the SST piece last week I thought it was pretty sensational and not very balanced. Also I would be interested in your views.
What would be useful though would be to see better disclosure around the soft-dollar stuff. I’m not sure we should go as far as
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THE SST special investigation is interesting given the things they have 'discovered' have been around for such a long time / will my cabinetmaker disclose the overseas conference incentive he goes on annually for using one company's hardware products in sufficient volume / run a nil commission quote and see the 'huge' price difference / can I disclose my expenses also please such as office space & 3 support staff ?
I am happy to disclose margins and soft dollar availability - as well as explain my value - but do not see specific dollar amounts as helpful in increasing the amount of risk coverage sold in our 'under insured' country.
Fee only would be great but a recipe for increasing the level of 'under insurance' in NZ.
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Whilst upfront commissions can be disputed, the time involved at the other end of the process (claim) can be quite involved and there is no financial compensation for this factor. I see the claims management process as being a pivotal factor in the equation (not shared by all advisers) and feel very comfortable with upfront remuneration for a total package service. I do not see a fee for service process being viable for insurance as I believe the consumer would not see value in this