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Website encourages churn

The man behind the merger of Guardian Trust and Perpetual Trust is causing waves in Australia with a site that pays commissions to customers rather than advisers, and essentially encourages churn.

Monday, November 17th 2014, 6:00AM 4 Comments

by Susan Edmunds

Australasian Wealth Investments (AWI), which is headed by Andrew Barnes, has established a website, YourShare.com.au, that promises to give Australian consumers their share of $3 billion paid in commissions to advisers every year.

Barnes most recently came to prominence in New Zealand after buying Perpetual Trust for $12.3 million from George Kerr’s company Pyne Gould. Before that he established Australian Wealth Management, a spin off from TOWER Australia.

He says a New Zealand version of the Australian website is a possibility.

The site collects the fees and commissions generated by sales of insurance, mortgage and investment products and gives half of the money back to consumers, above $75.

Barnes said consumers who registered with the site were, in effect, moving their asset from one adviser to another. “But adviser B gives a proportion of the commission back.”

Consumers receive no advice via the site but Barnes said because products could not be set up via the site, those who needed advice would already have got it.  “All it’s really doing, is effecting a transfer in such a way to get the rebate back.”

Some customers would have bought the products directly from the provider before transferring to YourShare, he said.

Barnes said it was not a threat to financial advisers because the site’s clients were usually those regulation had made advising too expensive or time-consuming. “Nine out of 10 times these customers are orphans.”

A large part of the financial services market had been disenfranchised in Australia under FOFA and RDR in Britain, he said. “The challenge at the bottom end is you’ve got a lot of people who are no longer on the radar of advisers. If an adviser actually engages with smaller customers, they have to go through a full fact find, it’s breathtakingly uneconomic.”

He said there was a possibility of something similar to YourShare working in New Zealand. He said the concept would work but New Zealand’s regulations were not yet as strict, so the problem of “mum and dad” clients’ access to advice was not so acute.

But he said it would work in any market where commission as being paid. “The client has the ability to say ‘I’d like a piece of that’.. it’s probably an inevitability as commissions come under pressure.”

« OnePath tweaks productsCommission regulation 'not the answer to churn' »

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Comments from our readers

On 18 November 2014 at 1:33 pm Mike Naylor said:
So - given that NZ commissions can be over 200% - can a customer use their half share of commission and fees to get free insurance? (at least for the first year)
On 18 November 2014 at 3:42 pm Broker said:
Yip the lucky punter gets free insurance for a year - but if they die or are seriously disabled there's a good likelihood of no pay out as there was non-disclosure, no advice and the policy wasn't set up right. It's not all about commissions...site should be banned...
On 21 November 2014 at 9:16 am Superman said:
Clawback risk will have to be mitagated somehow...
On 29 November 2014 at 12:41 pm Mark Ogden said:
Ah I get it:
"Consumers receive no advice via the site but Barnes said because products could not be set up via the site, those who needed advice "would already have got it". “All it’s really doing, is effecting a transfer in such a way to get the rebate back.”"
So a client comes to me, I design a plan that, has say: split stepped and level premiums, maybe hybrid IP with the software we have designed to illustrate the various options and spent all the time with the client, I take responsibility for my advice and I am liable for it. Then they can jump online buy the solution I proposed and get a rebate/commission for no advice. No.... because they don't set up policies via the website, I need to implement it for them?
Then via the website you change advisers and split the commissions between yourselves, what and income is clawed-back from me?
I suppose we should be thankful that clients with such scruples are weeded out from our client base by a similarly minded company that would enable that behaviour and I wouldn't want to deal with carriers of that moral fibre either.
So what does Barnes Company actually do for his share? Quite blatantly and unashamedly nothing. Not even any mention of assisting with claims on their site or reviews.
I have a meeting with Perpetual Trust next week. I sure this will lead to some interesting dialogue about who I want looking after my estate going forward now knowing the thinking of its directors. Maybe I can jump online and switch Trust Companies?

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