by Susan Edmunds
The summit was held last week and was attended by 20 representatives of a range of industry groups.
Topics discussed included adviser remuneration, replacement business, adviser designations, minimum standards and the Code of Conduct.
PAA president Bruce Cortesi said: “Everyone was reading from the same book. Their perspectives might have been different but their outlook was the same."
As well as the Financial Advisers Act review, which is under way, the FMA is conducting an investigation into replacement business.
It is looking into whether some business is being replaced for the benefit of the adviser – perhaps because of the high upfront commissions available for new insurance policies - rather than the customer.
But Cortesi said said there was general agreement that problems with replacement business would be best tackled through industry education and work on processes.
He said it should not be seen as solely advisers' problem.
“The industry needs to look at the solution to this because at the end of the day the industry has created the replacement business, it’s appropriate that the industry looks to bring in a solution, not an external body.”
The level of commission being earnt should also not be an issue, he said.
“There are key things that people need to take into consideration and one is the different business models in the industry. The second is the fact that revenue is really what remuneration is and it first goes towards meeting the costs of being in business – the cost of running a business is not going down, it's gone up. Remuneration is not an issue, nor should it be. If we deal with individual behaviour and education then remuneration and the type of remuneration are irrelevant.”
Cortesi said commission needed to be paid in a way that reflected the lifecycle of advice, which could span 20 years.
He said the summit had indicated that New Zealand could come up with a better model than that of Australia. which recently slashed upfront commissions. "We came out of the summit with enthusiasm to work proactively with the regulator and MBIE to assist in a pragmatic and practical way to bring in some solutions. It is not difficult to fix any of these issues,... the industry would embrace it if we could work together to solve the issues."
PAA would put the summit feedback into context and work with MBIE on the FAA review. The intention is to hold another summit to look at what options and solutions could look like, in detail.
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