Entity licensing could be detrimental to insurance advice
Entity licensing could be lead to fewer independent operators in New Zealand’s insurance sector, the departing chief executive of Fidelity Life says.
Friday, February 19th 2016, 6:00AM 
3 Comments
by Susan Edmunds
Entity, instead of individual, licensing is one of the changes that has been proposed in the Ministry of Business, Innovation and Employment options paper on the Financial Advisers Act review.
Some commentators have said it could help regulate a larger number of advisers, if changes bring advisers who are not currently authorised under more regulatory scrutiny.
Fidelity Life chief executive Milton Jennings said the suggestion risked killing off advice. “It hasn’t been that successful in Australia.”
He said the smaller entities tended to be bought by institutions. “We are a country of small businesses, to have this personalised advice from small practices is critically important. I’d like to see that continue and try to grow it.”
He said entity licensing was all about consolidation. “We’ve seen a lot of consolidation over the last 10 years, it continues to happen, the big swallow up the small firms because they want the economies of scale. Organisations like Advice First, Camelot, Lifetime, they’re out there buying up agencies.”
Big firms were sometimes the only operators with the funding to buy companies that had accumulated books with strong renewal bases, he said.
“The big organisations have the funding lines and take them out but that’s a risk for providers because your distribution is sometimes being bought by the competition.”
Jennings said he had made a submission to that effect to the Financial Advisers Act review.
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Comments from our readers
On the other hand, what's happened in Aussie is advice has become very 'sterile', at the expense of individuality - too many Statements of Advice are so heavily controlled that they are missing the target for true personalised advice.
"Before you take down the fence containing the stock, make sure you fully understand the consequences." It's not broken, so leave it alone....
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Surely if the entities held the license and the Advisers were operating under that entity, then that would enable the Advisers to get on and do what they are very good at doing, and that is give Independent Advice. The entity would take on all the responsibility & cost for making sure that the advisers were operating in a compliant manner. Milton is making the assumption that if Entities are licensed then the Advisers who are attached to that entity loose their independence.
The three companies listed above, Advice First, Camelot & Lifetime, have advisers who are all Independent. They hold agreements with all the companies and the Advisers place their business with the Company that best suits the clients needs.
How does licensing an entity like, Advice First, Camelot or Lifetime, lead to fewer independent operators?
Jeff Page