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[Comment] Advice matters

Fidelity Life Acting chief executive Ed Eadie provides his view on the value of financial advice; something that is in danger of being overlooked during the current debate on commission levels and churn.

Tuesday, June 21st 2016, 8:24PM 3 Comments

Advisers and the way they are remunerated continues to be under the spotlight and I believe it is time to change the focus and highlight the value financial advisers bring to New Zealand.

Good financial advice must be a cornerstone of the New Zealand financial sector. New legislation risks creating an advice gap, similar to those seen in other jurisdictions following similar debates, which is dangerous and will end up having a long-term damaging effect on many thousands of New Zealanders. 

Financial advice deepens our capital markets, by empowering and enabling New Zealanders to take responsibility for their own financial wellbeing. Unfortunately, commentary on financial advice continues to regularly have a narrow focus, undermining the role of financial advisers and challenging the public’s confidence in the life insurance market as a whole. The focus of the debate needs to change. We, as an industry, need to promote and support financial advisers as well as the value and importance of advice. In this respect, I applaud the position that the IFA and PAA have taken with the proposed formation of Financial Advice New Zealand. Fidelity Life supports this initiative and is committed to work with them, and any other interested stakeholder, to help build public confidence in the industry.

Why? Because New Zealand has a significant problem with underinsurance.  Many people do not get the cover that they need to protect themselves and their families. This is particularly so when it comes to income protection insurance. Although a person earning $50,000 will accrue $1 million gross over 20 years, most New Zealanders do not understand that their income is their greatest asset.  Only a quarter or so of New Zealanders have income protection cover. Advisers fulfil an important role in ensuring that people think carefully about their options, promoting the availability of products and making them accessible to consumers.

We need to acknowledge that advisers are an essential part of solving the underinsurance issue.  In the UK the decision to ban commission has created an “advice gap” where financial advice is only available to the wealthy.  In addition, customers need to be supported throughout the lifecycle of a product and through the various stages of their own life. 

Trusted advisers also perform a key role in educating New Zealanders, making sure that people have peace of mind and most importantly, supporting families at claim time. This continued service throughout the life of a policy is often overlooked and underestimated. I believe that New Zealanders are best served by financial advice from someone who takes the time to build relationships, who understands their family, their community and their needs.

The most emotive aspect of the conversation is commissions.

As a company that works closely with the adviser network, we know that the costs and risks involved in running an independent adviser business are significant. Commissions are simply a way of taking the payment strain off the consumer while ensuring that good financial advice is still available to everyone. Fidelity Life supports proposals to introduce commission disclosure for all advisers and unreservedly supports initiatives that protect consumers. However, let’s stop the sensationalism and focus on what is important, the availability of good financial advice.   

So in the coming debate don’t lose sight of what we have.  Our advisers are part of our communities.  Let the debate be about highlighting the importance of financial advice, ensuring financial advice remains accessible and affordable for all New Zealanders and emphasising the value financial advisers bring.

Ed Eadie is the acting chief executive at Fidelity Life

Tags: Fidelity Life

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Comments from our readers

On 20 June 2016 at 10:05 pm duncan@standaloneinsurance.co.nz said:
Thank you Ed, at last some common sense and the simple truth of the matter, very well said.
On 21 June 2016 at 10:07 am Referee said:
Well said Ed. However, I suggest that the underinsurance situation in NZ will not be improved until the insurance industry has a lot more Gen X and Y Advisers. There has to be a much greater focus on the recruitment and training of younger Advisers. This is due to the disproportionate number of Baby Boomer Advisers who are looking to slow down and/or retire. Most insurers these days haven't viewed this as their responsibility and I believe this has impacted on the underinsurance situation.

The other issue is the 'fight' to compete on product value. Many of today's products are priced for the middle to upper markets meaning there is a large market where affordability is the issue and they can't or won't pay for these high value products. Some cover is better than none, so it is refreshing to see some lower-value products now being introduced into the market.
On 22 June 2016 at 2:42 pm Bruce Cortesi said:
Well said Ed. Could it be that the industry is on the brink of positive change for positive outcomes to the benefit of all New Zealanders? It is amazing how ones passion comes back in spades when you see evidence of people starting to focus on the two most important components of our industry - what we as Advisers do - and the Consumer. Period.

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