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'High-volume' advisers earn 50% more

Half of the insurance advisers with at least one active policy on their books were not earning enough in commission to make the minimum wage, the Financial Markets Authority says.

Thursday, June 30th 2016, 6:00AM

by Susan Edmunds

That is one of the findings of its report into replacement business, released yesterday.

It said, in 2014, out of 3700 advisers who had one active life insurance policy on their books, 9% earned no commission.

Another 43% earned less than the minimum wage.

But 12% earned more than $100,000 and at least 4% earned more than $200,000.

One adviser earned more than $320,000 , with a lapse rate of 41% and a new business rate of 61%.

On average, the 200 advisers who were identified as meeting the FMA’s criteria for “high replacement” – turning over 12% of policies a year or 40 in a month - earned 50% more in commission than those who were merely dealing with high volumes of clients.

The median number of life policies for all advisers was 33. A quarter of advisers had at least 130 on their books. AFAs tended to have more life policies on their books than RFAs.

The high-volume advisers were more likely to deal with multiple providers. Of these advisers, 36% had at least 90% of their policies with only one provider, 49% had at least 90% of their policies with two or three providers, and 14% had at least 90% of their policies with four or five providers.

Section 25 report – the facts

  • 200 advisers met the FMA’s criteria for a high estimated rate of replacement business
  • 45 high-volume advisers replaced more than 20% of policies in a single year, nine replaced more than 30%.
  • The median rate of replacement business for RFAs was 7%, compared to 4% for AFAs.
  • RFAs made up 86% of high-replacement advisers
  • High-replacement advisers were making, on average $610 per policy per year in commission, compared to $410 for high-volume advisers.
  • High-replacement advisers had a median policy age of two years, compared to six years for high-volume advisers.
  • Policies no longer subject to clawbacks were 2.2 times more likely to be replaced if overseas trips were offered as an incentive.
  • Policies with high upfront commission and lower trail were 1.6 times more likely to be replaced.

Tags: FMA

« Churn report should include banks: InsurersLet's deal with rogue advisers »

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  • It starts with governance
    “@Adviser1 this is part of the discussion we need to have as an industry. It is also part of the message we have with the...”
    19 hours ago by JPHale
  • It starts with governance
    “Thanks Gavin, appreciate your comments. So by engaging a compliance consultant and having the necessary policies, procedures...”
    21 hours ago by Adviser1
  • It starts with governance
    “Hi Adviser 1 -I don't think peer review will cut the mustard. There is more to it than someone having a look at you do and...”
    1 day ago by gavin austin adviser business compliance
  • It starts with governance
    “Who offers a governance solution for a one man adviser business or is adviser peer review the way to go? Cheers...”
    2 days ago by Adviser1
  • It starts with governance
    “Well said as usual Russell, you’re right governance is one of the things that has been missing from the discussion and...”
    2 days ago by JPHale
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