About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds Other Sites:   tmmonline.nz  |   landlords.co.nz
Last Article Uploaded: Thursday, July 18th, 7:09PM
Latest Headlines

Soft commission schemes untenable under new regime: FMA

Many soft commission incentives currently offered to financial advisers will not be able to continue under new advice laws, the Financial Markets Authority says.

Thursday, May 17th 2018, 6:00AM

by Susan Edmunds

It released a report into soft commission incentives given to advisers by insurance companies, such as trips, events, professional development offers and gifts.

It found insurers spent $34 million on these incentives over two years – more than half of which went on trips for 800 advisers.

FMA director of regulation Liam Mason said it was not the amount of the incentives that bothered the regulator but what was incentivised by their structure.

Registered financial advisers do not currently have the AFA code of conduct requirement to put clients’ interests first but they are required to act with care diligence and skill.

Mason said the incentives were setting advisers up to fail on that count.

And he said, once all advisers were required by law to give priority to client interests, many of the schemes in existence would become “pretty untenable”.

The structures in the market at present should stop, he said – and insurers had a short window to fix the issue before they were compelled by legislation or regulation to do so. 

Rod Severn, chief executive of the PAA, said the focus on the law changes, the new code of conduct, and the Royal Co,mission of Inquiry into misconduct in Australia were suffocating the good news stories about the work advisers did.

“New Zealanders are better off by around $1 billion per year of policy payouts, people are able to buy homes due to mortgage advisers, and people are getting quality investment advice thanks to financial planners. We shouldn’t lose sight of this.”

IFA chief executive Fred Dodds said, if insurers were to spend half of the $5.5m the FMA found they allocated to professional development incentives over the two years, they could have helped all RFAs to complete level five qualifications.

Mason said the FMA wanted insures to look at the incentives schemes and what was being rewarded. They should be encouraging better customer service and ongoing contact and advice, he said.  “That’s more likely to produce better client outcomes and create less conflict for advisers.”

The FMA had a meeting with insurers on Wednesday to set its expectations.

Asteron Life said it had started an in-depth review of sales incentives for insurance advisers.

“Life insurance advisers play an important role in providing expert independent advice to customers and our role is to work with advisers and ensure they are appropriately trained and equipped to offer our suite of products that best meet customer needs.

“Asteron Life supports fair compensation for advisers for the important and detailed work they do. Our review therefore will look at how we can reward, recognise and provide professional development opportunities for advisers while delivering good customer outcomes. The review will be carried out in collaboration with life insurance advisers.”

Sovereign said it welcomed the report and would consider its findings carefully to ensure the design of its recognition programmes continued to deliver good customer outcomes.

Fidelity Life said it would comment further on Thursday

The Financial Services Council said it was an important conversation to have.

“Ultimately the way companies choose to structure their remuneration packages is a commercial decision and one that will differ from company to company.”

Chief executive Richard Klipin said the FSC supported the request to consider the nature and value of soft commissions to ensure they supported good consumer outcomes.

“The key issue with remuneration is clients’ right to know the who, what and why of the advice they are receiving and it’s linked to remuneration at all.”

Tags: FMA Insurance Advisers Life insurance soft commission

« Dale-Jones: Financial advice different to other professionsSchemes query disclosure requirement »

Special Offers

Comments from our readers

No comments yet

Sign In to add your comment



Printable version  


Email to a friend
News Bites
Latest Comments
  • Pathfinder-backed KiwiSaver to target gender diversity
    “This is a great initiative by Pathfinder - congratulations on taking a risk, and standing up for something that you believe...”
    11 hours ago by Pragmatic
  • Call to ensure efficient advice licensing
    “@all Put your cheque books away - no need to pay the lawyers to do the research to provide an opinion...... In my old...”
    1 day ago by Murray Weatherston
  • Call to ensure efficient advice licensing
    “Further reading - Kinsington Swan in February 2018 https://www.kensingtonswan.com/news-updates-and-events/financial-advice-reforms-insights-series-14-penalties-enforcement-complaints-and-disciplinary-matters/...”
    1 day ago by all hat, no cattle
  • Call to ensure efficient advice licensing
    “MPT and Murray this might help https://www.fma.govt.nz/assets/Fact-sheets/Who-will-need-a-licence-to-provide-financial-advice...”
    1 day ago by all hat, no cattle
  • Call to ensure efficient advice licensing
    “Thanks Murray, it seems we are on the same page. Be great if the regulators could confirm or not. AHNC, I agree I dont...”
    1 day ago by MPT Heretic
Subscribe Now

Weekly Wrap

Previous News


Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.69 4.35 4.35 4.55
ANZ Special - 3.85 3.85 4.05
ASB Bank 5.70 4.29 4.35 4.55
ASB Bank Special - 3.89 3.85 4.05
BNZ - Classic - 3.85 3.85 4.05
BNZ - Mortgage One 6.40 - - -
BNZ - Rapid Repay 5.85 - - -
BNZ - Std, FlyBuys 5.80 4.69 4.59 4.79
BNZ - TotalMoney 5.80 - - -
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Lender Flt 1yr 2yr 3yr
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 - - -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.60 4.75 -
Housing NZ Corp 5.80 4.69 4.49 4.45
HSBC Premier 5.89 3.79 3.79 3.89
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
Lender Flt 1yr 2yr 3yr
ICBC 5.65 3.85 3.95 3.89
Kiwibank 5.80 4.60 ▼4.60 ▼4.74
Kiwibank - Capped - - - -
Kiwibank - Offset 5.65 - - -
Kiwibank Special - 3.85 ▼3.85 ▼3.99
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 6.10 4.89 4.99 -
Resimac 5.30 4.86 4.14 4.19
RESIMAC Special - - - -
SBS Bank 5.79 4.85 5.05 5.49
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 3.85 3.85 3.99
Sovereign 5.80 4.29 4.35 4.55
Sovereign Special - 3.89 3.85 4.05
The Co-operative Bank - Owner Occ 5.65 3.89 3.89 4.05
The Co-operative Bank - Standard 5.65 4.39 4.39 4.55
TSB Bank 5.69 4.45 4.35 4.55
TSB Special - 3.95 3.85 4.05
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.79 4.69 4.79 5.19
Westpac - Offset 5.79 - - -
Westpac Special - 3.85 3.85 4.05
Median 5.80 4.35 4.35 4.19

Last updated: 15 July 2019 9:47am

News Quiz

The maximum remuneration model for Australian life insurance advisers is to be set at what?

Upfront 40% + trail 20%

Upfront 50% + trail 10%

Upfront 50% + trail 20%

Upfront 60% + trail 10%

Upfront 60% + trail 20%


About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
Site by Web Developer and eyelovedesign.com