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Faafoi says some commissions will be banned

Commerce Minister Kris Faafoi tells advisers there won't be a ban on commissions, but some will go. 

Sunday, August 25th 2019, 8:51PM 10 Comments

Kris Faafoi

Faafoi, speaking at the Financial Advice New Zealand conference, provided delegates with an update on work currently being done by the government.

The good news for many advisers is that there are no proposals for a total commission ban.

"I'm not considering a total ban on commissions," he said.

"I want to recognise the importance of commissions for your remuneration and in turn for the provision and availability of sound financial advice to Kiwis."

Faafoi acknowledged, "financial advisers play an important role in helping New Zealanders make wise financial decisions and I want to ensure that role is strengthened rather than weakened."

However, the government is currently considering some changes to the "more problematic types of incentives such as target based incentives and soft commissions."

He said any incentives need to contribute to good customer outcomes.

One of the big priorities of the proposed changed are that banks and insurance companies are treating customers fairly. Also the aim of any changes is to make sure that the products and services offered provide good customer outcomes through the "full life cycle" of the product.

Faafoi acknowledged there is concern in the industry about the pace of change, however he wants to "move quickly to achieve good customer outcomes."

In his prerecorded speech the minister also referred to the long-overdue review of the Insurance Law Contracts legislation and he encouraged advisers to get involved in the current review of default KiwiSaver schemes.

He would like to see more investors engage with their KiwiSaver accounts and more advisers working in this area.

"Getting good advice at right time can make big difference," he said.

Tags: Commission insurance insurance law KiwiSaver Kris Faafoi soft commission

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Comments from our readers

On 26 August 2019 at 1:30 pm RWAW said:
Pre recorded? Does that mean the minister didn't actually attend?
On 26 August 2019 at 3:19 pm Eyeinthesky said:
"good customer outcomes"

....just thinking off the cuff, this type of Orwellian Newspeak, makes me, well, want to puke.

The more this term gets bandied around in the public arena, the more unhappy 'customers' or rather 'clients' are likely to be, as their perception of the meaning of this term is going to be vastly different to the intended meaning by the creator of it.

And we advisers, will pay the price. As always.
On 26 August 2019 at 7:17 pm John Milner said:
RWAW like me, sounds like you didn’t attend the conference. This was possibly the first time in my career. I would suggest you refrain from throwing stones as it would seem you’re in the same boat as the Minister. (My assumption only as I couldn’t make it).

Eyeinthesky you are the epitome of why well need changes. What an archaic attitude. What’s it like there in the 80’s. Upskill, update and get with the program. To be considered a professional we need to start acting as professionals and embrace change. I’m glad to say as a CFP and CLU, most mortgage and insurance advisors I mix with are adapting and working hard for a “good client outcome”.
On 26 August 2019 at 8:51 pm RWAW said:
Hi John, I was just after an answer as to whether or not the Minister attended. Cheers Rohan Welsh
P.S. Dependant on the answer I wont be throwing stones they will be boulders.
On 26 August 2019 at 11:00 pm Stephen O'Connor said:
The Minister was unable to attend due to a family bereavement.
On 27 August 2019 at 9:54 am RWAW said:
Thank you Stephen.
Cheers, Rohan
On 27 August 2019 at 10:59 am Eyeinthesky said:
@John Milner...
I wonder if you were having a bad day with unnecessary and unjustified personal attacks directed at both myself and RWAW it seems.

RWAW was asking a simple question.

My comment was that the public have a different understanding of what a 'good customer outcome' is compared to the government, regulators and us as advisers.

In your response you described my attitudes as archaic. I have been providing fee based comprehensive planning services (As in fees directly paid by clients independent of the need for commissions or fees from FUM, for over 20 years) There were not many of us doing that then, or now.

Could I suggest that in future, John, you take some deep breaths prior to coming in contact with a keyboard?
On 29 August 2019 at 8:47 am Tash said:
John Milner
Please define specifically what 'good customer outcome' means. I have asked several people and no one knows.

Without clear legal definition of the concept it's entirely subjective, dependent on expectations and largely determined by ignorance and the benefit of hindsight. Wholly inappropriaste for determining an adviser's advice.

What do YOU mean by 'good customer outcomes'???
On 29 August 2019 at 1:18 pm Murray Weatherston said:
I share Tash's frustration about the meaning of "good customer outcome".

I reckon it is open to multiple interpretations.

The only way to get clarity is to see how people use it now.

As a contribution, the Combined Industry Forum (CIF) of Aussie Mortgage brkers adopted this definition

a good customer outcome is when “the customer has obtained a loan which is appropriate (in terms of size and structure), is affordable, applied for in a compliant manner and meets the customer’s set of objectives at the time of seeking the loan.”
On 29 August 2019 at 9:32 pm JPHale said:
I agree with the term good customer outcomes being problematic, I used ideal in my recent GR post to stay away from it a little.

Though I stand by my comments then as nothing has changed.

"So what is an ideal insurance client outcome?

I can’t tell you, no one can.

But I would suggest it fits somewhere in the range of; no claim paid, because there wasn’t a need to claim, and a claim has been successfully paid, with the caveat of not having the client in a position, if they had better information from the adviser, they could have had a better claim, and bracketed with the claim was paid with a minimum of delay’s, stress, additional information, and disclosure issues.

And that my friends is one hell of a mouthful to make sure we have covered off. Because the expectations of us are from a position of personal expectation, not industry understanding.

My final thought, nature and scope limitation is not going to help here, as has been suggested (edit) by some, because this is about the advice that is included in nature and scope, if it weren’t it wouldn’t be a problem."

Tash's comment about this being measured with hindsight is exactly how we are going to find ourselves and why my comments give such wide scope to trip us up.

However, the advisers who run a reasonable operation, that uses needs analysis, uses research, documents and presents the advice and the decisions in the process, and engages in review and upskilling, will probably do all right and avoid most of the pitfalls without complaint or judicial process.

It will be when it goes wrong, and horribly wrong for advisers who aren't running a professional operation that these tests of advice will be applied.

It will be with claims that have turned to custard for some very obvious adviser reasons.

So while we can gnash our teeth at the term, the majority here discussing it probably have little to worry about on this aspect. It is the ones trying to bastardise the process to their advantage, as we see everywhere, that will cop it, and so they should.

In the way this has been discussed we are assuming that the FMA will have sufficient resources to run down the minor issues that advisers current manage without the need of DRS or FMA involvement, unlike they have presently.

New Zealand government had demonstrated time and time again that it has great ideas but little resource or ability to follow it through. Unless it impacts tax or is creating significant systemic harm in some way.

We still don't have proof of actual systemic harm in the insurance advice space, it's there with some individuals, but not systemically with advisers as a whole. And this should be comforting that advisers as a majority are trying to do the right thing.

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AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - ▼6.99 ▼6.49 ▼6.29
ASB Bank 8.64 7.14 6.75 6.39
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BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
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China Construction Bank Special - - - -
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First Credit Union Special - 7.45 7.35 -
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