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Anti-commission advocate appointed to FMA board

Two new appointments have been made to the Financial Markets Authority board; One is opposes commission payments and the other a director who has polarised people.

Friday, September 6th 2019, 11:34AM 10 Comments

Sue Chetwin

Consumer NZ chief executive Sue Chetwin and Tower chairman Michael Stiassny have been appointed to the FMA board.

“Sue’s considerable experience as a consumer advocate and journalist will bring a strong consumer perspective to the FMA, and one that is independent from the industry. She is currently the chief executive of Consumer NZ, holds governance roles with consumer-focussed organisations, and worked as a journalist for more than 25 years,” Commerce Minister Kris Faafoi said.

“The combination of her skills and experience will be highly beneficial to the FMA, particularly as its mandate evolves to encompass more consumer-focussed regulation.

In Chetwin's time at Consumer NZ she has strongly advocated against commission payments, particularly for life insurance.

Earlier this year she was quoted as saying: "Commission-based selling comes with a huge risk the broker will put their earnings ahead of what's right for their customer."

"The results of our research suggest selling insurance this way is leading to poorer outcomes for consumers."

Stiassny has a colourful career including some controversial directorships and handling many company insolvencies.

“Michael Stiassny’s wealth of governance and professional experience will also provide considerable value to the FMA." the minister said in a release.

“Michael is an experienced director who has held a number of public and private directorships for many years, and specialises in strategic advice and dispute resolution. Before moving into leadership and governance roles, he worked as a senior corporate governance and insolvency practitioner.”

Both appointments are for three-year terms.

Stiassny was previously chairman of Vector and NZTA.

Chetwin is also a director of the Banking Ombudsman Scheme.

Tags: FMA Kris Faafoi people

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Comments from our readers

On 10 September 2019 at 6:21 pm JPHale said:
Ahh Sue, while I understand the reasons for Sue’s appointment, the stance on commission is one that has not borne any fruit from the research conducted here or overseas.

Yes, we can all agree that there have been cases where commission drivers have been a problem, but this is individuals and they have neither lasted very long nor have they been systemic in consumer harm.

When we look at claim issues where the claim wasn't paid at 4-7% of claims, while this number seems to be high it comes back to two reasons.

The claim expected was not provisioned under the policy, or the client didn't disclose what was required. Neither has any direct link to commission, as the advice from other forms of distribution have the exact same issues.

I'm still yet to hear why a bank provided a limited trauma cover to a client vs a comprehensive one.

The later was 8% more expensive or alternatively would have paid $92,000 vs $100,000 on the basic product, yet the client could claim the comprehensive product but not on the essential one. Commission had 0 impact on this transaction. It was the quality of the advice, understanding of the client, but more importantly the process around this that let it happen, not the commission.

Sue has had a long held view that advisers are bad and commission is evil, I hope that the board is clear in her skewed and biased motives when listening to her view. Because it is not one that is healthy for the advice market,

It's not how we’re paid that matters it's how we advise, and client's with choice on how we are remunerated consistently choose commission.

Consumers latest survey released to members was interesting to review, given the focus on the adviser aspects were about commission disclosure and how many times an adviser had suggested change, yet for the other distribution models no questions about incentives for sale or the number of times a client has been asked to change. So there's going to be no surprise to see more adviser bashing coming from consumer with their next report.

There is a clear bias against advisers and advice, and we advisers know clients come to us for advice because they want a professional opinion, well mine do.

So while the political optics in this will look good externally, it is likely we will see the stifling impact from this appointment that directly impacts consumers in ways that are completely unintended, lower quality advice and poorer client outcomes.

The unfortunate reality is we have very little input as practicing advisers in the governance of our industry.

Outside the FSLAA and the Code the rest of the changes happening feel a lot like being a mushroom.
On 11 September 2019 at 11:59 am RS said:
As a former journalist, Sue no doubt spent a lot of her career paying union dues, and is no doubt of the view that we should all be paid on inputs not quality of outputs.

She hasn't seemed to twig that billing clients directly for insurance advice in no way whatsoever leads to better client outcomes-quite the reverse-were that to become the norm, in lieu of evil commission, within less than a generation half the insured population will cease to be insured at all.

I'm sure you get paid for what you do, leave me to that privilege too, thanks.
On 12 September 2019 at 3:18 pm all hat, no cattle said:
a friend of mine paraphrased the great Winston Churchill thus regarding commission:

"To paraphrase Winston Churchill: It’s the worst form of remuneration… except all of the others."
On 13 September 2019 at 7:56 am Pragmatic said:
Whilst I don't want this to be a personal attack on anyone, the reality is that most people who haven't worked in the financial services industry remain unaware of how the billing mechanism works.

Commissions v fees is a dispute over the payment mechanism, and fails to miss the point. The remedy to solve the real issue of transparency is full disclosure. I'm not talking about obscure references being buried in documents that never get read, but real numbers of the amounts to be paid attached to a SOA (or equivalent). That enables the consumer to make an informed buying decision at the time of purchase, knowing the amount that the adviser will receive as payment.
On 13 September 2019 at 9:23 am Macman said:
JP I wonder if she has Insurance herself and if she bought direct or has an adviser ? Maybe you should contact her and offer to go through the advice process...She might learn a thing or two
On 16 September 2019 at 10:46 pm seandnz said:
Why would the FMA appoint someone who already has a pre-disposition to adviser remuneration by way of commission?

How is the FMA supposed to improve outcomes for consumers with a one-sided approach to commissions, surely an appointment of someone who is pro-commission, would bring some balance to the argument.

In my opinion, a commission is just the same as Salary and Wages; it's all income called different names. Commissions these days are effectively microloans to help an adviser build their business, remember that the adviser has a responsibility period for two years

To say that advisers who are influenced by commission may carry some weight, but what business owner does not consider profit when running a business. Retailers increase the cost of their goods to sell to the consumer because they need to make more profit, so how is this different?

It's important to remember that advisers are business owners who also have costs, just like retailers. There are staff wages, insurance premiums, vehicles, advertising, compliance costs, professional memberships etc.

No one want's to pay for anything, including insurance, so who is going to pay to get advice before they buy insurance?

It concerns me that if consumers bypass the professional advice process before they buy insurance, the number of claims declined will skyrocket, and most likely from non-disclosure.

Let's face it, right now, getting advice and service from an adviser is the best way to get the right insurance cover. Commissions make it easy for the consumer to get that right advice and service without having to pay upfront fees.

You cannot legislate ethics; there are always going to be business owners who put profit first regardless of industry.

Finally, I would like to ask or even challenge the FMA to release their research findings and not just make statements. Surely if the FMA wants to improve consumer outcomes, sharing the research data with advisers will be a good thing.
On 17 September 2019 at 10:48 am perryb said:
So does that mean ALL commission based businesses should move to fee based ie real estate, car sales, if not then it is purely an attack on insurance brokers P Bell
On 17 September 2019 at 11:12 am Bikedude said:
Seandnz, right on the money. Im gobsmacked that she should be recruited to the FMAS with her clearly biased views. Will there be an adviser recruited to balance out that view.
There was a very good question asked about where she buys her insurance! Point well made. It never ceases to amaze me that people who have only ever been on a wage or salary have such a dislike to commission, without even having a basic understanding of what it is. Sue, its income to a business, not an advisers wage. Big, no, huge difference. Only a small part of that will make it to an advisers pocket, and then he still has a responsibility for two years. How would you feel if your employer decided to have your salary on a two year call back in case he didnt like the work you did 18 months ago? Do your self a favour and get an education about commission by talking to adviser s before you make a judgement call. Anything else is just ignorance and arrogance.
On 17 September 2019 at 4:23 pm w k said:
hahaha i think we've got a bunch of "brain surgeons" working to overhaul the car engine. just my thoughts.
On 26 September 2019 at 2:59 pm 40 years on said:
the bit they seem to miss , is if i mis-sell or over sell, the client will stop paying and the remuneration i received within a 12 and 24 month period is withdrawn.

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