A different approach to commissions?
Recent developments across the Tasman have highlighted the critical point that there can be very different solutions adopted by governments when addressing how to reconcile the issue of life insurance commissions and conflicted advice while still serving the best interests of the consumer.
Many riskinfo readers will by now be aware that the New Zealand Government has decided to retain life insurance commissions in their current form, including upfront commissions that can reach up to 230%.
Like Australia, the New Zealand Government and its regulatory body has conducted studies and consulted with the financial services sector. Unlike Australia, the outcome of the NZ industry review has revealed that churning is not a deeply ingrained and widespread issue (see: NZ Regulator Claims Churn a Minor Problem).
Bear in mind that New Zealand’s historical, structural and regulatory environment differs from that of Australia’s, and just because the NZ regulator has found that churning has no substantial case to answer, that doesn’t automatically mean that the same applies within Australia. One of the most frustrating issues, however, is that within Australia, we still don’t know the extent to which churning is an issue!
This sense of frustration felt by so many advisers in Australia (or at least by so many riskinfo readers) is palpable. It is disappointing that a government should propose legislative changes that so directly impact the way a small business person is remunerated without first having more diligently explored the extent to which the purported issue is actually an issue.
The desired outcome, on which all stakeholders agree, is for as many Australians as possible to receive quality, unconflicted advice on life insurance solutions that will serve their best interests. To what extent is halving upfront commissions from 120% to 60% going to achieve this common goal?
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