No good reason for soft dollar commissions: Naylor

We don't accept softdollar incentives at Britannia from providers and were amused at the somewhat surprised reaction from an insurer when we returned their Shadow Shares. I don't think they had planned for this situation!

I know too many advisers who align themselves with providers and enjoy the free junket each year without any meaningful rationale when challenged. Have I missed something here?

Why do cowboys have such a bad reputation. Are they being unfairly maligned?
Advisers could do worse that be thought of as lithe, productive, resourceful & applied individuals, dedicated to delivering their charges at their destination without losses.
Why ape the UK - or Australia? Disclosure is important; not the form of remuneration.

I had a look at the industry in the United States and feel strongly that we have much better life, health and disability products available in NZ.

When I started disclosing commissions I found that people simply don't care how or what we get paid.

If regulation with regard to commissions or incentives really improved things, United States would offer better products than NZ - it doesn't.

This is a non issue.

Come now,Mike, don't be a melancholic academic. Some promotions are a legitimate way to incentivise agents to sell more insurance, grow their client bases and insure more people. Just disclose it.

I challenge either this publication or Mike Naylor as to where the claim that NZ has an International reputation for being "Cow boyish" can be substantiated??

Does Mike Naylor really mean that NZ risks being seen as behaving in a Cow boyish manner because of soft dollar commissions? If that is what he meant, then say it instead of forever throwing out inflammatory remarks aimed at self publicity dressed up as an honest attempt at debate.

I work in this industry and have done for nigh on 30 years, I think that there are many positive aspects of the Industry; I admit there are some I do not care for and wherever possible I do my bit to try to change them. EVERY TIME I see Mike Naylor's name, it is associated with some negative remark about this Industry or the people within in it. It has got to the stage now whenever I see his name I am almost ready to disagree even before I have seen what he has written/claimed this time.

I would agree that soft dollar commissions are likely on there way out, I am reasonably sure the majority of the market had stopped them in the UK 20 plus years ago.

Please, please Mike Naylor stop such self serving aggrandisement.

Well said Brett (and others). This is a non-issue and I am sure the vast majority of our clients themselves would agree. Frankly it's about time Dr Naylor changed his tune and focused his time and energy on tackling the very “real” problem of underinsurance in NZ. Every time he is given airtime by a journalist he gives consumers another reason to “fence sit” on whether they should even approach an insurance adviser in the first place to secure or increase cover. This would seem to be totally counterproductive to what is ultimately at issue here – making sure New Zealanders have adequate cover in place to protect themselves and their loved ones should they suffer a life changing event. Lord knows not enough people in New Zealand have even basic life/income cover at present.

Dr Naylor - Instead of maligning those who are actually out in the field daily trying to protect clients and their families how about presenting a positive spin to the industry for a change? Insurance advisers work with their clients tirelessly. We get to know them often as friends, watch their children grow up and ultimately should tragedy strike (as it does in life) help them secure claim payments from the insurer we placed them with for cover. For many Kiwis with a family to support securing cover can prove to be the single most important thing that they ever do in their lifetimes. Don’t give them pause Dr Naylor to put off making that appointment today. Ultimately someone will pay the price for their indecision if they do delay. Dr Naylor if you are the advocate for the consumer that you make yourself out to be then respectively you need to be looking at the bigger picture here.

In terms of “soft incentives” advisers that are focused only on themselves as opposed to the best interests of their clients ultimately reap the seeds they sow.

I was on a lovely 'junket' to Egypt in 2006. The plane was full with qualifiers from Phillips. In Cairo we couldn't get into a restaurant because of the Phillips junketeers. My plumber went to Brazil with Zip industries last year. Are the trips incentives? Do I care if my builder or plumber was given a junket? No. Do my clients care if I receive one in recognition for that fact that I work hard? No? I think the adjective should be altered to 'token of appreciation' I sincerely hope that advisers always explain the recommendations they have made based on premiums, quality of the product and the internal systems provided by the company that has been recommended. I suggest that a major reason for not recommending some companies has more to do with administrative incompetency as well as product quality but the two often go hand in hand. I usually find that poor quality products come from those few companies that have poor administrative systems. All advisers have access to software that shows premiums for all the major companies.
They simply need to identify the better priced premiums and then make recommendations by referring to research from two independent research companies. This way we are helping our clients to make an informed decision. There's no way we can be incentivised when we demonstrate 100% impartiality. These days most advisers are impartial so I expect we would all be following this system. If I was tied to one company, however, and that company was offering a 'junket' for the top producers I'd be motivated to find more business to write. Those that work the hardest get the goodies. That's how capitalism works. Try the alternative; Pay all advisers a salary and then see who brings in a lot of business and who brings in diddly squat. Some of us like winning and we work hard to achieve. This doesn't mean we recommend products based on which is the best 'junket' to go on. From my experience most of the advisers I talk with are very sincere and indeed have the best interests of their clients in mind when they make recommendations.

oops I forgot to disclose that free lunch I had with my BDM the other day!!!

...and don't forget to disclose the free pens you get either!

.....and what about the profit margin my butcher makes on his steak ! Am I concerned (I hope he is successful so he will stay in business)about that or his competitiveness. Cabinetmakers & joiners, hardware trade customers and medical fraternity and I wonder where academic Sabbaticals sit in the mix of remuneration that is looked sideways at by the broader community... oh that's right they are all about reward earnt for a job well done and personal education & development.

I am a little amused.
The issue is really from what pot the payments come.
When you pay your butcher baker or candlestick maker they tell you the price and you either buy or don't. When you have your wonderful trip and indeed your commission, the person paying has no idea that they are actually paying.
If it doesn't ultimately come from the investors money then where does it come from.
Please don't tell me that the provider pays from it's own funds !

Next time I am prescribed pills by my doctor I am going to insist on a full disclosure statement on the drug company conferences that he has attended...and I'll ask our list MP if he has enjoyed any free scampi dinners...

Its been nice to get debate on this issue. Two points:
1) Has anyone read the Aust "Future of Financial Advice" report - and seen what a regulator thinks of soft commissions? Its on the web.
2) If you went to a doctor and he/she immediately booked you in for an expensive operation, then commented "that's great, you're the tenth person I've booked in this week so I get a free trip to LA from the hospital" - won't you feel uneasy? If you don't give me phone call - I have a beautiful bridge in Brooklyn for sale.

On a serious note - there's a difference between a sales job and professional advice. If your advice is worth paying for, then shouldn't it look and smell as professional as possible?
That said - I agree that insurance needs to be sold, and incentives do help, I just think these are better as openly disclosed % commissions. Soft dollar harms the image of the profession and hurts policy uptake, thus worsening underinsurance.
Within the industry the worst problems tend to occur with banks who impose sales quotas on staff and humiliation on those who miss them.

Why is it that we have to be just like every other country. I get tired with academia saying that we should copy everyone else. What is done overseas is not necessarily BETTER it is DIFFERENT. Perhaps Dr Naylor just wants us to be clones. If the soft dollar is the only reason that an adviser recommends a provider then I would be concerned. I do not believe there is the problem that is perceived.

How about looking into real estate agent commissions?

By International standards we are paid over the odds in NZ by insurance companies. There is no doubt that sales incentives do potentially encourage less than best practice....except of course by those of you that are so outraged by Mike Naylor's comments. We do not have a great reputation and the more we perpetuate and focus on selling as opposed to giving advice we will always be mentioned in the same breath as lawyers and estate agents. Soft dollar incentives are an outrage and are a rod that the companies have created for their own backs. The sooner these are outlawed the better, and yes, it should include that free lunch.

That's your opinion John. Fairly standard worldwide for sales companies to offer overseas conferences and trips as incentives I would have thought. We are commission only salespeople after all even you prefer not to regard yourself as one...

The left hand says I use software to analyze the best possible outcome for my clients.....yet the right hand justifies soft dollar rewards by placing business with company X....somewhat hypocritical don't you think?? Sovereign just launched a new rewards campaign....barbecue,ipad,vouchers or overseas trip anyone....these things just keep coming!!! let the lemmings begin their run yet again...!!