by Susan Edmunds
The report, commissioned by the Financial Services Council (FSC), is already proving extremely divisive, although it is not due to be officially released until next Monday.
AIA and Partners have both handed in their FSC resignations over it.
Good Returns can now reveal some of the key points made by the review.
- It is suggested that advisers disclose their actual commission and make it clear to clients what the premium they pay would be if there was no commission involved.
- A full ban on volume and soft-dollar remuneration is proposed.
- The report suggests a restriction on upfront commission to 50%, on new business only. That compares to up to 200% at present.
- It proposes a full ban on upfront commission on replacement business, and an increase in renewal commission to 20%, but consumers can choose whether to direct that to the adviser or not.
Other changes include adding insurance to KiwiSaver and allowing KiwiSaver members to direct some of their contributions to pay for that.
That is a model that has previously been proposed to make insurance more affordable and tackle New Zealand’s underinsurance problem.
MJW also wants the FMA to become the market regulator for insurers and to encourage insurers to pass on advantageous product enhancements to their older products when they are introduced.
As previously reported on Good Returns, the report suggests an end to override commissions but instead proposes advisers give 5% of their 20% renewal commissions to the entity that would previously have received the override commission.
MJW has been meeting with key industry figures over the past days and is holding events in Auckland and Wellington to discuss the report further, ahead of its official release.
An industry source said insurance advisers should know what changes were being proposed for their industry.
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Or maybe they shopuld be paid nothing, especially since the quality of their advice doesn't meed the code we all live by. Does it match the stated goals, objectives and mandate of their clients? Is it clear and concise? Fit for purpose? Backed by appropriate research?
At least it meets code standard 1.