Asteron increases commission

Who cares about commission levels if we are to do what is right for our CLIENTS (In terms of the FAA)?

It is Superior and un-confusing products that we (and our clients) need!

Commission is vital to creating a vibrant adviser business. However they need to cut year one commission and increase ongoing trail commission in subsequent years - and tie it to on-going client service. This way advisers will have to ensure they provide good service so clients stay with them.

Aren't you running a business Andy re increase in commission revenue? Independent research does place Asteron at or near the top, especially their "Loss of Earnings" definition on their DI - a superior product with "un-confusing" definitions!

Mike, they also provide a choice for ongoing renewal commissions.

...and no, I do not work for Asteron, I'm a non-aligned adviser.

This is exactly why commissions need to be stripped out of insurance products. Mike N, how can you "increase ongoing trail commission....and tie it to on-going client service"? If there is a better product available elsewhere that would provide tangibly better benefits for the client, and they are capable of switching policies, shouldn't that be the over-riding factor? Make the client pay their fee upfront - if they then decide to switch policies/advisers, they can do so fully aware of the cost (both the new and previous fee) they are incurring to do it. That in itself could be a reasonably deterrent to churn, the client would have to be pretty convinced that the new adviser/policy has genuine value to offer over their existing situation.

"This is exactly why commissions need to be stripped out of insurance products".
Yes, Anon, but only if you want less product to be sold or you want to work in a bank, on salary, selling insurance.

Imagine for a minute a client who has paid a fee to have cover in place and then finds a better cover. This could be for a number of reasons such as having a broker who couldn't place business with the new insurer, whose product was superior or the broker getting a new agency with a company that offers better products. If he wasn't in a position to pay another fee he would be disadvantaged.

For a number of years I, and others, have tried to promote the following idea. Maybe now is the time for companies and/or regulators to consider it.

If you replace an existing policy in the interests of the client you would receive 20% level commission each month on the amount of premium being replaced. If the new premium exceeded the old one, you could elect to take upfront on the increase or level, your choice.

If the old premium was $200 per month and the new premium $240, you would be paid $40 per month (no claw back)and the balance at upfront or level whichever you prefer.

If the new premium was less than the old one, you would just receive 20% each month as each premium was paid.

If an adviser knowingly replaced a policy, but took upfront commission and didn't notify the new insurer, they would be banned from the industry and removed as an Authorised or Registered Financial Adviser.

With a new rating agency entering the marketplace we may see more policies being replaced as a result of their research. If this proves to be the case then a change as mentioned above may be one way of confirming that business is being replaced for the right reasons.

(Please note that these views are my own and not to be taken as the views of the two Professional Bodies I belong too nor the Ginger Group, of which I am also a member).

Ron

If I buy a tv, and a better tv comes on the market, I can decide to upgrade (and pay the additional cost), or stick with a slightly inferior product that continues to meet most of my needs. The fee is upfront and transparent and I am able to make that choice fully aware of the costs.

If the guy in the store (who could earn a sales bonus, but more than likely on sales volume, not on sales of one specific brand) can convince me that the new tv is actually considerably superior than the existing tv (that continues to work perfectly fine to the specifications I was initially happy with) and will give me real benefits that I actually WANT, then I'll more than likely spend more money to get the additional benefits the new tv offers.

Likewise, any number of other products and services. If I'm with a bank that has slightly higher interest rates and fees, but I like their on-line solution and the branch staff are friendly, then I may decide to stay where I am, even though another bank may actually be able to demonstrate tangible savings (or even better terms and conditions).

It's called customer choice. And it's quite often not rational, which is why many people have products and services that may not be the best for their needs. But here's the thing, they are HAPPY with their choice, even if they know they could possibly be getting a better deal elsewhere.

But in making that choice a customer/client should be able to make a fully informed decision knowing full well the motivations of the person selling it to them and what they are set to gain from making that sale.

Stripping commission out of financial products takes away any possible financial bias. I would be happy to pay an adviser a fee as it then puts the onus on them to make sure the product they are recommending is the best one for me.

The introduction of an industry-wide, mandatory fixed commission rate for every product would do the same.

But it would only work if we also ban "soft commissions" and other non-financial incentives.

You want to know why there is an under-insurance issue in NZ? A good deal of people have a lack of trust in advisers who they believe are driven by self-interest (just like real estate agents, but at least their fees are transparent and a client has an opportunity to negotiate a better deal). Also, the products and processes are so complicated that people just can't be bothered trying (and are often scared their future claims won't be paid due to non-disclosure). Not to mention the fact they can't be bothered with the idea that the adviser will be back in a year or two to make them go through the whole sordid process again in the guise of a "better deal".

There are several issues facing the industry some of which are unique to our times.
Firstly there are new regulations requiring all advisers to comply with.
There is an aging adviser force who are resisting any change in the way they have conducted business.
Advisers who have been in the industry for a lengthy time and have a sizeable client base are not looking to find new clients. Many are simply comfortable with their renewals.
Overall the insurance companies no longer recruit and train new advisers.
Very little by way of office and administration support is provided. Higher commissions and bonuses were meant to offset those costs however they are viewed as additional income for improved lifestyle.
One impact is that the numbers of new advisers entering the industry are low. In the past it was that new entrant who looked for new clients...especially those prospects who did not have any cover or an active broker.
We have an underinsured population and a seriously underinsured small business community.
Insurance companies are fighting for more business by improving their offerings for the benefit of the buying public.They are increasing the remuneration paid to advisers hoping that will bring in more business.
The survival rate for a new entrant has never been good in the past....mainly due to poor selection of the candidate.The survival rate today is still poorer than it could be however by stripping out financial support structures would ultimately destroy the agency force as we know it within a few years.
Clients need good advise to make the right choice of cover.They need to trust someone when making those decisions. They need an advocate at claim time. In the end the premiums they pay buys piece of mind.
A good adviser is essential to the distribution system we have come to rely on. Advisers are the lifeblood for most insurance providers and absolutely essential if new families and businesses are to be protected against financial hardships because of adverse events.Much more can be said to complicate an already complex world of insurance.
WHAT ALL THIS MEANS IS THAT WE ARE LOOKING AT HUGE OPPORTUNITIES

Anon- Do you really think charging a fee creates any less bias than receiving a commission? You're dreaming if you are.

After reading all this hot air, no wonder we can't get new blood into the industry. Pull together boys, not against each other.

Ray, maybe not but at least a fee is obvious and upfront and removes any hidden incentive/bias to promote one product over another. If the Adviser gets paid the same regardless of the product they recommend, then the chances are better that they'll actually be recommending the best product they have access to. Like I say though, that would only work if you also remove "soft commissions" such as overseas conferences, rugby tickets, etc. At the end of the day if an Adviser is truly offering independent and unbiased advice that is in the best interests of their client, they should be paid by the client, NOT the product manufacturers.