Do trips make a difference?
Forget for a moment what companies say, or confused journalists at The New Zealand Herald, or what regulators believe about soft commissions: what do you think of them?
Wednesday, August 14th 2013, 4:00PM
by Russell Hutchinson
First – quite a few of you go on the trips and like them – and you are just as entitled to play to the current rules of the market as companies are, and take the trips if you see fit.
Second – there was quite a mix of views on display in the comments on articles here on www.goodreturns.co.nz – if you haven’t already then you should check them out. These appear to be mainly supporters, but with a substantial, and vocal, minority against the trips.
Third - Finally we have a very timely little survey from the folks at www.quotemonster.co.nz who kindly gave me permission to cover it here (disclosure: I am in business with Quotemonster). The question was “In general what impact do you think soft commissions have on insurance advice?” As unscientific and non-quantifiable such self-selecting surveys as these are, there is a reasonable split between the answers:
- A huge impact, why else do the insurers offer them? 37%
- Maybe some, but it doesn’t influence most advisers. 52%
- None at all. 10%
Well which is it?
Actually I don’t believe it is a question of which, the answer is: it’s all three. Some advisers love the trips, some feel a little repressed guilt about them – and take pains to disclose them to clients, and others refuse to go.
Who is right?
Probably most of you. It depends what you do. Each of these kinds of adviser can be ‘right’. As the rules stand right now if you adequately disclose, then you are fine. If you decide not to go, you are fine. When the whole thing isn’t fine is when there is a bold promise to clients of a completely unbiased, whole-of-market, non-conflicted type of service and the adviser doesn’t disclose, and then cheerfully places all the business with one insurer for six months to make the trip – completely irrespective of actual client requirements. Not fine at all.
Will soft commissions be taken away – maybe?
If the regulator takes the application of ‘client first’ to the extreme it may be hard to distinguish the conflicts created by soft commissions, from those created by ‘hard’ commission. If they choose to shift the industry away from commissions and incentives as a whole – as they are for investment business in Australia – then it will probably mean a reduction in the availability of advice around insurance for consumers.
Many consumers find it hard to fund $1,000 in professional fees for a service. They will then fall back the vertically integrated single insurer sellers – the banks are one example – and choice will be reduced.
I hope that doesn’t happen.
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