New Zealand advisers won't dodge bullet: Rickerby
New Zealand financial advisers should be prepared for commission cuts such as those happening in Australia, one adviser who works on both sides of the Tasman says.
Tuesday, May 26th 2015, 6:00AM 
6 Comments
by Susan Edmunds
AMP, Centrepoint Alliance and Fortnum Financial Advisers have all changed their commission models after the Trowbridge Report slammed Australian risk advisers' remuneration structures, which it said were leading to conflicts of interest.
Fortnum last week announced it would adopt a fee-for-service model in what it said was an effort to “self-regulate and ward off further legislative attack”.
Allan Rickerby, of Super Advice Services, said changes would have to happen in New Zealand, too. “The reality is it is going to change. It is too high. We will see it happening over here. Unfortunately some of the aggregator businesses only get paid for new business and they encourage rewriting the business after a couple of years. But it is unfair on the insurer and everyone else.”
Fortnum said the insurers were not blameless and that most knew who the advisers were who were “churning” business.
Rickerby said the same thing could be said in New Zealand. He said insurers turned a blind eye until their own book started being rewritten.
But David Whyte, former AIA general manager and managing director of AIG Life in Australia, said there had been no decisive data delivered to show that churn was a problem in Australia or New Zealand.
He said the number of files reviewed for the Trowbridge Report was too small to draw any decisive conclusions.
“Without empirical evidence on churning you’re left with nothing more than speculation assertions that commission creations conflicts of interest. I would suggest replacement business figures need more robust attention.”
He said companies’ growth rates needed to be compared to the industry average and investigations made to determine how much of the difference was replacement business.
He said questions also needed to be asked about how many applications with replacement of business forms attached were declined because the reasons given for a replacement were inappropriate.
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Comments from our readers
I dont wish to debate the presence of churn here. Seems its a bit like driving ability - if I do it, it's replacement and is justified. If you do it, it's churn!
The key in the above article lies in the aggregation groups. Maybe those who clip the ticket need to be the most afraid. They may or may not add substantial value for their members, but the insurers, I suspect, will look there first.
If we are doing our job right and selling the right product there should really be no need to change life policies to "keep it up to date" that's an excuse. Do it right first time.
I have a SmartLife policy I took in 2005, level premiums and it has all the new benefits and features of the new product I sell today and it's cheaper than stepped premiums today.
It's like buying a car 10 years ago and each year they roll the brand new model into my garage for no extra cost.
Terrible business model if you want to sell upgrades every two years because it's obsolete, Dirty Harry.
Now Trauma and IP that's where carriers create churn around and guess what the life just follows no matter how relevant it is.
Carriers need to do a better job at packaging and managing their guarantees to mitigate the need to change.
Carriers know who the offenders are and then create the environment to encourage it.
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