Advisers ask for fee option

Advisers are interested in the option of offering a fee-based service to clients they place with New Zeaqland Income Guarantee (NZIG).

Wednesday, November 4th 2015, 6:00AM

by Susan Edmunds

NZIG is a guaranteed variable annuity product to be offered by Ralph Stewart’s Retirement Income Group (RIG).

RIG is conducting adviser roadshows around the country and is in the South Island at the moment.

Stewart said it would talk to about 300 advisers in total.

He said RIG was in the process of signing advisers up and going through credit checks and AML work.

RIG will pay a base trail commission of 20 basis points to advisers.

On top of that, the adviser has the option of asking the client to agree to pay another 50bps and also the option of a 1 per cent upfront fee.

The minimum investment is $100,000. On that investment, the most the adviser could earn is $1000 upfront and $700 commission in the first year.

It is an income-paying product so the balance will decline over the term of the investment, reducing the amount of commission the adviser earns.

Stewart said advisers could choose to rebate the 20bps they would get in RIG commission to the client, and charge their own fee.

“We have to cater for many approaches. We have only done two roadshows so far and at both presentations there have been several questions about whether they could rebate commissions. The fee model is getting traction.”

Adviser Murray Weatherston said the commission structure sounded reasonable. He said it was better to compare the product to a mortgage than an investment advice situation. “The difference between this and an investment product is that the investor usually earns positive cashflow which enables the fee to be paid.”

But he said some would question what ongoing advice an adviser might offer to justify the trail income. “But the core 20bps doesn’t sound to me to be excessive and the rest is negotiated between the adviser and the client anyway.”

Most banks charge upfront commissions of 0.85% or 0.95%, with no trail.

KiwiSaver advisers get a similar amount to the RIG trail – about 25 bps.

RIG will be in Auckland on Monday.

Tags: annuities Ralph Stewart