Yesterday the company announced sweeping changes to its commission structures which effectively kills off any insurance dealer group which bases its model on override commissions.
Instead the money will go to advisers and be paid to them based on good customer outcomes.
Partners Life deserves plaudits for listening to the regulator and making changes to its business to address perceived issues around conflicts of interest.
The Financial Markets Authority is bound to be chipper that commission is being paid on customer outcomes.
How these will be measured and monitored is still a bit of a work in progress, but it's a step in the right direction.
A shake up to the dealer group market is a good thing. Many of the groups have been changing over the years and new models have evolved. We captured this in the most recent issue of ASSET Magazine (get your copy here).
However, the writing had been on the wall for business models that relied on override commissions. For some time now life insurers had complained the millions of dollars they paid to groups was not being spent as they wanted.
The last time something like this happened was way back when Tower still had a life insurance business. It's decision to get rid of overrides caused much gritting of teeth, especially at Kepa.
This latest decision is bound to have impact as Partners has such a strong position in new business sales.
Now Partners have decided to pay it to the financial advice providers (FAPs) actually giving the advice to customers which is the right thing to do.
That way advisers can spend the money on their individual professional development and business needs.
This is bound to lead to a change of thinking at Newpark which had been encouraging its members to establish their own FAPs.
The advisers who have their own FAPs will be paid override commission rather than having to rely on dealer groups.
With these changes dealer groups will need to demonstrate they can provide services to members, which they are prepared to pay for.
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MySolutions has held the belief since inception, that the best adviser businesses are owned and run by advisers.
We have been assisting advisers for a year to become their own licence holders, as that is the best business model we believe in for independent advice for the future.
We staked our position very early, and have maintained the belief that the mySolutions group should not be a FAP – even with this announcement – and have been reinvesting over-ride into the actual practices in a large variety of ways for some time.
We would go so far as to say, that a dealer group which is itself a FAP and is receiving commissions from suppliers for production is heavily conflicted.
We wonder how a dealer group ‘FAP’ being reliant upon volume payments as a core part of its business model can also maintain genuine objectivity when it comes to upholding behavioural and practice standards.
If a group is ‘policing’ members as a FAP should. Then don’t they stand to cut out their own revenue when suspending or removing members?
That seems to be a rather large conflict to be resolved, and one which is entirely avoidable.
We believe it’s best for an adviser business to be its own FAP, and to work with a supportive group that helps foster their own brand, creates greater business value, and leaves them to make their own choices on which business lines they wish to operate in and which suppliers they wish to support.