New business model needed: FSC

Chief executive Peter Neilson said 60% of New Zealanders did not get enough financial advice because they could not afford to pay and adviser business models were not set up to cater for them. 

“It’s one of the issues we haven’t got an answer for. There isn’t a business model for general advice that is not related to commission,” he said.

The insurance industry’s commission structure was out-of-date, he said. “[It is] a legacy of when most New Zealand life insurance policies were mainly whole-of-life, endowment policies. Most life policies sold today in New Zealand are single-year renewable contracts but the legacy of high upfront commission remains.”

In Australia, the Trowbridge Report, funded by the Australian Financial Services Council and the Australian Association of Financial Advisers, has proposed a cap on upfront insurance policy commissions and flat commission structures.