$2,000 or $5,000?

Would you prefer a benefit of $2,000 or $5,000? (Be warned, a bit of a rant follows!)

As an independent financial adviser, I don’t accept any commissions, including on insurance.

With insurance – which is really the only product that still pays commissions – my preference is to turn them off completely, because it can reduce the premiums by 25-30%.

In my experience, it’s the cleanest way to do it.

Why NOT?

When the insurer lets you, anyway…

We recently started working with a client with existing insurance premiums of $20,000, on a 10% commission (to an adviser they’ve never met, incidentally).

As part of our discovery process, we’ve asked the insurer how we can turn off the commissions.

“Can’t be done. Once the policy is in place, we can’t change the commissions.” (Note their use of the word “can’t” instead of the more accurate “won’t”…)

So instead of turning off the commission and saving our client $5,000, we’re best off accepting the commissions paid by the insurer and then immediately paying the entire amount on to our client*.

Legacy issues, blah, blah, I get it. But gee it’s frustrating! Because while $2,000 is nothing to sneeze at, $5,000 is even better.

A Matter of Attitude

Stepping away from the specifics of this particular case, I’m confronted by just how prevalent this attitude is in the world of the large insurance companies.

My way, or the high way, is a good way of describing it. Combine this attitude with the consequences of decades of underinvestment in administrative competence – and a pre-glasnost approach to feedback and criticism – and you have one of the most frustrating parts of the Australian financial sector.

As the move away from commissions accelerates – and the truly independent part of the advice market grows – this situation is going to become more common.

Why shouldn’t clients and advisers be able to turn off commissions? Why should the administrative burden fall upon the adviser’s office?

I know there are always ‘reasons’. But in my opinion we’re rapidly approaching the point where the excuses simply aren’t good enough.

I think some of these companies still haven’t realised we’re in the age of CLIENT best interests – not theirs.

I look forward to them joining us in this brave new world!

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