Updated with comments from the FMA.
Partners Life wants to show that financial advisers are the “good guys” and that industry regulator the FMA is mistaken when it comes to its concerns about upfront commission payments.
The regulator says insurance remuneration structures risk conflicts of interest issues that may harm consumers.
An FMA report claims that current remuneration structures used by insurance providers could negatively affect the overall price, and therefore accessibility, of life insurance to New Zealanders.
To counter this, Partners Life has designed what it calls a Customer Outcomes Matrix to monitor the performance of financial advisers selling its products.
Speaking during a Partners Life webinar, the company’s Managing Director Naomi Ballantyne, told advisers they should support the firm’s advice monitoring initiative and have nothing to fear.
“We are doing this because we are trying to protect upfront commission levels against regulatory changes,” she said.
“We are trying to stop regulators from believing that upfront commission levels, as they are, is a bad thing. So we want to prove that you can use upfront commission to incentivise good advice, because that’s what they (FMA) said upfront commissions don’t incentivise.
“We don’t want to step into advice auditing – we shouldn’t be in the middle of the advice process – but we are required to demonstrate that our customers had advice.”
To do this, Partners Life’s clients are being asked to complete an online survey, or answer questions by phone, about their experience with their financial adviser.
We are doing this because we are trying to protect upfront commission levels…
Ballantyne says the questions it might ask clients include; “did you get advice?” and “were you given advice about this?”. Not, “what was that advice?’.
“It should give us for the first time as an industry, proof,” says Ballantyne. “Proof to the regulator that advisers are the good guys and their customers say that they are.
“So you shouldn’t be scared of that, you should help us with this. Because that is what this will do. It will prove that advisers are good guys and the way in which they are paid is not making them bad guys.”
Concern
A spokesperson for the FMA says it remains concerned about high upfront commissions being paid to advisers.
“We have made our concerns and expectations clear about the issues involved with the conflicts of interest that are driven by high upfront commissions and incentive structures focused on sales volumes,” says the spokesperson.
“The FMA is also aware of the new commission structure implemented by Partners Life but we don’t have enough detail at this stage to comment fully.
“We welcome structures that are designed to recognise and prioritise good standards of customer care. We will continue to engage with the industry to see how these initiatives may work in practice.”