The issue of adviser commission claw-backs was raised with the Minister of Commerce and Consumer Affairs Kris Faafoi during a webinar hosted by Financial Advice New Zealand this week.
The organisation’s CEO Katrina Shanks is concerned clients will cancel policies to save money – due to the economic impact of Covid-19 – and insurance companies will claw-back payments in the months after government wage subsidies have ended. Leaving advisers without a safety net.
While not addressing the issue directly, Faafoi told an online audience of 250 advisers and industry stakeholders the government is focusing on the issues immediately before it.
“I think the second wave [of financial assistance] – which we are looking at starting in a month’s time – will start us looking at some of those sectors that are facing increased time, or long periods of time, where they will continue to struggle,” said Minister Faafoi.
“What I think the second wave will look like is direct assistance for those New Zealanders who can’t meet their needs above and beyond the likes of paying the mortgage, so we are talking about utility bills etc.
The revenue streams of financial advisers have a lag, unlike nearly everybody else…
“I think in a month or two’s time we’ll start to see how tough it is for the average family.”
Speaking after Tuesday’s webinar ended, Shanks said clients cancelling their policies – and possibly triggering a commission claw-back – doesn’t mean they didn’t get the right advice, but more likely the client’s circumstances have significantly changed.
“The revenue streams of financial advisers have a lag, unlike nearly everybody else, and the issue is that government relief packages will come to an end just when financial advisers need them – more than ever. This is the area that I am most concerned about.”
Shanks says among those with the highest risk of seeing their income drop are advisers who are new to the industry and who do not have long trails or lots of new clients.
“Those advisers are at the high-risk end because they haven’t had the time to develop their businesses in a more sustainable manner.”
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