Renewals Underpin Fidelity Life Adviser Commission Model

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Advisers working with Fidelity Life will soon see a portion of their remuneration linked to the number of clients who renew their policies. In addition, advisers will enjoy a top initial commission rate of 240%.

The change is all down to “sustainability” of the business, says Adrian Riminton, the firm’s Chief Distribution Officer (who will start his new role as the insurer’s Chief Risk Officer on 1 April – see our report here).

Other changes to be introduced include the option for Fidelity Life’s top advisers to be paid under a ‘commission upon submission’ model. Something the firm says is unique in the market.

Central to the firm’s new remuneration model is a scorecard system that will help advisers calculate the value of their initial commission. It comprises three elements:

  • Persistency (60%)
  • Conversion rate (10%)
  • In-force policies (30%)

While the scorecard system offers a top commission rate of 240%, could the new system reduce what some advisers earn?

“It depends very much on the individual adviser,” says Riminton. “We haven’t gone into this model thinking that we have a plan to spend more on commissions or less on commissions, we want a sustainable model.

Adrian Riminton, Chief Distribution Officer and joint acting CEO at Fidelity Life
Adrian Riminton, Fidelity Life’s Chief Distribution Officer is focusing on business sustainability.

“Paying a higher level of commissions to an adviser with poor persistency, for example, is not sustainable.

“What we would expect to see is a greater proportion of business being written by those advisers who have strong performance in terms of their persistency and the other metrics – but the model is heavily weighted to persistency.”

Riminton says persistency is a core measure of sustainability from his point of view, “…a good lead indicator for customer outcomes”.

“It’s not perfect,” he says. “And essentially what this process is doing is putting a spotlight on those elements so advisers can look at how they can improve their performance with customers. How they can improve customer outcomes and in the process have a better outcome for their business – which is a key component of the whole programme.”

Advanced payments

Riminton says paying advisers a portion of their remuneration in advance of policy acceptance will help with their cashflow. The company estimates half its advisers will be in line to apply for upfront payments of 30% of their total initial commission.

Download Fidelity Life's new commission scorecard.
Download Fidelity Life’s new commission scorecard.

“It’s come about because common feedback from advisers is around two things. One is the cashflow implications for the business in terms of identifying customers, meeting them, taking them through the process, getting the policy submitted into us, and that process is expensive – it is a cashflow drain to them,” says Riminton.

“Advisers are now facing increased regulatory costs, and a way to respond to that is to make a portion of that commission available at the time a policy is submitted.

“It is only available to those advisers who qualify for the two top tiers of our four-tier commission model. And therefore there is a strong link to the performance of the adviser, and [their ability] to meet any commitments to clawbacks.”

Another change will see the simplification of ongoing commission for new business, with renewal and service commissions combined into one rate of 10% and referred to as ‘servicing commission’.

Riminton says: “This evolution of our commission model is just one aspect of Fidelity Life’s broader transformation and is designed to help both advisers and ourselves secure a more sustainable future. We know commissions can be complicated, and we’ve redesigned our model to be as transparent and sustainable as possible.”

Fidelity Life is also to launch professional development resources and a new online dashboard for advisers (see the video below).