Is this the end for commission? Is this the end for commission? The move towards fee-based The move towards fee-based

adviceadvice

LIMRA Webinar, 22 June 2011LIMRA Webinar, 22 June 2011

Is this the end for commission? Is this the end for commission? The move towards fee-based The move towards fee-based

adviceadvice

LIMRA Webinar, 22 June 2011LIMRA Webinar, 22 June 2011

Commission in Australia, the Commission in Australia, the Netherlands and the United Netherlands and the United KingdomKingdom

Commission in Australia, the Commission in Australia, the Netherlands and the United Netherlands and the United KingdomKingdom

Brian J EvesBrian J Eves

Research Analyst, LIMRA Europe, Middle East & Africa

June 2011

Commission in Australia, the Commission in Australia, the Netherlands and the United KingdomNetherlands and the United KingdomCommission in Australia, the Commission in Australia, the Netherlands and the United KingdomNetherlands and the United Kingdom

Drawbacks of Commission Based Selling

Commission-driven financial advisors are essentially

product salespersons;

Even where a product presents itself as suitable

different providers pay different commission rates for

the same or similar products.

Commission in Australia, the Commission in Australia, the Netherlands and the United KingdomNetherlands and the United KingdomCommission in Australia, the Commission in Australia, the Netherlands and the United KingdomNetherlands and the United KingdomAustralia

The Future of Financial Advice legislation, effective July 1 2012:

Ban on conflicted remuneration structures;

Statutory duty for financial advisors to act in the best

interests of their clients;

Introduction of advisor charging to increase transparency

and flexibility of payments for financial advice;

Expansion of low-cost ‘simple advice’ to improve access to

and affordability of financial advice.

Commission in Australia, Netherlands and the United Kingdom Commission in Australia, Netherlands and the United Kingdom

Netherlands

Commission ban on financial services products from 2013:

Applies to bank advisers and independent advisers

Applies to mortgage and protection products (as well as

investment products)

This is part of an ongoing process that started in 2006

after seven million high-cost insurance policies were mis-

sold to consumers.

Commission in Australia, Netherlands and the United KingdomCommission in Australia, Netherlands and the United Kingdom

United Kingdom

The Retail Distribution Review (RDR) main provisions:

Commission for financial advice on investment products to be

banned;

Two main levels of advice: independent and restricted. Non-advised

services, including execution only, will still be allowed.

Investors to be told how much advice is going to cost and how they

will pay for it;

All investment advisers to be qualified to a new, higher level,

equivalent to the first year of a degree course.

Commission in Australia, Netherlands and the United KingdomCommission in Australia, Netherlands and the United Kingdom

Possible effects of banning commission in the UK

A growth in the market for non-intermediated sales of

simple investment products;

Loss of commission stream may translate into fewer

opportunities to help those on modest incomes;

Growth of bancassurance and worksite marketing;

‘Simplified advice’ could be increasingly important for

the mass market.

Commission in Australia, the Commission in Australia, the Netherlands and the United KingdomNetherlands and the United KingdomCommission in Australia, the Commission in Australia, the Netherlands and the United KingdomNetherlands and the United Kingdom

To find out more …

http://www.limra.com/members/abstracts/reports/10789.pdf