Life advisors appear to have lost the battle on upfront commissions in a war that foreshadows changes for Canadian professionals.
Canadian life advisors, take note: Australia’s assistant treasurer has formally notified the life insurance industry that it has two months to do away with big upfront commissions for advisor or his government will move it to do it.
“Let's move away from upfront commissions, let's move to level commissions and let's determine what those level commissions are," Josh Frydenberg told an audience of industry players late last week. “The extent to which we intervene will ultimately depend on the industry's response.”
The comments – likely the last from the government before taking any action itself – are a resounding endorsement of an inquiry’s report calling for a $1,200 cap on upfront commission on life policies.
Under the proposal, seen as a harbinger of future Canadian reforms, advisors would also have their trailing commission capped at 20 per cent of the policy value for the duration of its life.
Canada has long followed Australia’s lead on regulation reform and if these recommendations are adopted they could soon find their way to the Great White North.
The recommendations are looking to axe advance payments of 100 per cent to 130 per cent of the first year's premiums, which tempt advisors to put profits ahead of clients' interest.
But when complex life insurance advice was provided to clients advisors should be permitted to keep commissions.
Frydenberg appears to be agreement that, a more rigid system of rules and exceptions is needed to better protect consumers. That thinking precipitated the fee-transparency changes ushered in a couple years ago and which have now made their way to Canada – at least in part – in the form of CRM2.
“Let's move away from upfront commissions, let's move to level commissions and let's determine what those level commissions are," Josh Frydenberg told an audience of industry players late last week. “The extent to which we intervene will ultimately depend on the industry's response.”
The comments – likely the last from the government before taking any action itself – are a resounding endorsement of an inquiry’s report calling for a $1,200 cap on upfront commission on life policies.
Under the proposal, seen as a harbinger of future Canadian reforms, advisors would also have their trailing commission capped at 20 per cent of the policy value for the duration of its life.
Canada has long followed Australia’s lead on regulation reform and if these recommendations are adopted they could soon find their way to the Great White North.
The recommendations are looking to axe advance payments of 100 per cent to 130 per cent of the first year's premiums, which tempt advisors to put profits ahead of clients' interest.
But when complex life insurance advice was provided to clients advisors should be permitted to keep commissions.
Frydenberg appears to be agreement that, a more rigid system of rules and exceptions is needed to better protect consumers. That thinking precipitated the fee-transparency changes ushered in a couple years ago and which have now made their way to Canada – at least in part – in the form of CRM2.
