The fact that there are advisers who charge a fee for service inside risk insurance proves that the model works, according to IFAAA president Daniel Brammall.
Addressing the notion that risk advice without commissions will not work, Mr Brammall said in a report aired on ABC24 that advisers like himself have “innovated” and moved on from “outdated models” of remuneration when charging clients for advice inside life insurance.
“The fact that we exist and have done so for years now proves that it is possible,” Mr Brammall said.
Life insurance salesmen, he added, are remunerated by “shifting product” whereas an adviser should be remunerated by the advice they give, not the product they recommend.
“If you are talking about providing advice on the client’s options in relation to insurance, what the structure should be and your policies available, the sorts of cover that they need, then that is an event that is divorced from product,” Mr Brammall said.
However, Doug Scriven, principal of financial advice practice Informed Decisions, told ABC24 that if commissions are to be taken out of the equation, clients will end up paying more for insurance.
“Clients are going to be finding a premium that is a little less expensive but they are going to be paying for ongoing advice to maintain the policies and the upfront advice to provide the policy and implement it,” Mr Scriven said.
Commenting on the presence of churning so that advisers can earn more upfront commissions, Mr Scriven pointed out that the practice does not actually add any benefit to an adviser’s business.
“If you are taking a policy and simply rewriting it every two years so you can get new upfront commission, you are basically chewing your own leg," Mr Scriven said.
"You're not actually growing your business. You’re just earning another dollar,” he said.