It’s been a busy New Year already! Starting with what I said in the last newsletter, the Reserve Bank/FMA reports on major insurance companies were pretty critical of the industry, and small independent advisers have been swept up in the flak that has ensued.
The TripleA has been meeting with FANZ, SIFA, The Association and IBANZ (all members of the Stakeholder Engagement Group (SEG)) in late December and early February to look at a co-ordinated response by adviser professional bodies.
A few of the key media messages we are starting to promulgate are:
1. It is important financial advisers have a healthy system to operate in so New Zealanders can continue to access quality financial advice.
2. Financial advisers provide a valuable service to New Zealanders as they help them to increase their financial health, wealth and wellbeing.
3. It is important there are unaligned advisers in the system to ensure that consumer choice is not restricted to product providers only advising/selling their own product.
4. We believe the RBNZ/FMA report which showed the comparison of life insurance commissions worldwide was not an accurate ‘apples-with-apples’ comparison as the various markets differ significantly. The comparison was flawed for reasons such as:
a. Some markets provide advisers with serviced offices which is not the case in New Zealand, and
b. The New Zealand market size in comparison is tiny and this impacts on remuneration structures.
5. We believe a number of comments being made in relation to high commission are unsubstantiated without any evidence of systemic failure. Taking a knee jerk approach to the issue will lead to poor outcomes for consumers in future.
We would encourage members to pick up on these messages as you talk to people across the industry. The SEG will be doing the same both collectively and individually. In addition, we are seeking a meeting with the Minister to make these and other points, so that the adviser perspective is not lost, and policy makers do not rush to incorrect conclusions.
In addition, we are also looking to:
1. Shift the language when speaking with legislators and regulators from incentives to remuneration, and highlighting the need to ensure they know financial advisers do not set the remuneration structure.
2. To obtain evidence and research regarding other jurisdictions’ remuneration structures, so that factual information can be fed into future discussions.
3. Highlight that the Reserve Bank/FMA report was focussed on life insurance not all insurance, nor all advisers.
For our members that currently have an AMP distributor agreement, the TripleA has been asked to help review the two draft agreements that will be required in future for AMP Life and AMP Wealth Management. The TripleA was heavily involved in this space when AMP purchased AXA several years ago. We haven’t seen the draft agreements yet, but we have been advised that the proposed approach is to:
– Use the current standard independent AMP Distributor Agreement as the base agreement to work from;
– The AMP Distributor Agreement will be ‘right-sized’ for both AMP Life and AMP Wealth Management. What this means is that any reference to Life will be removed from the WM agreement and vice versa;
– The same key terms will be carried through to the new agreements – including the adviser’s obligations, remuneration, termination rights and disputes;
– The same payment terms (at a minimum);
– Any additional adviser benefits like superannuation etc will be maintained.
The guiding principle AMP is aiming to follow, is to keep the exercise as ‘simple as possible’. The key message is ‘same as before’, noting the agreement will be with different entities. We may well have AMP management along to the next Board meeting on March 13th to update us further. We will keep affected members informed via our newsletters and website.
On the PI front unfortunately, we can now confirm that our PI scheme will see solid premium increases this year. We understand other schemes have also been shouldering large increases.
We don’t have details yet but, on the positive side, it appears that any increase to our scheme will be less than half that of other schemes. The key reason for this is once again our excellent claims history, which allows AON to negotiate with the insurer from a position of some strength. It also vindicates all the work the TripleA has done over the years to ensure we have good quality advisers coming into our scheme.
Also, any increase this year must be set against the backdrop of the modest premium decreases all our members have enjoyed over the last, I think, three years now!
Once again, we will have both AON and NZI along to the Board to discuss the extent of this. We will have these details in time for the next newsletter.
We want to keep our PI scheme in a strong position vis-à-vis other schemes which provide less cover and higher excess levels for more cost. Notifications are a key element to retaining this competitive advantage, so AON has drafted two articles for us on Notifications and Claims. The first you can find here and the second will be in the next newsletter.
Wayne Smith, CEO