Adviser battles lifetime commission rules
A financial adviser has been battling with TAL for more than two years over the commission arrangements surrounding one of his clients.
The client, on the advice of a former adviser, took out an insurance policy from insurance company Prefsure, which was acquired by TAL in 2006. The policy has a lifetime trail commission arrangement, in which the initiating adviser would receive commissions from Prefsure over the life of the policy.
GWM Adviser Services adviser Felix Sher told Money Management that his client nominated him as the new adviser on the insurance policy; however, he was informed by TAL business development managers that while he was indeed named as the new adviser on the policy, they would not be able to alter the agreement with the client's former adviser and all commissions would continue to go to him.
Sher was nominated two years ago, and has gone without commissions during that whole period.
A TAL spokesperson said that these arrangements apply to a limited number of policies issued by Prefsure.
The advisers involved are able to work this out by agreement among themselves, and TAL would be happy to assist in resolving the matter, the spokesperson said.
However, Sher said that he contacted TAL multiple times about the issue but they refused to provide any other information to him, including the name of the former adviser.
Sher also claimed that he wrote to TAL managing director Jim Minto about the problem and never got a reply.
"There are other advisers who are as flummoxed as I am about this," he said.
"It's unacceptable in this day and age that you can continue to run that kind of situation, where you expect a client not to get any service, or to have an adviser service him for nothing at all."
Synchron director Don Trapnell said he was glad there weren't too many of these policies in force, because some advisers had to service clients and not get remunerated for it.
But it had to be acknowledged that it was under that basis that the original adviser sold the policy, he said.
Unless it was in the best interests of the client, the adviser can't move him out of the policy, Trapnell said.
He said he serviced a few clients himself where the commissions went to the initiating adviser.
Senior lawyer at Holley Nethercote David Court said the situation was a private arrangement between the insurer and the initiating adviser which wasn't really covered by the law.
The Future of Financial Advice changes would get rid of commissions like this, Court said.
The new adviser could try approaching the insurer to come to some arrangement, or effectively get the client to move into a new policy, Court said.
However, that would put him into a difficult position of finding a reasonable basis for making that recommendation, he added.
"If the client went to the insurer and said the first adviser isn't acting for me anymore, I'm pretty sure the insurer would come to the party," Court said.
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