Jury still out on life/risk commission realities

18 June 2019
| By Mike |
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Further work needs to be done on understanding the role and appropriateness of commissions in life/risk advice, according to the technical manager of wealthdigital, Rod Lavery.

Pointing to the renewed debate around life/risk commissions generated by the final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry Lavery suggested that a question mark still hangs over the issue of whether commission-based remuneration models represent a conflict of interest for advisers.

Pointing to overseas experience and research including the experience in Holland where commission-based payments for mortgage advice were banned, Lavery noted a range of differing opinions.

He pointed to the Dutch research which had found that in the wake of the banning of commissions the proportion of clients seeking advice had dropped from 67 per cent to 55 per cent.

Lavery also pointed to European, US and Canadian research which suggested that commissions could work for the benefit of clients if those clients were appropriately informed.

Having looked at the various pieces of research Lavery said he believed the debate around commissions was far from settled.

“The conclusions drawn by the research conducted to date are still debatable, and further independent studies are essential to inform the direction of the industry, particularly in Australia,” he said. “History shows that, just because something sounds true, doesn’t mean it is.”
 
“It is important to keep in mind that studies only represent trends, averages and means. Adviser-client interactions occur every day, and the quality of advice provided is in the hands of each individual planner,” Lavery said.

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