Those arguing for prescriptive remuneration arrangements including the setting of caps for life/risk advisers are wrong, and the market should be left to decide, according to former Financial Planning Association (FPA) chairman, Matthew Rowe.
In a column to be published in the upcoming edition of Money Management, Rowe has also stated that it is “a poorly kept secret that life insurers know which advisers ‘churn'” and that if the industry and the regulator were effectively working together a hit list of “churners” could be combined with stronger and smarter enforcement.
“Churning blights the entire sector and not one adviser I know would be opposed to a ‘head on stick’ approach to rid us of this issue,” he said.
“What is most important is for professional advice to always be in the client’s best interest. This means thinly veiled product sales disguised as ‘advice’ to generate upfront sales commissions cannot and should not have a place in our profession.”
On the question of adviser remuneration, Rowe referenced those arguing for prescriptive remuneration arrangements with caps to be set and said it was his view that what an adviser and client agreed could be charged for professional services should be left to the market to decide.
Rowe pointed to overseas experience in dealing with the issue of conflict in remuneration practices within life insurance and cited Ireland where the Minister has the power to reduce commission payments if he forms the view they are excessive.
He noted that insurance intermediaries could only pay commissions to advisers if they were a member of a recognised professional body adding, “this fits neatly into the professional standards framework currently being built as a response to the bi-partisan Joint Parliamentary Inquiry into professional standards, education and ethics in financial advice”.
