Why do insurers assume we want commission?
It is clearly the attitude of the product providers (the insurance companies and the investment firms) that in the world of financial advice, fees continue to play second fiddle to commission.
And if all the firms that pass themselves off as independent financial advisers are actually offering their clients the option of paying a fee, then why is full commission still the default option on the illustrations offered by providers?
The difference in policy premiums between an insurance quote issued without commission compared to a quote with commission can be significant, on some illustrations we recently looked at premiums had been hiked by more than 30% to pay the commission. Yet whilst that’s a lot of money, it isn’t what I’m talking about today.
The issue is this; because commission is so embedded into the way products are sold it is the default option for many product providers, and it creates so much extra work for firms like us, who work entirely on a fee basis.
Whether it is the initial request for an illustration, or the physical processing of an application on which we have asked for nil commission terms, I am surprised at how often the instruction is ignored. This causes more work because we then need to ask for replacement illustrations without commission, or in some cases we have to return policy documents which have been issued on the basis that commission will be paid – we don’t want it!
We have an agreement with our clients to work on a time/cost basis, so surely the client should not have to pay more for the time spent correcting product provider errors. Certainly we would not feel justified passing on these costs to the client, but it’s the devil’s own job trying to get any compensation out of providers.
So when can we expect this move to fees to actually filter into the world of the product provider? If an adviser wants commission from selling a policy I am sure they will ask for it.
