One of the country’s leading dealer groups has signalled an end to receiving commissions on new risk business, at the same time as the corporate regulator has given the clearest indication yet that it has advised the Government to stamp out all commissions on risk products.
Godfrey Pembroke will announce in June the date from which all of its practices will cease to receive commission on the sale of risk products. It will also turn off the commissions tap on new mortgage business.
The general manager of Godfrey Pembroke (GPL), Tom Reddacliff, says the decision will bring risk products more in line with how the firm treats investment and superannuation business. GPL has been fully fee-for-service for new business for several years, and from October 2011 will also eliminate trail commissions on its back-book of investment and super.
Reddacliff says GPL’s risk commission stance will initially apply only to new business; no decision has been made on how, or if, the same principle will be applied to books of existing risk business.
“We’re moving to a full fee-for-advice position on everything,” Reddacliff says.
“We’ll no longer have a back-book [of investment and superannuation], and that’s from October 2011. We’re looking to get ourselves into a 100 per cent fee-for-advice situation on superannuation and investment.”
The next step is to go “fee-for-advice for all new business in insurance and mortgages”, Reddacliff says.
“I can’t confirm the date just yet. I am making a definitive statement of will; I will probably come out and say when, in June.”
Reddacliff says risk products generally are “not as advanced as investment rpoducts on fee-for-advice capabilities” and GPL will be working with underwriters in coming weeks and months to ensure there’s an adequate range of risk product available for when its advisers turn off the commission tap.
He says the aim is to ensure that any commission forgone by GPL results in a lower premium for clients.
GPL’s move comes despite a recent announcement by the Financial Planning Association of Australia (FPA) that under the association’s policy on remuneration, its members will be permitted to continue to receive commissions on risk business.
The FPA’s stance appears to be at odds with the corporate regulator, the Australian Securities and Investments Commission (ASIC).
At the MLC/Professional Planner Advice Forum 2010 in Sydney last week, ASIC commissioner Greg Medcraft hinted strongly that the regulator has recommended to the Minister for Financial Services and Superannuation, Chris Bowen, that commissions of all sorts on risk products be outlawed.
Medcraft said: “What we have said in our submission to the Ripoll inquiry is that all commissions should be banned.”
“That’s on all products,” he said. “We have been very clear on that. [The submission covers] includes other forms of remuneration as well – volume bonuses, shelf-space fees [and] rebates received by dealer groups. It’s important that there should be no perception of conflict.
“What we’ve had is an inquiry; we’ve had a reaction to the inquiry; we’ve provided our advice to the Minister; now it’s up to the Minister and the Government to make a decision.”
Medcraft would not elaborate specifically on the advice that ASIC had provided to the Government, but said the views expressed in the regulator’s Ripoll submission remained unchanged.
A full report on Godfrey Pembroke’s risk business strategy will appear in the June – July edition of Professional Planner.
