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Hewison and Associates is now rebating all commissions paid on insurance policies, which it says will save clients thousands of dollars in hidden fees.
The independent wealth management firm, which has never charged commissions on investment and super products, is among the first in the industry capable of applying a fee-for-service model to life, total and permanent disability, trauma and income protection insurance.
The firm will rebate all commissions received back to insurance policy owners, and instead charge for the advice provided to establish the policy and review it annually.
The firm previously outsourced risk to a risk provider, but that was unsatisfactory due to both the cost and the fact that the secondary adviser may not necessarily have the same relationship with the client, which means clients may not always get the most appropriate cover, according to Hewison and Associates chief executive John Hewison.
Responding to suggestions that fee-based structure could be more expensive than commission payments for insurance and exacerbate Australia’s underinsurance problem, Hewison said the fee cost charged to clients at Hewison and Associates worked out to be much less than commission payments.
“What consumers don’t realise is that in some cases advisers will receive 140 per cent of the first year premium, and then 20 per cent each year after that in commissions. This can have a huge impact on the overall cost of the insurance — but if the commissions are paid back to you it can save you thousands,” he said.
Removing commissions from insurance products shouldn’t reduce the incentive for advisers to make sure clients were adequately protected, he said.
“As an adviser we have a responsibility that our clients are properly advised on their risks and are appropriately protected. In the past we’ve found that our clients are quite happy to accept that they need to cover the risk until they find out how much it’s going to cost them. Usually it’s an issue of cost more than anything when people won’t take the advice to cover themselves,” he said.
Without the conflict of commissions attached, clients could be confident the best and most affordable outcome would be suggested, he added.
Under the new structure, advisers at the firm will do the risk assessment (which is charged at an hourly rate), then one of the firm’s portfolio administrators in the office does the organisation of the policy arrangement and that is charged on a time basis as well, Hewison said.
