Insurers are estimated to be paying between $10 million and $15 million a year in shelf space fees, according to ClearView Wealth.
What is more the financial services group has told the Senate Economics Committee inquiry into the life insurance industry that this “pay to play” model results in a burden that is passed on to policyholders.
Answering a question on notice, ClearView managing director, Simon Swanson said that the cross-subsidies between institutional insurers and their licensees created inefficiencies in the system which could only be detrimental for consumers.
His formal answer contained an infographic which Swanson said “illustrates how vertically-integrated institutions use restricted Approved Product Lists (APLs) to influence advice and channel customers into in-house products.
“Therefore, not only do consumers foot the bill for the impact of the shelf space fees but many are unknowingly receive poor quality, conflicted advice,” Swanson said.
The ClearView infographic declared that “shelf space fees are an arbitrary and prohibitive cost charged by licensees (often institutional) to external product manufacturers to get on their APLs”.
It said that fees ranged from $80,000 to $500,000.
Swanson reiterated his earlier statement given in testimony to the Senate Committee that ClearView did not pay shelf space fees because it believed advisers should be able to recommend any APRA-regulated insurer in the market, based on what is in the best interests of clients.
As well as the infographic, the ClearView answer also contained a table of the shelf space fees relating to licensees and their institutional owners such as those applying to AMP Financial Planning, Hillross and Charter, and those applying to Securitor Financial Advisers in relation to Westpac/BT Financial Group.
The table also pointed to Aon Hewitt Financial Advice and Aon, as well as Professional Investment Services and Centrepoint alliance.
