Give clients choice between commissions and upfront fees

Clients should be presented with the choice between commissions and paying upfront fees, and this will help bring back lower income clients into advice, according to the Association of Financial Advisers (AFA).

Speaking at the FSC Life Insurance Summit, Phil Anderson, AFA acting chief executive, said: “We know there are emerging problems there, we know it’s very difficult for people on lower incomes to access advice because financial advisers are no longer able to work with those people who are only going to generate smaller premiums as a result.

“But this gives us the opportunity to ask what the client wants – give them the choice between commissions and paying an upfront fee.

“We know from experience that clients in these situations choose the commission option.

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“We would really like to see existing clients listened to as part of the process, because unfortunately they’re the missing voice in all of these debates that we have about regulatory reform.”

Anderson said the move to put the Life Insurance Framework (LIF) review under Treasury was a positive.

“The LIF review will still be done, they’ll still be getting those advice files in and they will still be looking at those advice files,” Anderson said.

“But in terms of the assessment of the future of commissions, which is the core issue of the LIF review, they have to look more broadly, they have to consider things like under insurance, they’re also going to consider things like access and affordability of advice.”