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NZ opts for planner remuneration transparency

As Australian financial planners brace themselves for the fallout from the Royal Commission, their counterparts in New Zealand are being made to embrace greater disclosure about the commissions and incentives they receive with respect to insurance sales.

But while the Australian Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry appears headed towards the phasing out of almost all commission-based remuneration and soft-dollar arrangements, the New Zealand regime appears to be headed towards imposing transparency around who gets what.

The New Zealand Financial Services Council (FSC), led by former Association of Financial Advisers chief executive, Richard Klipin, has welcomed the FMA report noting that it had raised important issues in relation to transparency and disclosure.

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“The FMA’s work in this area is driving an important conversation about the use of incentives in our industry and appropriate conduct and disclosure around them,” Klipin said. “Ultimately, the way companies choose to structure their remuneration packages is a commercial decision and one that will differ from company to company.”

Klipin said his organisation strongly supported the request from the FMA for insurers to consider the nature and value of the soft commissions they provide to ensure that their use supports good outcomes for consumers.

“The key issue with remuneration is clients’ right to know the who, what, and why of the advice they’re receiving and if it’s linked to remuneration at all,” he said. “In other words, ensuring that any potential conflicts are properly managed and disclosed, and that the adviser is up front about them.”

“This hasn’t always been the case and all of us have had to lift our game to ensure that our policies are driving the best outcomes for clients.”

Klipin said that changes underway through New Zealand’s Financial Services Legislation Amendment Bill, the Financial Advice Code Working Group, and the FSC’s own code of conduct collectively represented a significant lifting of standards across the sector.

“When fully implemented, these initiatives will mean a much higher standard of transparency and disclosure across the industry and that’s a good thing.”

Klipin said that when advisers were providing information to clients, they needed to ensure it answered three simple questions:

  1. Do you get any incentives/commissions from the provider you are recommending? If so, what are they?
  2. Will you receive any other benefits as part of me giving you my business?
  3. (If your adviser is recommending that you change providers) Will my benefits and cover remain the same?



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New Zealand seems to recognise that advisers actually need to earn a living unlike Australia. They also seem to recognise that commissions work well in certain areas e.g. insurance.
I think the key difference is they have a regulator that actually took the time to understand the market. We have a regulator that deals quite unethically at times. E.g report 413 and does not seem to understand the markets they regulate.

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