Trowbridge model lacks substantiation - Madison
Yet another life/risk focused dealer group has called for more work to be done on the Trowbridge recommendations before any move is made towards implementation.
This time it is the Madison Financial Group with its general manager, Giulio Russo, stating that the Trowbridge report was "light on substantiation with little diagnostic analysis to support its recommendations".
Further he said the report's suggestion that some of the recommendations be implemented on a best endeavours basis by 30 June, this year was unrealistic and failed to give serious consideration to the impact on the industry and how the recommendations would impact risk advisers, financial advisers and their clients.
"To put forward just one remuneration model, with no alternative models not only creates an uncompetitive market and goes against all current economic models, it is especially restrictive for advisers who are predominantly risk advisers and have no other form of income," Russo said.
"The suggested ‘Reform Model' for adviser remuneration — Initial Advice Payment capped at $1200 per client plus 20 per cent level commissions for vie years is not accompanied by any substantiation or basis," he said. "The report even concedes that the IAP would not cover the initial cost of advice."
Russo claimed such a remuneration structure would result in risk advisers exiting the industry, as clients would simply not pay a fee for service if the advice provided were solely on insurance products.
Russo also pointed to issues with respect to licensees being required to expand their approved product lists to include at least half of the authorised retail life insurance providers.
"To force licensees to expand their APL to a minimum of at least half the retail insurers is contrary to what the industry has been trying to achieve for the past few years — develop an APL which reduces exposure to inferior managers and products," he said.
Russo said this represented a dangerous precedent because although Madison already met the requirement, if it included other insurers and products just for the sake of it, the dealer group would have to go through the costly exercise of conducting further due diligence.
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