KEY POINTS:
A leading insurer says the finance advisory industry should be more open about how its agents calculate and set commissions on any insurance products they sell to clients.
Ed Saul, CEO of Pinnacle Life, made the call on his blog this week.
"The Professional Advisors Association (PAA), trade body for Financial Advisors in NZ, argues that its members shouldn't have to say how much commission they get when they sell an insurance companies' policy to one of their clients", said Saul.
This was part of the Association's response to new rules governing the NZ financial sector, announced last week by the Ministry of Economic Development, he said, which features such disclosure of remuneration.
Saul pointed out a quote from the head of the PAA on the financial news site Good Returns: "We are not convinced that the unique nature of life insurance compensation is fully understood by the Ministry".
"On the contrary, I think the Ministry understands perfectly", countered Saul.
"I firmly believe that consumers have every right to know how much their financial advisor is paid by the insurance companies."
He pointed out that these commissions are built into the cost that the consumers pay for their life insurance - for the life of the policy.
"Financial Advisors are paid out of the pocket of the insured, not the insurance company. If commissions were lower, then the price of life insurance would be lower for everyone.
"I also question why the PAA don't want to disclose commissions. Could it be that commissions in NZ are embarrassingly high?", he queried.
Commissions paid to Financial Advisors in New Zealand are amongst the highest in the world, according to Saul.
