Asian News - New Zealand: Govt considering ban on commissions for advisers
Source: Asia Insurance Review | Jul 2015
The New Zealand government is proposing, in its review of the Financial Advisers Act and the Financial Service Providers Act, to ban commissions for insurance brokers and advisers.
In an issue paper seeking public feedback on the proposal, the Ministry of Business, Innovation and Employment (MBIE), said: “A number of financial advisers are either partly or wholly paid by commissions that are paid by product providers. These commissions can create a conflict of interest for the adviser; incentivising them to advise that their client buy a particular product.”
Authorised Financial Advisers are legally obliged to disclose commissions they may earn, as well as any conflicts of interest. However, the problem in the insurance industry is that most brokers/advisers are only Registered Financial Advisers, who do not have to explicitly make these disclosures, reported the interest.co.nz news website.
Mr Robert Oddy, Chairman of the Financial Adviser Associations of New Zealand, said that it was too early to comment on the specifics of the Government’s review of the Financial Advisors Act. But he said there is a risk that any decline in the income of advisers as a result of a ban will prevent the industry from attracting well qualified and experienced advisers.
He added: “If they ban commissions outright, I think the chances of getting the bulk of New Zealanders to pay fees for insurance advice would be a question to be addressed. Whether that pushes the insurance sector into more use of online facilities is open to debate.”