I acknowledge that commissions create conflicts and that one possible solution is to regulate to ban such conflicted remuneration. However, as I have commented before, the issue for me isn’t necessarily about whether commissions are banned, but the effects that banning commissions can have on consumer access to advice and how to overcome that impact.
Simply put, to the extent that commissions represent a payment by the product provider to an adviser for advice provided that the consumer could not otherwise afford to pay for or would decline to pay for, a ban on commissions can have the unintended effect of creating an insurmountable barrier to many consumers seeking or obtaining advice.
If there is a move to ban conflicted remuneration, I believe that it should only occur when we have come up with a solution as to how consumers can still access advice when they can’t afford to or won’t pay for it, when advice is clearly necessary and appropriate. Unfortunately, I have not yet identified anywhere in the world where this issue has been successfully resolved, while accepting the good work that the Commission for Financial Literacy and Retirement Income does through things like the Sorted website here in NZ, that still just won't do it.
Consumers, by the way, don't usually think they are getting unconflicted advice anyway. They know, as sure as they do when they buy a washing machine or a car, that the person helpfuly listing features and benefits is getting paid.
Overall, that's why even with all the conflicts, I prefer a disclosure-based regime, and no ban on commissions for insurance products.