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No Utopia

Sense has prevailed in the UK and the FSA has confirmed through the Association of Mortgage Intermediaries that:

"...brokers do not have to recommend specific direct products to clients."

Also, crucially, it notes:

"AMI has confirmed today that the regulator does not expect firms to recommend lenders or particular products that they cannot access."

Product manufacturers and many large advisory firms will heave a sigh of relief. We can only hope that such sense prevails here too. Pursued to its logical conlcusion the fallacious idea that best advice = best product in the universe would mean no financial advisers, and a dramatic reduction in the availability of financial services.

Link.


Questions, Questions...

A veritable storm has erupted over at Phil's Blog on the news item, commented in in the blog, that Grant Samuel reckoned that commission levels in the NZ market are a world high - and under threat because of numerous forthcoming changes to the industry, such as changes to taxation and rules that may require some local incorporation.

I don't think the GS report was intended to be a call for reduction in commission. But calls for 'sustainable' levels of commissions are, frankly, silly, here's why. So rather than make pronouncements, how about we list the good questions around commissions:

  • Don't you think the life companies are capable of working out what they can afford to pay?
  • If they are so high - why?
  • If you can put life insurance on the books cheaper in other ways - why not do it?
  • If direct models are so much cheaper why isn't more business written that way?
  • If brokers are a good way to ad distribution at a variable cost - why do we expect commissions to remain fixed? Won't the price (commission rate) ubmp up and down like a market for - pretty much - anything else?
  • If high commission rates cause high premiums why have average life premiums dropped over the last ten years while commission rates have risen?

But equally, for those brokers that may be living in the fantasy that commission rates have always been this high, and will always be this high...

  • ...do industries and conditions never change?
  • ...then why do you sound worried?
  • and that stuff that's just happened to mortgage brokers - why couldn't that ever happen to you?

Then there's the difference between commission paid by the company, and that received by the individual adviser. There is a difference.

So if you want to know more about commissions, the actual scales, and the realised levels in the market, drop us a line about our commission survey.


How to make money from the government...

...lease it premium offices in Wellington, says Bernard Hickey. Who, of course, is right. This now provides us with an interesting proxy price in the market for how serious John Key is about reducing government waste. The more serious the market believes he is, the lower AMP NZ Office Trust's unit price should fall. But sadly for taxpayers, and happily for shareholders, it won't move by a lot. Because there will likely be premium lease deals lasting years on all that premium office space, wrecking budget cutting exercises for years to come. Link.


Commission Model

Hi folks, just to let you know that we are working on updating our life commission model. This dynamically compares commissions for a number of flexible scenarios, and looks over a variable period of time too. It's a hell of a goo tool and we periodically update it. Obviously, making sure your model is accurately represented is worthwhile, so drop us a line if you'd like to see what we have down for you.