By now you will probably have heard about the reforms to the financial planning industry under the federal government’s Future of Financial Advice Act – known as FoFA – that commence 1 July this year.
It would be reasonable to believe that the conflicted advice issues that have existed for many years in the financial advice industry are fixed. Problem is, they’re not.
The news headlines have heralded the removal of commissions on new group insurance (through super) and superannuation and investment products.
So, why is it that you could continue to pay commissions? Because there are several carve-outs in the reforms that mean commissions will still be paid.
1. Commissions are not banned for new products up until 1 July 2013.
2. Nor are they banned for your existing products. This means that if you are currently paying commissions then you will most likely continue to do so.
3. Commissions are not banned for any individual insurance policies – ever. This is significant – as these commissions can increase the cost of your annual premium by up to 30 percent. What’s more, did you know that nine out of 10 advisers charge insurance commissions (including those who are ‘fee for service’). So, chances are, you will pay commissions on your insurance.
What’s the alternative?
If you do nothing with your existing investment, super and insurance products, you could continue to pay commissions. Which means you are probably paying more than you could.
You should also be aware that for insurance, if you seek to take out insurance through a direct offer, the amount of commission is generally included in the premium – in which case, there is no saving.
It really is worth reviewing your insurances. Clients are surprised to find that by reviewing and re-structuring their insurance, they save thousands of dollars a year, every year.
Have you considered how much you could be paying unnecessarily – and how much you could save?
If you’d like to find out more about your commission payments – and potential savings – then please contact us. Simply email or call (02 9262 6045). We’d be delighted to help.