Life Life Assurance Policy - Commission

P

Pjomes

Guest
Hi,

I have been living in the UK previously and have moved to Ireland recently. We are building a family home and as part of the process we had to take out a mortgage protection policy. I went to a financial advisor who showed me the various insurers and their respective premium for this cover. I went with the cheapest on his recommendation and the policy was arranged easily. I did not have to pay a fee as he advised the insurers pay him by way of a commmission.

When I received the Policy Document, I couldn't help noticing the 'intermediary remuneration' table. My premium is over €100 per month however the total commission was nearly €2000! I left it there and thought no more about it as I had got the best rate in the market anyway.

The issue arose again on Monday when a number of my colleagues and I met our Pensions Consultant in our Head Office. The meeting was actually just about joining the Scheme and the costs and benefits etc. They mentioned that they are remunerated by our company on a fee-based scenario and as a result we get better allocation on our contributions as they take no commission from the provider. I had mentioned the scenario with regard to Mortgage Protection commission and they advised that, based on their discussions with Insurance Companies, the premiums would be 20-25% lower for the customer if no commission was taken.

My family and I would have paid these fees in the UK over the years for any financial advice we got, however I can't help but think that the consumer here is getting a raw deal. The premiums are obviously going to have to take account of these, obscene in my opinion, levels of commission. If I was to pay an upfront fee for advice of €200-400, I could in theory get a reduction in premium from €100 per month to €75 per month...sure I'd make that back in about a year or so anyway.

I am happy to pay for financial advice, but this system seems a bit odd to me.....I would be grateful if any of the contributors have any opinions in this regard....Am I missing something here?

Phil
 
If you buy a computer in a shop then you dont pay the wholesale price. You play the wholesale price plus markup for the seller to cover costs and profit. The same principle applies. You dont agree what level of markup the retailer is entitled to.

For every large case where the advisor can make a good amount of commission, there is smaller cases where advisors make less. The average ultimately dictates what kind of an income the advisor can have after costs.

There is nothing to stop a customer asking an advisor to sell a case on a fee basis rather than on a commission basis, often however clients will be reluctant to pay a fee if they feel they can get the advice for free and buy the product elsewhere without said fee (not fair but it happens). There is also nothing to stop customers haggling over the commission and asking for a rebate (many advisors will offer this service).

Ultimately you get what you pay for though to some degree, if you want to sit down with someone for an hour or more to talk about policies or indeed have multiple meetings with an advisor then obviously they will have to be paid for their time and expertise. Some advisors may do hours of work on a case for €100 commission (or even no commission if the case doesnt proceed due to declinature), the larger cases subsidise the smaller ones so that an advisor can offer an equally good service to all his/her clients if they are doing their job properly.

No doubt some will post here saying its a disgrace advisors get paid commission the way they do, thats their opinion and they are entitled to it. I feel however that without the current commission system we wouldnt have the amount of financial advisors we do as people in general dont really value the advice given and would ultimately try to avoid paying fees. I would also be extremely skeptical about the insurance companies actually passing on any savings to customers if they didnt have to pay commission, then the customer could end up worse off.



www.CheaperLifeAssurance.ie
 
Cavendish in the uk use this model that you are talking about, http://www.cavendishonline.co.uk/

There are plenty of advisors who will take a reduction in commission and offer no advice or there are some who will offer a reduction in commission and offer advice - the reason can be to save on time or time wasters.

I could ask a customer a number of questions, assist them in reaching their decision and put the cover inplace while another person could spend 10 hours searching the internet trying to save €25.

My advice is to ask some of your friends for a referral to a broker who will assist in all aspects of life, pensions, health, motor and home insurance, A good broker could be of great help for years and make you plenty of money.

Don't get to bet up over commission.

ps - in the time it took me to type this I could have spoken to you and probably had cover in place and emailed pdfs over to you !

pps - there a number of solicitors who offered cut price deals during property boom, some possible offering deals on this site and they are no out of business.

Patrick
 
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