Altrisk Launches Ongoing Commission for Brokers

Financial advisors face multiple headwinds – an exceptionally challenging economy, tight cash flow, premium affordability and continued pressure on the regulatory front. In a bid to provide financial advisors with a means to strategically manage cash flow challenges as well as maximise the value of their business, Altrisk has launched a new commission structure called Ongoing Commission. This alternative to traditional commission allows for the flexibility to better manage these headwinds.

“In developing ‘ongoing commission’, we were aware of the need to improve financial advisors’ prospects for growth, profit and containing risk by allowing them to manage their revenue better. Altrisk’s ongoing commission allows advisors to build an annuity-based risk product business that has a saleable value and to better manage clawback risks. Financial advisors can now choose ongoing commission at up to 15% of every premium, standard upfront commission, or a combination of the two,” explains Craig Harding, managing director of Altrisk.

Ongoing commission provides advisors with the power to structure remuneration in a way that meets the unique needs of their business. “Internationally there is pressure to move away from front-end loaded remuneration towards a means to match the increasing costs associated with maintaining a portfolio of clients. We also recognise and support the fact that for an advisor to increase the long term value in an advice business, one needs annuity revenue streams,” says Craig.

Ongoing commission is based on the following principles:

· commission is paid within legislative limits,

· the premium paid by the consumer will never exceed the premium had 100% upfront commission been applied, and

· any savings arising from ongoing commission will be passed onto the consumer.

The extent of any savings, will depend on the:

· age of the client at inception of the policy,

· premium pattern applied - increasing or level,

· nature of benefits – for example, benefits may have varying terms, and

· the rate and combination of commission chosen by the advisor.

In deciding on the right mix of remuneration models between upfront and ongoing, it is important that advisors consider the following:

· the costs and value associated with initial advice, recommendation and implementation versus the regular maintenance needs of the client’s portfolio, and

· different client profiles and brokerage practices each have unique considerations which need to be taken into account .

“The important thing to remember is that there is no single answer to the correct model and in most instances a mix of the two remuneration models may be appropriate. Altrisk provides financial advisors with a choice, enabling them to select the best model or combination of models to suit their practice,” concludes Craig.