Readers responses to draft regulations dealing with commission structures
Having looked at the commission for an RA say R1000.00 monthly premium. One wonders how many will be bought directly as a request by the client and how many will continue to be sold by the industry. Congratulations on regulating this product directly into ex stink tion. Not good for a nation who in any case dont save.
Ek is n makelaar wat uitsluitlik in ons bank se fexi mark werk dws individu met kleiner salarisse. Ons hoofstroom van besigheid is spaarplanne (30%), annuteite (25%), begrafnisplanne (20%), beleggings (25%). Met die nuwe komm. struktuur soos voorgestel sal dit net nie meer vir my die moeite werd wees om die mark te bedien nie aangesien die komm. struktuur te swak is. Dan verloor die regering sy doel om sy mense te leer spaar aangesien daar baie ander makelaars is wat ook hul f**us sal wegskuif van spaar produkte na risiko besigheid. Ek het ook 6 assistente in diens waarvan 5 hul werk gaan verloor omdat ek hulle nie meer sal kan bekostig nie. Ek dink regtig die komm. struktuur moet ernstig heroorweeg word
Some years ago the RA commissions were "fiddled" with, and the sales of the products slumped. The on going argument is that the public does NOT go out looking for someone to sell them an RA. RA's , as with many other products, are slotted into clients portfolios on a needs basis, after a fairly lengthy analysis of the client's affairs. How are we as professionals supposed to survive on the new commission rates by doing the correct thing and placing investment business where it is needed. In my early days in the Assurance industry,( 1968..+++..) life assurance was bought and sold. It looks as though we should all be going back to the good old solid Risk cover, and not waist too much of our precious time on Assurance Investment products.
Having looked at the commission for an RA say R1000.00 monthly premium. One wonders how many will be bought directly as a request by the client and how many will continue to be sold by the industry. Congratulations on regulating this product directly into ex stink tion. Not good for a nation who in any case dont save.
Ek is n makelaar wat uitsluitlik in ons bank se fexi mark werk dws individu met kleiner salarisse. Ons hoofstroom van besigheid is spaarplanne (30%), annuteite (25%), begrafnisplanne (20%), beleggings (25%). Met die nuwe komm. struktuur soos voorgestel sal dit net nie meer vir my die moeite werd wees om die mark te bedien nie aangesien die komm. struktuur te swak is. Dan verloor die regering sy doel om sy mense te leer spaar aangesien daar baie ander makelaars is wat ook hul f**us sal wegskuif van spaar produkte na risiko besigheid. Ek het ook 6 assistente in diens waarvan 5 hul werk gaan verloor omdat ek hulle nie meer sal kan bekostig nie. Ek dink regtig die komm. struktuur moet ernstig heroorweeg word
Some years ago the RA commissions were "fiddled" with, and the sales of the products slumped. The on going argument is that the public does NOT go out looking for someone to sell them an RA. RA's , as with many other products, are slotted into clients portfolios on a needs basis, after a fairly lengthy analysis of the client's affairs. How are we as professionals supposed to survive on the new commission rates by doing the correct thing and placing investment business where it is needed. In my early days in the Assurance industry,( 1968..+++..) life assurance was bought and sold. It looks as though we should all be going back to the good old solid Risk cover, and not waist too much of our precious time on Assurance Investment products.
It seems to me that it will not be equitable for the client to have the right to redirect “service” commission. As I see it, intermediaries do the work ”upfront” and the reason for spreading the 50% balance commission was to give better fund values in the event of early termination. The bottom line is that intermediaries are only “guaranteed” 50% commission (providing the plan stays on the books for 5 years), so we could in effect be looking at a possible scenario of a 50% cut in remuneration. We also hear a lot about alleged “mis-selling”. In view of the fact that very few people have sufficient retirement provision, it seems to me that there should be more selling of retirement savings products not less – and how can an RA be mis-sold? Possibly when the policyholder already has the maximum contribution for tax relief i.t.o. s 11(n) of the Income Tax Act but arguably even without tax relief, it will still be an excellent long term investment with the recent abolition of taxation in the plan. The 5 year claw-back further puts the intermediary at risk of losing the bulk of the remuneration for having done the work “upfront”. For example, after an intermediary has done all that is required by FAIS and the assurer to put the plan in place, the client decides to emigrate after 1 year, the intermediary will only retain 10% of the remuneration. This hardly seems appropriate. Consequently potential new entrants into the profession may decide to follow another career path. I shudder to think of the difficulties John and Jane Citizen will experience 10 years from now when the aging experienced intermediary force have retired but that is another subject all on it’s own. I also believe the client should have to prove that he or she has been disadvantaged before commission can be redirected. If you think about it, say an intermediary does a comprehensive analysis highlighting a retirement shortfall, does the risk profile and places the business (say an RA) on the books with an appropriate portfolio for the long term, what more “service” needs to be done on this plan. Obviously the intermediary should maintain contact with the client to provide ongoing service and to take care of new business, but that has nothing to do with the original RA. This is even more ludicrous if a “Lifetime” type portfolio is selected in which the portfolio managers automatically reduce the risk of the RA portfolio as the plan nears payout. In theory, in this case, no further service should be required on the plan. In any event I predict a big drop-off in RAs and endowment sales and a surge in the sales of risk products. This will be a great pity as savings levels in this country are abysmal as it is. It seems to me that Treasury will achieve the very opposite of what was the original goal, namely to help the public save more for retirement. So predictable. So sad.
Ek stem tot n mate saam met die nuwe kommissie strukture maar is dit net jammer dat die Adviseur/Makelaar altyd alleen die risiko moet dra. As dit kom by beleggings produkte is daar verskeie partye betrokke. Ons kan kortliks dit saam vat as Produk*ntwikkelaars, Aktuarisse asook Fondsbestuurders en dan die Adviseurs. As n mens weet wat in die veld aangaan sal jy gou agterkom hoekom mense hulle produkte stop en kan daar verskeie redes daarvoor wees bv. Kostestrukture, Fondse wat nie presteer nie, Swak diens ens. Indien enige van die partye nou binne die volgende 5 jaar fouteer dra die Adviseur die volle verlies terwyl die ander partye nogsteeds sy pond vleis huistoe neem. Dit is ook vir my interessant as ons hoor hoe die Aandeelmakelaars met die nuwe kommissie strukture saamstem, maar wonder ek maar net of hulle die kliente vergoed as die aandelemark val soos nou.
With the 5 year claw back period aplying to the upfront and ongoing commision,the amount of commision that will be on risk every 3-4 years could skyrocket. Why not then have a seperate clawback with the upfront being 2 years and the ongoing 5 years,at least then the risk is reduced for us but you still need to give ongoing service to the client. I must say it would be better to ask no commision and just ask a monthly fee to the client for service and ongoing advise,at least then there would be no future risk for the client or us. This claw back period could put brokers in serious financial risk within the following 3-5 years, especialy if the economy takes a dip.Thay would rather cancel their r/a and savings than life cover. what a pitty the treasury and LOA had the oportunity to set things right now the risk isonly shifted to the intermediary.
My concern is that not all has been exposed about the claw back of commission that intermediaries/financial advisors are subjected to ‘ hence ; About 2 years ago there was a debate on 3rd Degree , the programme on ETV , suggesting that the penalties that policy holders suffered were due largely to the commission that financial advisors received . This debate was attended by a well known analyst who writes for Personal Finance of Independent Newspapers and who I believe is a financial advisor as well. I emailed ETV re 3rd Degree and my comments were such ; Please ask the financial advisor attending your debate why he on national TV, did not stand up for the advisors and correct the myth about commission being the reason for low surrender values . THE TRUTH OF THE MATTER IS THAT WHEN A CONTRACT IS SURRENDED , COMMISSION IS CLAWED BACK , and as this is the case , what has happened to this reversal of commission. It stands to reason that if the claw backs were passed on to the clients , there would not have been the big uproar about low surrender values. DO THE PUBLIC KNOW THAT WE AS FINANCIAL ADVISORS HAVE COMMISSION CLAWBACKS ON SURRENDERS AND HENCE THIS IS NOT THE REASON FOR PENALTIES ON CANCELLED POLICIES. Kind regards PS To date I have not had a reply from ETV , whom had invited any comments with regards to this particular programme .
How do you reconcile this proposal with the Dep. of Finance's drive to get people to save and invest? Retirement savings is the biggest financial obligation you have to yourself in your life. Now I must do the same work for 35% less commision - I don't think so. Spread the commision over a longer period - no problem. In a democracy you cannot arbitrary reduce or remove someones income because you simply have a certain point of view. This is a dangerous business practice and should not be tolerated.
Although I support the proposals in principal I have difficulty in understanding and accepting that the proposals cater for scenario's of "advivce without remuneration" as well as "remuneration without advice".
It is so very interesting that treasury has a complete lapse of mind as far as the role of all the different taxes are concerned in the reduction of the nett yield obtained by savers on endowments and ra's. Can anybody tell me who makes the most of the back of the poor saver in the end? Is it the financial planner, the insurer or SARS?
I believe less savings and RA s will be sold nowBut wat about life policies????That is where most commission is payable to a planner.
These proposals should provide a huge boost for Unit trust RA's - up to 3% comm (paid monthly), place for a trail fee and no claw backs, ever! What is everyone waiting for?
The issue of As and When Comm is a bug bear. As a planner, I consider that I only give the client correct advice and do not sell for commission. Should I die, what happens to the commission. My work is professional and "now". I should be paid accordingly. I do however agree that when funds are transferred from one company to another, there should be no commissions apart from a trail commission as the client has already paid a fee. Clients should not be forced to pay for the same thing twice.
I have long been of the opinion that an intermediary should not take an upfront commission on a recurring premium investment product. So no argument there. What I do have a problem with, is where the broker can't transfer a retirement annuity to another insurance or investment company where the original insurance company turns out to be a lame duck. In that case, unless the client is prepared to pay the broker fees for the work involved to move the money around to a more viable destination - and few of them are - then the client has to stay with the lame duck company. There are a few lame duck investment companies out there that started out brilliantly a few years ago, with all kinds of incentives, such as no initial or reduced investment fees, that have failed to deliver. Then there is the assurance company that flatly refuses to pay trail fees at all, even though the broker still has to look after those portfolios. We all know the one I mean, the one that sent out e-mails recently wanting to know which of us intermediaries has R50m assets under indirect management with other investment companies. I think there is a great deal of hypocrisy flying around here.
Comments