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Category Life Insurance

My soapbox - Churning is alive and well

07 September 2006 Angelo Coppola

One of our readers raised an interesting issue recently. It centres on the fact that at least one life office hasn't sorted itself out yet, and expects the broker or intermediary to work for gratis.

The issue centres on the upgrading of legacy policies to the new platforms, with three of the big players having come to the party, although the most recent entrant hasn't got it quite right.

Momentum and Sanlam appear to be on the right track, but Old Mutual SA, according to our reader has a flawed process, as it appears that they (Old Mutual) won't pay ongoing commission to the new servicing broker.

It appears that the company in question expects the servicing broker to organise the transfer, quotation, print it, advise the client on their new fund selection, visit the client to get the forms signed, submit the forms, observe compliance procedures and be liable under FAIS for their advice for no reward whatsoever.

Does this make any kind of business sense - our reader wants to know? Their marketing literature claims that there is no further need for churning, and yet there appears to be no incentive to the servicing broker to do the right thing?

The new policies offer the client better investment choices as well as improved flexibility - the supplier will benefit from retained clients and reduced costs as the legacy systems get cleaned out, while the intermediary gets burdened with more costs and responsibilities.

If the National Treasury new commission proposals are to be adhered to, in terms of ongoing commission going to the servicing broker, then it appears that Old Mutual is on the wrong track?

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QUESTION

SA’s 2025 Budget appears unlikely to introduce major tax hikes, but bracket creep, fiscal debt, and policy uncertainty remain key concerns. What will have the biggest impact on financial planning after the budget?

ANSWER

Bracket creep
Government debt
Laffer Curve effects
Policy uncertainty
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