HERSCH: MDRT President Jennifer
Borislow and AALU Regulatory Reform Committee Chair Larry Rybka
warn that advisors’ practices are increasingly threatened by government
restrictions on agent compensation,
most notably in respect to commissions. What government regulations
are you facing in your respective
countries and how well are you dealing with them?
ASHE: In the U.S., one area of concern in the health insurance market is
the imposition of the medical loss ratio [of the 2010 Dodd-Frank Act which
has effectively imposed price controls
on life insurance companies as well
as limits on what agents can get paid.
The result is that agents who sell
insurance have experienced a 20% to
80% reduction in commissions.
The second big area of concern is
the proposed fiduciary standard for
broker-dealers. Underpinning the
proposal is a belief that only advisors who operate under a fiduciary
standard can act in the client’s best
interest and that commissions are
BAKER: In the U.K., we’re just six
months away from implementing one
of the largest shake-ups in financial
services in the last 30 years: the Retail Distribution Review. The legislation affects not just commissions, but
also renewal commissions.
On January 1, 2013, every advisor
will have to satisfy new educational
National Underwriter Life & Health • July 2012 46
“ The resale value of their practices has been totally com- promised with the stroke of a pen.” - Ashe
requirements of the U.K.’s Financial Services Authority. There has
been a massive loss of agents from
the industry because of the time
and cost of retraining. If you’re an
independent advisor after January 1,
then you can only accept fee-based
One of the most significant issues stemming from the new law is
renewal commissions on policies.
Clients must have the opportunity to
discontinue renewal commissions
if they believe they’re not receiving
adequate advice or service.
For agents who have been in the
business a long time, this change
could have a massive effect on their
income. We expect that many clients
will cash out policies and buy new
ones so they can turn off renewal
commissions, which advisors can
only receive for sales concluded
BRALEY: Not much has happened
in Canada bearing on compensation.
But I imagine that Canada will abolish commissions at some point.
Many of the major insurers in
Canada are now auditing our files
on a “friendly basis.” This auditing
used to be limited to mutual funds
and other investment products for
compliance; now it’s happening with
life insurance products.
MORRISON: We in New Zealand
are half-way between the regulatory regimes of Canada and the
U.K. Since enactment of the Financial Services Act of 2008, which
was fully implemented 18 months
ago, all investment advisors must
meet educational requirements of
a revised version of the National
Certificate in Financial Services—
unless they satisfy recognized
alternative qualifications or designations—to become an Authorised
Most advisors have taken six
months away from their practices to
do this. As of 18 months ago, if you
weren’t an AFA, then you couldn’t
sell investment-based products.
Originally, the new educational re-
“These changes have dramatically affected pension planning in the U.K. and have advisors asking, “What’s next?”
quirements were supposed to cover
both insurance and investments,
but the government didn’t have the
systems to cope with getting every-
one through the AFA program. So
they scaled back the requirement to