The Commissions-to-Fees challenge

One of the challenges I have set myself in Mentor Circle is to help advisers solve the problem of moving away from insurance commissions to fees for advice.

There is no shortage of risk advisers who say they have tried, and conclude it can’t be done.  And yet the problem has been solved by independent financial planning practices across the country.

They provide insurance advice, as part of an advice package; and they do it for fees only.  They don’t accept commissions because they can’t.  It’s part of the independence rules.

Besides the ‘independents’, there are many other fee-only advisers who reside in commission-based, non-independent licensee groups who have made a similar journey.

But simply asking existing clients to suddenly start paying fees, after having been conditioned to the commission concept for years, won’t work. I’d say no too, if I was already paying rising premiums and couldn’t perceive any additional value in return the requested fee.

It doesn’t mean that insurance isn’t valuable. It most certainly is.  The problem is that clients value the acquisition of their insurance cover because that’s what they pay for.  Whereas they should also be valuing the advice they receive from their adviser.

Although clients might highly appreciate the advice, they don’t value it because they don’t pay for it.  The insurer does.

For decades, clients have been happy for advisers to accept commissions in lieu of having to pay for the advice from their own pockets.  But what that has done is positioned risk insurance as a commodity, and unintentionally created the illusion of free advice in the mind of the client.

I am acutely aware of the under insurance problem in Australia, but we have to find a way to work within the ever-moving legislative environment that is advice.

I would rather start developing solutions now before the next government or the one after decides to further tinker with the commission rules.

If this is a challenges that you would like to solve, join Mentor Circle at