“I know that the regulators are watching it,” said Christopher Dewdney, an advisor with DWL Financial Services Inc., “and it could potentially come to Canada – I hope not but it could potentially come to (here).”
The Trowbridge Report was recently published in Australia recommending commissions be capped at $1,200 and limited to trailers of 20 per cent of the policy value for the duration of the contract.
“It seems that our regulators here are paying very close attention to what’s going on Down Under,” said Dewdney. “Right now we have CRM2 on the investment side and the potential banning of embedded commissions on the mutual funds. Capping the upfront commission – I don’t know what they’re trying to gain or the end result of that.”
With CRM2 chugging towards final implementation in Canada, life insurance advisors are worried about what any step towards a fee-based structure could do – not only for their sector, but also for clients.
“The net impact of going fee-based is clients get underinsured and underserviced,” said Jorge Ramos, senior estate planning consultant at The McClelland Financial Group at Assante Capital Management Ltd.
“That’s going to create longer-term problems for clients. Then they’re going to become a burden on the government. So having a society that has enough insurance and has saved enough is actually a better situation and if that means they have to have full commissions to get that advice that’s what it (means).”
Dewdney also pointed out a cap on commissions diminishes the amount of work an advisor has put in on complex policies.
“If you’re looking at something like a succession plan, a transfer of assets or mitigation of taxation on an estate… the work that’s involved behind it, you should be compensated for that work,” said Dewdney. “I don’t know, maybe they have a hybrid solution if that was to go forward.”
Canadian advisors are on alert with Australian regulators looking at implementing a cap on commissions.