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Risk advice: fees versus commission

The age-old debate about fees versus commissions has become a distant memory in the financial planning industry, with advisers no longer able to charge commissions relating to investments for new or existing clients.

However, in the risk advice world the debate rages on, and new research recently released by Metlife has added fuel to the fire. The research suggests most Australians (78 per cent) with life insurance purchased through an adviser would prefer to pay an upfront fee for advice – provided it meant lower premiums over the lifetime of the policy.

This caveat is important, because they’re understandably only willing to make this change in exchange for some level of personal benefit, namely a reduction in premiums.

Disclaimer: I’m not a fan of the commission structure in general. I think it lacks transparency, and essentially devalues the important role an adviser plays in the mind of the consumer.

If you’re putting your hand in your pocket, you know exactly what you’re paying and you’re making a conscious choice that the product or service is worth the fee you’re being charged. Ostensibly, you perceive value in what you’re buying. If you’re not paying a fee directly, then you’re no longer making that conscious choice.

This assumption is backed up by CoreData’s research, which suggests only half of consumers (51.6 per cent) with life insurance cover outside super know how much this costs them each year.

This article was originally published by riskinfo – click the image below to read the full version

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