Despite continuing dissent in its ranks the Financial Services Council NZ (FSC) was unlikely to bleed more members, according to sources familiar with the matter.
The resignation of four members in the space of a few months has prompted fears the industry body representing big-end-of-town insurance and investment firms could be on the verge of implosion.
As revealed by Investment News NZ (IN NZ) last week, insurer Partners Life resigned the FSC in protest at the organisation’s as-yet-unreleased report on the local life insurance industry. At the same time, US-headquartered insurer, AIA, also tendered its FSC notice citing similar concerns.
However, Fidelity and Asteron – both life insurance companies that rely on third-party advisers for distribution – have signaled they would remain with the organisation despite opposing some of the findings of the FSC report.
A current FSC member told IN NZ, Asteron NZ would toe-the-line with its Australian parent (owned by Queensland-based financial services group, Suncorp), which has backed similar life insurance reforms across the Tasman.
Peter Neilson, FSC chief, said: “I don’t comment on member activity.”
In an earlier exclusive, IN NZ reported AMP had handed in its 12-month notice to the FSC about six months ago, with the ASB-owned Sovereign also resigning months ago. The FSC upped the notice period from three months to a year last November to ensure all current members at that time would share restructuring costs.
Based on the time-frame, it’s clear the resignations of AMP and Sovereign were unrelated to the FSC life insurance report, which was only commissioned this July.
While draft versions of the life insurance report – authored by actuarial consulting firm Melville Jessup Weaver (MJW) – have been circulating with FSC board members since September, its final recommendations have been closely-guarded.
However, it was widely expected that the MJW analysis, to be published next Monday, would closely follow the findings of last year’s so-called ‘Trowbridge’ report on the Australian life insurance industry.
The Trowbridge report led to major changes in the Australian life insurance industry with the government there signing off earlier this month on a raft of reforms including a cap on upfront commissions of 60 per cent and limiting ongoing payments to advisers of 20 per cent.
It is understood, the NZ report would recommend a limit on upfront commissions of 70 per cent. Media reports pricing the MJW report at over $500,000 were grossly inaccurate, sources says, with the true cost was less than half that.
In a statement issued early this November, FSC Australia director of policy, Andrew Bragg, endorsed the Australian life insurance reforms.
“If consumer outcomes do not improve, the Government has given a clear commitment to implement the Financial System Inquiry’s recommendation of a level commission model in 2018,” Bragg said in the statement.
“As the financial advice profession matures, we expect all financial advisers to move to a fee-for-service model”
While FSC Australia and FSC New Zealand are not related entities they share a name and similar branding.