Offshore life offices are “considering their position” in light of the initial findings of a major industry-sponsored research project into adviser remuneration in the international market.
The study, sponsored by member companies of the Association of International Life Offices (AILO) and carried out by specialist consultancy to the offshore industry Acuity, found advisers were keen to adapt their business models so that they received more mixed revenue sources, be they through the addition of recurring commission or fee income.
Advisers who participated in the research said the financial crisis – and associated drop in new business and therefore initial commission – had spurred them on to seeking more dependable sources of income that would also allow them to build long-term value into their businesses.
According to the findings, advisers also expect regulation to continue to tighten in a way similar to that of the UK – where commission is to be banned – meaning new remuneration structures are required.
However, they generally only highlighted regular premium products as being suitable for a recurring income model, meaning something different may need to be developed for single premium plans.
Product providers too will recognise the benefits of creating new fee structures that reduce upfront payments but carry regular income payments for advisers – not least because it may create greater persistency among investors and a more stable asset base for them.
Some 20 IFAs in Europe, Dubai, Singapore and Hong Kong were interviewed for the research, all of which were authorised businesses.
Bob Pain, chairman of AILO’s sales committee, said: “This consultation has formed an
important part of the ongoing dialogue between international advisers and cross-border life companies. AILO is committed to helping financial adviser firms prepare for the regulatory changes that are being introduced across the world, and the impact that these changes are likely to have on advisers’ relationships with their clients and on the advisers’ own businesses.”
Acuity said it was likely further consultation would be required before providers would act on the findings.
