Tackle life insurance rort
Let us let you in on a little secret that some old-school financial planners and mobs like AMP don’t want you to know about.
There is a good chance you will be able to get back commissions you never see but which are now paid every year on your life insurance to a financial planner or a financial planning firm.
It can also apply to some other old-style financial products on which a planner might still be collecting an annual commission for tipping you into.
Or failing that, you might be able to put in place arrangements where a decent planner will rebate those commissions old-school planners are receiving each year for doing no work.
Many financial planning firms build handy retirement legacies from continuing commissions on financial products they might have flogged to you years or decades ago.
Very often those commissions started going to another financial planning firm when the planner you saw decided to retire, flog their business and head to their luxury apartment on the Gold Coast.
Unless you think you’re getting value from a financial planner, you really shouldn’t be paying them money and bolstering the value of their operation years after they provided you a service.
Your chance to save money comes from the modernisation of some aspects of the financial planning industry and some financial products over the course of this decade and some life insurance groups accepting that their industry needs to be dragged out of the dark ages of the 1970s.
But like all things in the deliberately complicated area of life insurance, there is not a simple answer.
There is no uniform way to stop paying a financial planner a continuing commission for having helped you a decade or more ago.
Rather, it depends on the company involved and even the product involved.
The simplest way can be if your life insurance is through groups such as BT, Maple Brown, Colonial First State and OnePath and you have a product where they will rebate commissions to you if you tell them you’re no longer using the adviser. Instead of the commission being paid to the financial planner who tipped you into the product, the part of your premium that was previously paid out as commission can generally be refunded to you.
Or the insurer can charge less for the products because there is not a big trailing commission built in.
Either way, you end up in front because the cost of your insurance can go down.
This is not only good for the household budget, it maximises financial choices as we get older.
Rapidly rising premiums can make people decide to get out of insurance in their late 50s.
Cutting out life insurance might be OK if you’re on top of your mortgage and your kids are off your hands.
But there are plenty of us who still have people who will financially suffer if we die.
The financial planner might not like the fact that you’ve cut off the commission, but they can hardly claim to be deserving of such payments if you haven’t seen them for a long time and have no reason to keep paying them.
It can be a bit more complicated with financial services groups AMP, Challenger, Zurich and Macquarie.
They refuse to rebate commissions to clients who choose to disconnect the adviser, instead either keeping it for themselves or allowing the lucky financial planning firm to receive money for nothing.
But there are ways you can get back at them with the help of commission rebate services or with the help of a good financial planners willing to offer proper service.
Like all things in the deliberately complicated area of life insurance, there is not a simple answer.