Advisers will have the opportunity to increase the value of their new business thanks to a hybrid commission program to be launched by life insurer AIA Australia.
Called ‘transition to hybrid’, the program is designed to help advisers manage their cash flow as they move to a hybrid commission model, which AIA assert can provide greater value over time than upfront structures.
The general manager of life insurance, Damien Mu, said the program was developed because AIA Australia wanted to support its partners to develop and grow their business over the long term.
“Many advisers have told us that they want to be less dependent on up front revenues, and that they want to grow their recurring revenue,” he said. “Through this program, we believe we can assist advisers in managing their cash flow while transitioning them onto the hybrid commission model, which can increase the value of their business in the long run.”
Phil Anderson, the COO of the Association of Financial Advisers (AFA) told Wealth Insurance
that it's great to see life insurers helping out advisers to make the transition to a hybrid model.
"A lot of businesses have confronted that transition in recent years. It's tough in the first year you commence because none of your existing book is hybrid, and it's tough for new advisers who don't have a big client book." he said. "I think the hybrid message is good because the remuneration is staggered over time and it gives more incentive to meet the needs of the client. It's defintely a key part of the market and we expect to see it grow."
Advisers that join the AIA Australia program can receive 90% upfront commission for hybrid new business policies submitted in year one of the program, 87.5% for new business policies submitted in year two, and 85% for the same in year three.
Renewal commission, in respect of the second and subsequent years of a policy, remains unchanged.
The program, which commences on March 17, comes on the back of research through Forethought that revealed the preference for hybrid is expected to double over the next year.
However the research also showed that the cash flow gap that would result from a movement to the model was a big obstruction. The transition to hybrid program is designed to cover one-third of that gap.
By moving to the AIA hybrid structure, it’s anticipated that advisers could increase the value of their business by as much as 71% by the start of the fourth year in the program, and 93% at the end of year 10.