'Set aside indemnity cash to reduce fear of clawback'
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Fortis Life UK managing director Martin Werth says advisers need to learn to survive on 80 per cent of their indemnity commission as he warns that the threat of clawback may be holding advisers back from writing new business.
He says the threat of clawback is always in the back of the adviser’s mind and questions whether it may hold advisers back from revisiting past sales.
He says: “We always know there is a risk that a customer cancels their plan and a result of this is unexpected clawback for the adviser. Is this something that will support an additional sale or question whether the initial sale was right?”
To mitigate clawback risks, Werth suggests that advisers should be putting aside about 20 per cent of their indemnity commission.
He adds: “Advisers need to put that money aside in cash because at some point it is going to be required.
“Alternatively, they could take a lower level of initial commission and a higher level of renewal commission. Having a stream of renewable income is a big positive in demonstrating that a business has value.”
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