Adviser group Synchron wants an alternative adviser remuneration model driven by competitive forces rather than the model being proposed by the Financial Services Council (FSC).

The council has proposed a “clawback” process in relation to upfront commissions, with 100% of the payment being clawed back if the policy lapses in the first year.

There is a sliding scale of clawback for lapses in year two and three of the policy.

Synchron Director Don Trapnell yesterday criticised the arrangement under which life insurers are working with the FSC to create a uniform remuneration policy for advisers.

“That is anti-competitive and Synchron will never support that kind of behaviour,” he said.

The one-year adviser responsibility for life policies was introduced in the mid-1980s due to market forces.

“In the 1970s, advisers had a three-year responsibility period; by the 1980s, due to competitive pressures, this moved to a two-year responsibility,” Mr Trapnell said.

“These changes were the result of a competitive market at work.”

He says policies lapse for a variety of reasons, many of which are outside the adviser’s control.

“It’s a fact of life that client circumstances change and what once suited them may not suit them three or even two years later,” he said.

“This is not the fault of advisers and advisers should not be penalised for it.”