Dissecting the Numbers

The figures published in the Retail Distribution Review discussion document provide a very clear picture of the current make-up of the industry in terms of market segmentation of advisors.

In the past it was always difficult to distinguish between the number of “tied” representatives and those working for independent brokers. The table below, published in the RDR discussion document, provides statistics on the size and composition of the authorised intermediary population, using FAIS data as at May 2014:

Total number of FSPs 10 270
Total number of Representatives 113 532
Total number of Key Individuals 10 865
Insurer FSPs  98
Insurer Representatives (Persons) 38 318
Insurer Juristic Representatives 924
Insurer Key Individuals  298
Bank FSPs 40
Bank Representatives (Persons) 19 961
Bank Juristic Representatives 4
Bank Key Individuals 78
Total number of Insurer Representatives
(incl. juristic)
39 242
Percentage of Total Reps that are Insurer Representatives 34.6%
Total number of Bank Representatives 19 961
Percentage of total Representatives that are Bank Representatives 17.6%
Total number of Bank & Insurer Representatives 59 281
Percentage of total Representatives that are Insurer & Bank Representatives: 52.2%

A footnote states that the statistics concerning registered representatives only provide an indication of the actual position:

  • Currently there is no separate designation for “tied” representatives and
  • It is possible for the same individual to be registered as a representative of more than one FSP.

In most instances, insurer representatives are contracted to provide advice or intermediary services in relation to that insurer’s products only. Accordingly, it is reasonable to assume that the majority of insurer representatives are “tied”. There may be some duplication where insurers agree that their representatives may also sell another insurer’s products, but this is limited to an agreement between the insurers, and not between the representative and the other insurer.

Where bank representatives are concerned, they may or may not be restricted to providing services in relation to products of the bank only. Even where bank representatives are not so restricted, business models are often in place that encourage bank representatives to focus their attention on marketing products of financial institutions within the banking group – for example the products of an associated insurer.

The table above therefore also combines statistics of insurer and bank representatives to reflect the percentage of total representatives that are either tied or, even where not fully tied, would typically have an allegiance to the products of a particular group.

The data in the table therefore suggests that more than a third of all registered representatives are tied agents of insurers, and that just over half of all representatives represent a banking and/or insurance group. The balance of 47% of representatives contained in the statistics represents an FSP that is neither a bank nor an insurer, and are, in most cases multi-tied representatives.

In the insurance context, an adviser contracted to multiple product suppliers to distribute their products (usually through commission paying contracts) is defined in our current legislation as an “independent intermediary”. In certain other jurisdictions this type of intermediary is referred to as “multi-tied”, a concept not currently used in our legislation, but sometimes used in practice.

These intermediaries are also commonly referred to as “brokers” or “brokerages” (terms not defined in legislation), depending on whether they are natural or juristic persons. In terms of our common law, they are regarded (at least in certain respects) as the agent of the customer to whom they provide advice in spite of the fact that they are remunerated by the product supplier.

In practice some of the services they provide in addition to intermediary services could be seen as administrative services that are, in effect, outsourced to them by product suppliers and provided for and on behalf of the product supplier.

A further element in this regard concerns the Regulator’s intention to set standards to clarify and strengthen the principle of “equivalence of reward” as the basis on which long-term insurers may remunerate their tied advisers. “These standards will confirm that the principle of equivalence applies at the level of each individual tied adviser.”

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