How commissions work

What commission is

Commission is a payment a product provider makes to an adviser when a client takes out a product through that adviser. For Mutual Solutions, the providers are insurers, KiwiSaver and investment providers, and home loan lenders.

It is the main way we are paid. It is how most New Zealand advice businesses like ours are funded, and it means you can usually get personalised advice without paying us directly.

Who pays commission

The product provider pays it, out of its own revenue. You do not pay it to us, and it is not added as a separate charge on your policy, loan or account.

Commission is paid to Mutual Solutions Limited, the Financial Advice Provider, not to the adviser personally.

Upfront commission

When a new insurance policy starts, the insurer pays an upfront commission. It is worked out as a percentage of the first year's premium and, depending on the insurer and product, typically ranges from about 100% to 230% of that premium. For health insurance the range is lower, typically 10% to 170%.

This payment reflects the work involved in assessing your needs, comparing options, preparing your Statement of Advice, and managing the application and underwriting process. Upfront commission is also what an insurer can claw back if the policy is cancelled early, which is covered below.

Ongoing (renewal) commission

For each year an insurance policy stays in force, the insurer pays a smaller ongoing commission, typically between 2.5% and 30% of the annual premium depending on the product and insurer.

This is what funds the ongoing service we provide, including annual reviews of your cover, help with changes to your policy, and standing beside you through a claim.

KiwiSaver and investment commission

KiwiSaver and investment providers we work with may pay a one-off member commission when you join through us, typically up to $200, and an ongoing commission based on your balance, typically between 0.20% and 0.50% per year.

This ongoing amount is paid by the provider from the fees it already charges. It is not deducted from your balance as a separate adviser fee.

Home loan (lender) commission

When a home loan arranged through us settles, the lender pays a commission based on the loan amount. Some lenders also pay a small ongoing trail commission for as long as the loan remains with them.

Home loan advice is provided under our separate Home Loan Disclosure Guide, which sets out the lenders we work with and the commission each one pays. We will give you that guide before any mortgage engagement.

Insurance clawback and client recoupment

If an insurance policy is cancelled or materially reduced within the first 24 months, the insurer can require Mutual Solutions to repay some or all of the upfront commission. That is known as a clawback, and in some circumstances we may pass part of that cost on to you.

We include this because it is fair for you to know about it before you take out cover, not after. The full wording is in our disclosure statement.

How we manage the conflict

Being paid by providers, and working with a selected group of them, creates an obvious conflict of interest. We do not pretend it does not exist. We manage it like this:

1. We assess your needs in writing before we look at any product or what it pays.
2. We compare the options available from our providers where appropriate, using a research matrix, and document why we recommend what we do.
3. Your Statement of Advice shows the commission and any other benefit we receive for the recommendation.
4. We keep records of our advice, and it is reviewed internally and, where required, independently.
5. The adviser completes an annual conflicts attestation and ongoing training.
6. If you think a conflict has affected our advice, you can complain to us and escalate to FSCL at no cost.

Full details are in the conflicts of interest section of our disclosure statement.

Advice must be based on your needs

The law is clear on this. Under the Financial Markets Conduct Act 2013, we must give priority to your interests, and our advice must not be materially influenced by what we are paid. Commission is how the business is funded. It is not how we decide what to recommend.

If a product that pays us less, or nothing at all, is the right one for you, that is what we will recommend. If you ever feel that has not been the case, please tell us.