Introduction

The problem of commission-driven miss-selling, has been previously the subject of discussion, within consumer groups, politicians and the insurance industry. In May 2004, the research bureau ECORYS-NEI, conducted research for the Ministry of Finances on the operation of the mortgage recommendation market. In its report ECORYS-NEI concluded that intermediaries seemed to attach more importance to their own financial position than the interests of the consumer. Intermediaries, motivated by the commission which they receive, recommend unnecessarily complex products more often than non commission receiving intermediaries. Mortgage consultants would through “perverse” impetuses be seduced to thinking especially of their own financial position

The lobbies of the commission agents, in the meantime, recognize at a management level the need for transparency. After consultation between the Ministry of Finance, lobbies, the consumer association, and i- house associations, October 2009 was chosen as the date from which there would be openness about the level of commissions.

Advios believes that the confidence of consumers can only be regained when the problem of commission related sales is overcome. We expect that most commission agents will adopt complete commission transparency before October 2009, as a result of persistent public pressure  and increasing competition from modern internet commission agents.Through the website, www.advios.nl, in 2001 Advios was the first insurance commission agent in the Netherlands to introduce a separation between the price of a product and the price of a service. The innovative internet commission agent from Utrecht informed consumers actively about the level of insurance product commissions and maximized the commission to an absolute amount. According to Advios, this method of working guarantees a completely independent financial recommendation, not issued on account of its commission income.

On the 30 August 2006, the Dutch Minister for Economic Affairs granted Advios the predicate “Techno Partner”. The Techno Partner action plan aims at moving the Dutch economy towards a knowledge-based economy. The Techno Partner predicate has been received because "Advios demonstrated innovative approaches in the sector in which it operates with the open manner of commission indication and offering services via the internet, substantially distinguishing Advios from other insurance commission agents".

By 2010 Holland must be one of the most dynamic and competitive knowledge-based economies in Europe. According to the report, action for innovation, from the Ministry of Economic Matters innovation is renewal which occurs in the form of products, services, processes and organization. The essence of innovation is converting knowledge in to money.

In the Money Guide of April 2006, the consumer association expressed strong support again for the concept behind the commission ceiling. The consumer association describes the commission ceiling as “no more than logical” and illustrates this with an example: if a consultant arranges a mortgage of €200,000 or €400,000 there is little difference in the amount of work. Nevertheless the remuneration for the more expensive mortgage will be higher.

Our cooperation partner for mortgage arrangement (=Retourion Hypotheken) scored particularly well in comparison with other consultants. The “investigation” only looked at the level of the commission returned. A large objective study into mortgage brokers has since been announced by the consumer association.

Advios is the first insurance commission agent in Holland which has introduced a separation between the price of a product and the price of a service. The idea behind the introduction of the commission ceiling corresponds exactly with the concept of the consumer association. At Advios the level of the bonus commission plays absolutely no role in day to day recommendation practise.

The whole concept of the commission ceiling aims at giving an independent financial recommendation. Advios has for many years been a fierce opponent of “commission related sales”; in commission related sales the financial adviser aims at selling products which give him the most commission. The giving of openness over the level of the commission and the subsequent commission, maximized to an absolute sum, is in our opinion the only correct solution for banishing commission related sales.

Abolish bonus commission

The consumer association calls return commission a step in the right direction, but indicates at the same time that return commission does not guarantee an independent recommendation. Clarity is required over the total commission received by a consultant for an involvement.
The consumer association is here referring to the present system of bonuses. In addition to the one-off commission (after achieving a definite mortgage product from a loan supplier) a bonus is paid. According to the consumer association lenders give this bonus to mortgage brokers for them to become “preferred suppliers”. The consumer association and Own House Society are openly campaigning for the abolition of the bonus commissions so that an entirely independent advice is possible.

Advios support the consumer association in its pursuit to abolish the bonus schemes in the insurance sector. But there is the feeling that striving to abolish the bonus commission schemes is a meaningless fight. The bonus is a part of the cooperation contract between an insurance company and an insurance office. All the intermediate insurers in the Netherlands pay a bonus when certain targets have been obtained by the commission agent. It was no more than logical that insurance companies aim to establish a “preferred supplier” associated with their office, and the commission bonus has been seen by insurance companies as means of securing business.

A general prohibition on bonuses is not realistic according to Advios, certainly when you think that only a hand full of commission agents want to abolish the current bonus structure. Thousands of other commission agents and the intermediate insurers are satisfied concerning the current scheme of bonus commission. In several other sectors and also other countries, bonus commission systems are used, and as soon as it is decided legally that bonus commissions are no longer permitted then the same law must also be administered in other sectors. Commission related sales are not only restricted to the insurance sector and to Holland.

Advios has been officially certified by the Task Force Innovation committee as an innovative company. Task Force Innovation has been set-up with the aim of promoting innovation in Holland. Task Force Innovation is supported by large renowned organizations such as Syntens, Cap Gemini, Berenschot, University of Nyenrode,Utrecht College , ING, Fortis, Rabobank and ABN AMRO.

"Advios has a lead on the competition”

The final judgement of the committee was positive both concerning the business concept and concerning the entrepreneur. The committee noted that Ralph Geissen (28 years old) is resolute with his own forceful opinion. He typifies the future generations and this will work to his advantage. The concept is unique because of the combination of the commission ceiling and the recommendation modules, giving Advios a lead on the competition.

Syntens has evaluated the recommendation module. Syntens is bullish over the commercial prospects because consumers will increasingly use interactive modules of financial comparison sites.

The forty page business plan is being enacted in a number of phases. The aim is to obtain a position in the top 3 of the Dutch financial comparison sites.

In the MoneyGuide of September 2004, the Consumentenbond has published the outcome of a large study into financial comparison sites. In the research 13 internet sites were assessed.

According to the Consumentenbond no impartial recommendation can be made by a financial comparison site unless there is openness concerning the level of the commission. The possibility always exists that this type of site aims to push one towards a certain product producing more commission, but a product not the most advantageous for the client.

The association refers to the commission ceiling which Expiratieweb has introduced in 2001: “Expiratieweb.nl imposes a commission ceiling of € 680. This means that the commission for an insurance product will never be greater than €680 and where the standard commission is greater than €680 the client receives the surplus as a one off bonus payment.

The commission ceiling is the maximum reward for the service, the client always receives a commission statement quoting the level of the commission so that there will not be the slightest doubt. In contrast to the fixed remuneration per offer inquiry each quotation of Expiratieweb is completely free of obligation and the client receives no charge when the standard commission is lower than the commission ceiling.