It comes after Tony Vidler, of Strictly Biz, said there was a strong perception among consumers and other professionals that advisers were not independent because of relationships they had with providers.

He said there were concerns that advisers all had an inherent bias.  “We have to accept that perception is a reality even if we don’t agree with it.”

Naylor said New Zealand had one of the lowest rates of independent financial advisers, per capita, in the world.

He said there was a real problem with the way insurance commissions are distributed.

Naylor said risk advisers were caught in a catch 22, where if they charged what their advice was worth, no one would want to pay it.

New Zealand insurance commission structures were out of line with the rest of the world and had increased over the past two decades, he said.

Typically, advisers would get twice the annual premium back on the initial sale, and no ongoing commission. “That gives an incentive to sell and then to churn.”

Most other countries paid a quarter of annual premium upfront and then a lot more as trail.

Naylor said all the insurance companies accepted their current commission structure was not a good model but none wanted to be the first to do something about it.

“It needs the Government to come in and say ‘these are the rules’. The companies would be quite happy about that. No one in the industry thinks the current commission structure is a sound way to do things.”

Vidler said regulation was not necessary. “It’s an issue of education more than anything else.”

He said existing regulation helped increase transparency but it was still optional to a degree. “It’s not applied evenly across the market… there is still a large proportion of the RFA world that doesn’t disclose in a fully transparent way, as the rest of the RFAs are. That creates an imbalance, which drives the perception [of a lack of independence].

He said if there was a simple regime that applied unilaterally there would be no room for doubt.