Fidelity aims for a sustainable commission structure

Fidelity Life is rolling out a new commission model that places persistence at the heart of its offering.

Friday March 19, 2021, 3:26 p.m.

Adrien riminton

The new structure is designed to be simple and transparent, says Adrian Riminton, director of distribution. But it is also about creating a sustainable model for the company.

Like Partners Life, Fidelity uses a tally sheet to define commission levels. The three factors in its matrix are persistence (60%), number of policies in force (30%) and conversion rate (10%).

Advisors are scored in five bands for these three measures.

A weighted score is then calculated and these correspond to four commission bands. The lowest commission is 150% and the highest 240%, with intermediate bands of 180% and 210% (see table below).

The new model was put in place before new CEO Melissa Cantell joined the company. She was happy with it and didn’t change anything.

“He has my full support,” she said.

The company clearly aims to improve perseverance. Currently, the overall persistence rates of its products are in the order of 90%, says Riminton.

Another change will see the simplification of the standing commission for new business, with renewal and service commissions being combined into a single rate of 10% and referred to as “service commission”.

Missing replacements

Last year, Partners Life rocked the industry when it decided to pay overage commissions to DPFs rather than dealer groups. This decision had many impacts on the market, including leading to the sale of Newpark to SHARE.

Riminton says Fidelity Life will not pay waiver commissions. Instead, the full amount of commission available is included in its new package (the highest being 240%).

This will be calculated at the FAP level.

How it is paid is a decision for the advisers. For example, if an advisor wanted to split the commission and include the payment of one part to a group of brokers, that would be possible.

He says some dealer groups are still trying to develop their models in the new licensing environment.

Fidelity supports dealer groups, he adds.

“We still believe that a number of groups provide valuable support to counselors.”

Fidelity also plans to introduce a new “commission on bid” payment to its compensation package.

While eligibility details will be confirmed in the coming months before July, the company estimates that 50% of all advisors will be eligible to receive a commission on submission. If they are eligible and choose to receive a commission on submission, they will receive a fixed amount of 30% of their total initial commission according to their dashboard calculation.

Below is an example of an advisor whose metrics are:

91% persistence
50 policies in force
70% conversion rate

A weighted average score is then calculated

The overall score then determines the commission levels

Tags: Fidelity Life Commission

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