Bound or unbound: What you should look for in your insurance advisor

What is the VAG revision?

The ISA revision is a revision of the Insurance Supervision Act (ISA), which regulates the activities of intermediaries in the insurance sector. The aim of the revision is to introduce stricter rules for the qualification and conduct of intermediaries in order to improve customer protection. Intermediaries must meet new requirements with regard to training, further training and transparency in remuneration.

Tied and untied intermediaries - what's the difference?

A tied agent is an advisor who is contractually bound to one or more insurance companies and mainly offers their products. Their recommendations can therefore be influenced by the interests of the company they work for.

An independent intermediary, on the other hand, works independently of insurance companies and has access to products from various providers. He can therefore provide more objective advice and act in the best interests of the customer. However, the VAG revision imposes stricter requirements on independent intermediaries, while tied intermediaries are partially exempt from them.

Unequal conditions

The revision imposes strict requirements on independent intermediaries: Education and training, transparency in remuneration and detailed disclosure of working practices. These measures are aimed at increasing the quality of advice and strengthening customer protection. But why do these strict requirements not also apply to tied agents?

Tied agents are often bound by corporate objectives that are broken down to them and in practice often overlap with the client's objectives. In this environment in particular, it would be especially important to create the same conditions as for independent intermediaries - especially with regard to transparent, commission-based remuneration models, which can put the advisor in a potential conflict of interest.

Lack of representation of private client brokers

The negotiations on the ISA revision were mainly conducted with the Swiss Brokers' Association SIBA. This is where the core problem lies: SIBA primarily represents wholesale brokers who specialize in corporate clients. Private clients, who have the greatest need for protection, were largely ignored.

Why were the leading private client brokers or innovative start-ups that are committed to financial education and advisor-autonomous services not included in the negotiation process? Nor was the Swiss Financial Planners Association, which has precisely the expertise to represent the interests of private clients, consulted.

Protection for private clients remains piecemeal

The basic idea of the ISA revision - to improve protection for private clients - is laudable. However, in its current form, its implementation remains half-hearted and leaves many questions unanswered. There is a lack of a balanced approach that holds both tied and non-tied intermediaries equally accountable. The actual needs of private customers are falling by the wayside, while the regulatory hurdles for independent intermediaries continue to rise.

Possible solutions for fairer regulation

In order to make the ISA revision fairer and more effective, the following solutions should be considered:

1. Equal standards for tied and non-tied intermediaries: training and continuing education requirements, transparency in remuneration and consideration of client objectives must apply equally to all intermediaries - tied and non-tied. This would reduce conflicts of interest and increase the overall quality of advice.

2. Involvement of relevant stakeholders: It is essential that retail brokers, independent financial planners and start-ups that promote financial education are also consulted in future negotiations on regulatory changes. These players are closer to the needs of private clients and could make valuable contributions to the discussion.

3. Clearer definition of commission models: To avoid conflicts of interest, clear and transparent rules for commission-based remuneration should be established. These should be designed in such a way that advisors act primarily in the interests of the client without getting into conflict situations due to internal group guidelines.

4. Better training opportunities: The financial sector is evolving rapidly, particularly in the area of digital services. Intermediaries should have access to practical and future-oriented training opportunities that not only cover regulatory requirements, but also topics such as digital advisory tools and sustainable financial planning.

Conclusion: What should you as a customer pay attention to now?

The VAG revision is a step in the right direction, but there is still room for improvement. Until the desired improvements have been implemented, you as a client should be particularly vigilant. If you work with an advisor, ask specifically whether they are tied or untied. Untied brokers can often offer a wider range of products, while tied brokers may be more focused on specific insurers.

Ask for transparency about the advisor's remuneration models - for both tied and non-tied intermediaries. It is important to know if and how commissions could influence the advice you receive. Make sure that your financial interests are at the center of the advice and not the intermediary's business objectives.

By taking these precautions, you can better orient yourself and benefit from the reform while the regulation is still being improved.

About the author

Philippe Muntwyler is CEO of Caveo and a seasoned financial planner with over 15 years of experience in the insurance and pension industry. As an advocate of financial education and digital transformation in the financial industry, he is committed to sustainable change in the advisory landscape. With his expertise and passion for modern technology, he co-developed the first robo-advisor for pensions in Switzerland. Philippe is also a podcaster and regularly shares his insights on LinkedIn, where he discusses topics related to financial planning, pensions and the future of the industry. You can find out more about Philippe Muntwyler on LinkedIn.