Fees vs Commission Based Financial Planning for Property

Earlier this month, a representative from an insurance company (that will not be named) had sent me an email. Assuming that I was an Estate Agent, the email presented me with a sales tactic that would drastically increase my income from house sales had I been a property agent. Highlighting a paragraph from the email, this is how the information was presented, word for word:


“Mr. Andrew (age 45) and Mrs. Adel (age 44) Smith have just bought a R 3 million house, and their request for a home loan has just been approved. So even through transfer has not yet happened, they have now met all suspensive conditions, and hence have become liable for the full purchase value of the home.   

At this time you could sit down and assist with a Mortgage Protection Cover for the Smiths. 

A quote for Life Cover and accelerated lump-sum disability cover for R 3 million each means their mortgage loan cover will be R 3 048.00 per month.”

Let’s unpack this study further.

At face value, Mr. and Mrs. Smith are delighted to finally receive their dream home. Below the surface, the bad news – that they don’t even realise – implies that:

  • The cost of the life cover will add an additional value of R 731,520.00 to the price of their home loan, provided that the price of the life cover does not increase.
  • The policy generates R 26,976.00 commission value on the issuing of the policy, and again, in the 13th month of the policy another R 8,991.00 is generated in the second year of commissions. Altogether, the Smith’s will be paying R 35,967.00 in commission fees for minimal work; and in this case, they’re actually assisting the buyer in making the bond cover very easy to execute.

Northwood Financial Services cc is a fees-based financial planning firm. When we, as fee-based service providers, “sell” policies, we don’t earn a single cent from the sale as commission-based planners do.

In the case study of Mr. and Mrs. Smith, our clients; for the exact same plan, and from the same insurer; would pay considerably less than R 3,048.00 per month. Also, their total payments over the lifetime of the home loan (mentioned above as well into the thousands) would be considerably less.

As fees-based financial planners, we charge an annual fee, disclosed upfront before any dealings commence. As all of the advice and insurance costs are already included in the fee, there are no hidden costs to the client.

In the case of Mr. and Mrs. Smith, they would have paid R6000.00 plus vat for the first year’s financial advice alone. With a fee-based financial planner, they would have saved over R 20,000.00.

If you are interested in beginning your journey toward financial freedom with a fee-based financial planner, contact Northwood Financial Services cc and talk to one of our consultants.

To read more about the difference between fee-based and commission-based financial planning, read the following post.

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