In its submission to the parliamentary inquiry into the life insurance industry, seen by ifa, the corporate regulator explained that its “regulatory experience” has produced evidence that “advice providers operating within a vertically integrated group tend to recommend in-house products over non-related products”.
In addition, the submission suggests that this in-house product bias is visible even when broad approved product lists (APLs) are in place allowing advisers to recommend financial products that are not linked to their licensee or owner.
While ASIC continues to support broader APLs in general, the submission suggests that any move to mandate APLs that include a multitude of products will not necessarily “improve quality of advice”.
The situation is not endemic to the institutionally-aligned sector, the submission states.
“Even in circumstances where an advice provider does not operate within a vertically integrated group, a wider APL may not protect consumers from the poor outcomes that can result where the adviser has a conflict of interest,” it said.
ASIC noted the conclusion to its review of retail life insurance advice, REP 413, saying the drivers of poor quality retail life insurance advice were adviser incentives and failure to consider the relationship between life insurance and superannuation.
The submission also suggested that an over-reliance on APLs may lead to poor advice if advisers do not conduct proper research on the client’s existing non-APL products before providing ‘switching advice’.
Wouldn’t it make sense?
There’s more scope to get line-ball cases over the line or loadings wiped for clients etc when they are dealing with a product that’s aligned. There’s more sway to get the business through. Isn’t this in the best interests of the client?
As a non-aligned adviser, I receive referrals from other advisers, who have had to give up as they couldn’t get the right result, so I am able to work in the clients best interest by having so much flexibility and the knowledge and experience of who and where to place with. If you are saying that placing clients in an in house product get blanket favorable treatment and the risk isn’t being priced correctly, then let me know who this insurer is and I’ll never write them again. The industry is already facing sustainability issues, so if this is true and it’s just another reason why vertical integration is a bad idea.
If you dont want a CBA product , don’t wander in to a CBA bank !! Its called business and competition.I work with a dealer group , if you dont like their products , move to another one or become independent .
That’s fair enough, although as has been mentioned elsewhere people who choose to go to a CBA, AMP, MLC etc branded adviser expect the adviser to recommended products from those companies.
However consumers who go to Financial Wisdom, Garvan Financial Planning, or Securitor do not.
the practices that institutionally aligned dealer groups use to brainwash advisers into thinking the home team is great should be investigated and are anti competitive. Once you break free of the cult and move away from these bank associated dealer groups you realize you were brainwashed.
Pot calling kettle black? It seems brainwashing comes from zealots with a narrow view of how things should/must be done. No deviations from the mantra! If it is not done our way then it must be bad.
Agreed. Attribution analysis of investment performance shows that 90% of return comes from asset allocation selection not product selection. Also behavioural studies such as Dalbar outline the wealth destruction caused by investors panicking when markets fall and following the herd when markets are up. The value add of an adviser is therefore in helping clients determine their asset allocation and helping them stay on track with this strategy. This independence fluff is all about the self righteous few trying to market themselves to pretend they offer something special despite the research showing it is BS.
100% correct! In fact, the actual figures are even more stark. More than 95% of the returns come from asset allocation the rest from investment manager selection. ASIC themselves acknowledge the value add of “psychological benefits” of financial advice. so why i am mired in red tape and being persecuted. Why are they focusing on signing date of forms. do they actually understand anything ?
As a member of a Vertically aligned dealership, I can say this. Our Life insurance offering is generally across 4 insurers , who for various reasons fit our (customers) needs which has a lot to do with who our “target” market is.
One of the 4 does happen to be related to the dealer group, BUT they are by no means our go to option, in fact they place second or third on our preferred list by volume. naturally this changes over time, BUT they are by no means our major insurance go to option.
where super platforms are concerned, we have selected a number of options based (once again) the profile of the targeted client, taking into considerations for example account size and investment menu, amongst other factors. moreover we have chosen to go out side the Dealer Group to consult on aspects of our investment and insurance philosophy. I’m not sure what else we can do to be anymore transparent or unbiased. I cant speak for the bank channel of dealer group options, but in my experience many of the advisers I have met over the years, many like me don’t appreciate the notion that we do as the Dealer group wants / expects, vs what we believe is best for our clients.
I don’t think you’re quite the free thinker you think you are. How much do those insurance companies pay in shelf fees to be 1 of those 4 on the APL. Or is that commercially sensitive information.
Everyone will nod their head if you ask them if they believe “innovation” is critical to a flourishing industry, sector or business. Innovation is much more than conceiving of a concept (ideas are a dime a dozen), but implementing it and accepting the risk that comes with development and implementation. If we want innovation and thus better products, better ways to do things, more choice and ultimately better outcomes for consumers, then we need a regulatory environment that encourages innovation and that means allowing businesses to explore ideas, develop products and get them to market. And what markets will these be? Their own markets! That’s right, their own vertical network. The innovator must be prepared to take the risk that it doesn’t work. The innovator is not going to convince someone else to let them ‘experiment’ with a market that is not their own. If we have a regulatory environment that doesn’t allow internal development and distribution then there will be no innovation at all. Everyone loses especially consumers.
the regulator is not interested in innovation. they are interested in finding someone to blame. just as long as it’s not them, they are happy. they don’t want to see anything from the consumers or competition perspective that’s not in their mandate
the blame culture in australia is disgraceful. let’s find the root cause(s) of issues and I guarantee you they can be drilled down to two things. 1. ethics 2. insufficient education and training. so how about we stop the blame game, collaborate as an industry and implement a code of ethics [b]AND[/b][u][/u] raise the education requirement to at [b]least[/b][i][/i][u][/u] post graduate or equivalent. this will go a long ways to solving 99% of the issues plaguing the industry
Clearly this fails to take into account the relationship between the adviser and the vertically integrated business ie employee or business owner licenced through an owned dealer group. Another example of the regulator making broad statement without sufficient evidence. Very selective to support their predetermined position.
Wake me up when ASIC realises that customers that go to an aligned and badged adviser are seeking the product with the same logo as the one of the adviser’s door. Once we get there we can talk about what defines an an adviser and a product representative and maybe have some workable legislation around that…
Correct up to a point. As others have commented, people who choose to go to a CBA, AMP, MLC etc branded adviser expect the adviser to recommended products from those companies.
However consumers who go to Financial Wisdom, Charter, or Godfrey Pembroke do not. Aligned advice firms who operate under quasi independent branding is where consumers are being misled. The law needs to change to ensure that any advice firm owned or controlled by a product provider, is branded identically to that product provider.
Whoa, what a revelation!! Well done ASIC, nobody had any idea this was happening!!!
What next…? Ford dealerships sell predominately Ford vehicles?
Mind blown.