Having recently participated in meetings of financial services industry stakeholders in Canberra, at which ASIC’s surveillance of financial advisers specialising in insurance was a major topic, FPA general manager, policy and conduct, Dante De Gori raised concerns about the ‘churn’ debate.
“The issue of the adviser motivation and conduct and behaviour is paramount in terms of ASIC’s surveillance of advice around insurance, but there are a number of pieces of the insurance jigsaw puzzle that are broken,” Mr De Gori told ifa yesterday.
“There are a whole range of things that need to be fixed,” he said, singling out deficiencies in product design, the claims and underwriting process, disputes over data feeds and the under-insurance problem in Australia.
“The remuneration issue is the one that ASIC can swing a stick at to fix – but it will not fix the underlying cause, just a symptom,” he said, calling for the industry to do a “deep dive into things people don’t want to talk about” with regards to insurance advice.
At the same time, Mr De Gori emphasised that where adviser recommendations to switch policies are “motivated by remuneration or greed” this is a serious issue, even where there is “no client detriment”, since churning is influenced by the adviser’s best interests, not the client’s.
The comments follow a press conference held by the FPA in Sydney yesterday in which the industry association said it had received “little to no complaints” from clients regarding instance of churning.
FPA chief executive Mark Rantall said the association would investigate any instances of churning brought to its attention by licensees or insurers, and if necessary take enforcement action, including “remediation, suspension or termination”.
The corporate regulator first indicated its plans to conduct a widespread surveillance project for the risk advice sector in September, when ASIC’s senior executive leader, financial advisers, Louise Macaulay said the key focus would be assessing “whether advisers are acting in the best interests [of clients] when advising around changing policies”.
Good on FPA for standing up for our collective rights, identifying clearly the issues and that we all should not be fiscally punished due to the actions of a few unscrupulous practitioners.
Hope to see more of this type of activity by the FPA in the media.
This is typicl of the FPA. It knows churning is a problem but wants to bury its head in the sand and blame everyone else but the Advisers that are doing it.
The problem is that the FPA is there to represent (and protect) the Advisers not the public. As such they cannot, and should not, be relied upon to take enforcement action. It is not, and nor should it be, the role of the FPA to investigate/punish Advisers – this is ASIC’s role.
Most clients don’t understand how much commission is generated for advisers when they are churned, and they certainly don’t understand the various commission options that the Adviser can choose between.
If you want to solve the problem then either remove commissions altogether or make providers only offer level commissions to Advisers. This way clients would only be moved when it is in the clients best interest not the Advisers.