When shopping around for private health insurance, consumers are asked to examine the cost and benefits of hospital and extras cover from over 20 providers. Australians in the market for a new car can compare and choose from 14 manufacturers and 30 brands, and those applying for a loan can select from 90 banks and credit unions.
But financial advisers, many of whom are degree-qualified and boast 20-30 years’ experience, shouldn’t have the freedom and autonomy to assess and compare all 11 APRA-regulated insurers in the market to determine the right fit for their clients, according to the Financial Services Council.
Reading the FSC’s draft APL standard, one could be forgiven for thinking that the FSC sees financial advisers as nothing more than distribution agents for their vertically-integrated members given the standard empowers licensees to restrict the number of insurers on their APLs to as little as two.
And the FSC isn’t alone in its views.
The head of a major life insurer was recently quoted in a rival trade publication suggesting that limited APLs are the trade-off between choice and the ability of advisers to “fully understand the breadth of propositions” given the competitive nature of Australia’s life insurance market.
(Whack!)
What a monumental insult!
It seems that despite decades of continuous reform, resulting in advisers becoming more educated, skilled and qualified than ever before, the FSC and its sympathisers still don’t see advisers as professionals.
They still believe it’s acceptable to try and influence advice by restricting product choice.
Under the FSC draft standard, APLs only need offer “choice of multiple life insurance providers”. It’s up to the discretion of FSC members to determine the number of insurers on their APLs and the process by which they get on there.
Based on the FSC’s lax guidelines, two insurers could be deemed adequate choice.
But that’s a significantly lower standard than that recommended by the 2015 Trowbridge report, which proposed at least half of all insurers. ClearView advocates completely open APLs.
It’s time for the financial services industry, led by its professional bodies and product manufacturers, to honour the beliefs it publicly espouses to uphold. Beliefs including the importance of product choice; the value of quality, objective advice; and the growing professionalism of financial advice.
It’s time for the industry to stand up for the practitioners it professes to admire.
Anything short of vehement opposition of the FSC’s standard only reinforces the lie that advisers don’t have the ability, and shouldn’t have the authority, to choose from all 11 retail life insurers in the market.
Silence effectively says that it’s okay for dealer groups to minimise and control product choice.
Yet choice is critical for fostering healthy competition and innovation. It encourages product providers to add value, and ensures a vibrant, sustainable market.
Consumers need choice, therefore advisers need choice.
After decades of examining policies, providing advice and dealing with insurance companies, advisers have earned the right to choose the most appropriate solutions for their clients.
That doesn’t necessarily mean they’ll recommend all 11 insurers.
In reality, many advisers who already enjoy access to the entire market stick primarily to the handful of insurers they know, through experience, will deliver great value and service, and pay claims.
If the industry is serious about delivering improved client outcomes it must advocate for open risk APLs to give advisers genuine choice and the ability to act solely in their clients’ best interest.
Chris Blaxland-Walker is general manager, distribution at ClearView.
solve all this and go back to how Mortgage industry works. Go to an institutions, get their loan. Go to a broker, get options across the market. Why should aligned business try and pretend. They are business, they don’t make money from selling others products.
Banks don’t get advice!
It’s a cruel irony that the FSC (The financial services council) the organisation tasked with making sense of bank advisers providing financial advice from an approved product list (APL, s) these are researched life insurance solutions from 11 of the APRA approved life insurance providers in Australia that an adviser can select from before making a recommendation to a client, after carefully considering each and every unique detail of a client circumstance.
Westpac only offer one life insurance solution offered by their owned BT Life.’” Customers need more financial advice, they need more insurance “said Westpac’s Brian Hartzer in his submission to the government inquiry.
Recently the FSC has suggested that perhaps two solutions in an APL would be suitable.
The reason I say cruel irony is because on the FSC linked site Lifewise, they raise the concern of underinsurance in Australia.
Affordability being just one factor why people either don’t have insurance or not enough cover.
Recently Zurich insurance has said that “cost “of being considered entry onto an approved product list is $800,000.
The opportunity to act in the client’s best interests is closed to most bank advisers and their clients the consumers. If they cannot consider and make recommendations from an open market.
“The savings that people could make by selecting from an open approved product list could be applied to buy more cover for example trauma insurance “
But it would seem that even the Sedgwick report into bank conflict and staff remuneration failed to shed light onto this issue.
One of the fundamental goals of the FOFA reforms has been to produce a uniform approach to the provision of high-quality advice. This cannot be achieved by bank advisers only offering house brand over other solutions
To add even further confusion ASIC have announced that under section 923a of the corporations act an adviser who has no affiliation with any product manufacture cannot call themselves Non- aligned where as a bank adviser who is aligned by nature of their employment with a bank and as a condition of that employment obliged to sell whatever the bank deems suitable, how then can a consumer compare the pair? The ethical issue the bank adviser has to face on a daily basis do they follow the spirt and wording of the FSC and the FPA code of conduct, to always look out for the client’s best interest, or risk getting sacked for not selling only what’s on offer thru the APL? Well from July 1 this will be put to the test, be interesting to see how many breaches are reported in the first week.
A dilemma that the Honourable Kelly O’Dwyer minister for financial services will take under consideration I’m sure? As she considers these impacts on an industry that represents $44 billion to the Australian economy.
Totally agree, but why not have the same mentality with your AR’s for platforms also? What seems to be coming out of Clearview at the moment is we want everyone to be able to write our stuff but who cares about anyone else, including the clients. Glass House at Clearview, APL’s in general are rubbish and outdated, what DG’s should be doing in the interest of their adviser’s and clients is selecting what particular investment funds and insurance providers they cannot use rather than the ones they can and given that Risk is so unique to a client circumstance I agree there should be no limitation at all, but should the same not apply to all aspects of financial planning, including platforms, direct investments, estate planning and Corp Super????? Agree with the article however I’m questioning the motivation.
A limited APL means limited opportunity for ‘proper’ fully fledged/appropriately researched advice. Perhaps an AFSL might like to comment as to why they undertake these pretend tender processes. Or better still, how about AMPFP, ANZFP, WestpacFP etc. reveal their basis for the ridiculous lock-out they have.
I previously worked at one of the big 4. Only that particular banks insurance products were on the APL. If another insurer was more appropriate for a client it would take 5 days and a ridiculous amount of research material provided to get One-Off Approval. I don’t see how this model allows the bank advisers to give advice in the clients best interest and don’t understand how they get away with it!! Sure an open APL could create problems with weak products but c’mon, one insurer on the APL??
If your big 4 was clearly branded as a big 4, then the client probably had a preference for that big 4’s products in the first place. Why else would they go there for advice rather to a non aligned adviser? Many people are quite willing to trade off product cost and features, for the comfort and convenience of using a brand they are familiar with.
However if your big 4 was deceptively branded to give the impression of being non aligned (eg Securitor, Financial Wisdom, RI Advice) then you, the client, ASIC, and ACCC would be quite right to complain that the consumer was being deceived and the advice was not in their best interests.
I’ve always thought that, with respect to product suitability and APLs, people read too much into the difference between a Big 4-branded practice and a Big 4-aligned practice. If these firms are competing in the market for financial advice services (and not the financial products they recommend) then the branding of the practice should be a distinction without a difference as far as the APL goes. In either case, the APL should be broad enough to allow the adviser to meet their best interests duty within the scale of services agreed between adviser and client. I wonder if this plays out in practice?
The client may have had a preference for the Big 4 branded product, but that did not mean that it was in the client’s best interest. It was very interesting to see that when CBA opened up their risk APL to other insurers (TAL and Asteron), that so many of their planners began using TAL over CommInsure that TAL were forced to add more staff. A clear indication that the previous (restricted to only CommInsure) APL was not considered in the client’s best interests!
Big difference between advisers who are employed/operate under a license branded in the name of the product that they are offering ie if i go to a CBA branch to see a CBA Financial Planner and i get offered a Comminsure policy (which is what you would expect) and going to see an adviser licensed with say Garvan and offering a product from MLC. All the different names are different and the client may not be able to determine that there is a common linkage through to the NAB. (Disclaimer: I dont know what is or isnt on Garvan’s APL, just used that to illustrate my point)
Plus sticking to the Garvan example. Whilst Comminsure might be on their APL, In return for a nice little wad of cash, Gavan head office has banned any Comminsure BDM contact, emails or any other form of communication, giving MLC the home team advantage and appearance to the ordinary Garvan adviser just how fantastic they are. A standard practice at many dealer groups.
Couldn’t agree more. Licensees are the biggest abusers of utilising limited APL’s for money, simple as that. If the industry was truly interested in the best interest of clients, it should be open APLs across the board. No sponsorships or sneaky margin money.
It’s no accident this article is written by Clearview’s Head of Distribution… Does that mean research Houses and Licensee Research teams are now redundant? Think of every dodgy product that could get sales under this principle (ala agri, unsecured notes…). Clearview have shown they only want access to more adviser sales to boost value…. Unfortunately for them, many of us remember how they’ve gone about getting sales in the past (ala Comminsure…)
I don’t think that’s what the article is getting at. If anything, an open APL means it’s harder to satisfy the best interests duty because the scope of possible alternative strategies and financial products that the adviser must consider is much wider. More and better research is required to make those decisions.
Spot on…. it’s lobbying for the sake of a boost in sales first and foremost, not in the interest of clients. It would carry more sincerity if it was written by someone in the dealer group or advice side rather than GM of Sales…. 🙂
And the time to required to fully investigate all the products on the open APL will make getting advice unaffordable for the average Australian.
Well Anonymous, this is why we have independent comparator software isn’t it? Not saying that sarcastically, the software I use is independent and I pay for it myself on a monthly basis . . . is yours?
Don’t see why Anon is getting so much negative feedback – the cost of reliable research is a real factor here. Open APLs introduce risk that has to be managed appropriately. Maybe the cost is not as dramatic as Anon suggests but it is real and not-insignificant.
My intention wasn’t to be negative to his comment at all, just comes across that way due to limitations of the written word I suppose. It was more a happy tongue-in-cheek comment. All good.
Excellent sentiments Chris. But, somehow, surely you cannot expect our “professional ” organizations to come out strongly against limited risk APLs while the insurers, who have been the key drivers of LIF changes, and fund the FSC , also fund, in one way or another, directly or indirectly, those same “Professional “bodies. At least not until hell freezes over !
If institutions don’t have faith in their employed advisers to have the capacity to research and choose appropriate policies why should consumers have faith in advice provided by those advisers at all?