The corporate regulator will accelerate its monitoring of risk advice services and is on the lookout for financial advisers guilty of churning insurance policies in breach of the FOFA Best Interests Duty.
Speaking at last week’s Finsia conference, ASIC senior executive leader, financial advisers, Louise Macaulay said risk advisers are about to come under the regulatory microscope.
“We are embarking on a major surveillance of life insurance advice to review and assess whether advisers are acting in the best interests [of clients] when advising around changing policies,” Ms Macaulay said.
“We will be looking specifically at instances of churn where there is excessive switching between policies in order to maximise upfront commissions and the client is not left any better off.”
The regulator expressed concerns that the risk specialist advice sector may be more susceptible to cases of “inappropriate advice which has a detrimental impact on consumers”.
While product commissions for risk products have not been banned outright by the FOFA reforms, the fiduciary duty imposed on financial advisers under the regime should help stamp out instances of churning, Ms Macaulay said.
“The bottom line is that while commissions might not be banned, other FOFA obligations such as best interests do apply,” she said.
ASIC will also be engaging with insurance providers to investigate the ways they offer remuneration to advisers that may be churning, she added.
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