Speaking at a press conference at the association’s national conference in Cairns yesterday, AFA CEO Brad Fox said stakeholders should take the review’s sample size and possible limitations into account.
“It certainly has been a targeted piece of research to the extent that they defined very tightly where to look,” Mr Fox said.
“There are some question marks around how representative this sample is – and I think anytime you are only looking at 70-odd advisers, it’s not enough to be fully representative – but to have found the levels of failure, especially on upfront commissions suggests we do need to look at this.”
Mr Fox also suggested that some identified cases of “failure” in the report may not have had adverse client outcomes attached, explaining that while some advisers may have had good reasons to switch a client’s insurance policies, failure to properly articulate the benefits in an SOA would be considered a “fail” by the regulator.
“The way this is being judged, there are some cases where the failure found is actually a failure of the adviser to do their job in terms of recording the reasons for the advice,” he said. “That’s a lesson.”
However, while there may be questions around the ability for the review to be considered “statistically significant”, the AFA boss said the upside is that the report was clear about which practices are being followed well and which need improvement from a compliance perspective.
He also called on insurers to play their part, arguing the outcome of the review should be greater “accountability for the entire value chain” in insurance.
“Our job is to make sure [product manufacturers] take [the report] seriously,” he said.
The AFA has announced it will co-convene a working group with the FSC to address the report’s concerns.
The review essentially asked the Insurers which Advisers had high lapse rates and then reviewed their files and the results are!!! Would be interesting to see what type of Advice was produced from an unbiased sample of Advisors. Even better if the advice could be divided up -so could see the Bank-planners, aligned-planers, independent and telephone advisors. Not sure ASIC, industry funds or Banks would like that – but at least would find out what the risk advice industry was really like and also if different licensee models a yielded different results.
Better supervision of business written required. That should be easy given it all flows through commission statements. Get rid of 60 page risk SOAs and make an industry standardised file note that can be called up by the insurer and licensee at will. No file note or an incomplete file note equals no policy completion. Probably see less churning as a result.
Do you really think an unsophisticated retail client could wade through several replacement policy tables and the other 50 pages of RG requirements? Cut the crap to the consumer and allow more time and money on better direct supervision.
The risk advice is still likely better than no insurance advice in the ISA world…
Speaking of which, any word of ASIC investigating the Licencee and the financial transactions behind ISA funds and all these rorts and corruption that are currently in court? Or are they going to do a ‘Storm’ yet again and stick their head in the sand until it all blows up?
Maybe a conflict of interest to investigate their Labor/Union mates… Much easier to target 70 advisers and go to the media to make up look bad yet again.
There was never any doubt in anyone’s mind that there was a pre-determined outcome looking for a process to justify it. The sample size is totally inappropriate to draw any conclusion or result from.
I understand there may be up to 18,000 Financial Planners and Advisers in Australia and if this is correct, the sample size of 70-odd advisers, represents .40%.
Concluding results from any profession or industry based on this sample size is negligent.Imagine ASIC sampling .40% of Accountants and then concluding that there is an endemic and widespread issue.The reaction would be deafening.
So, where does the licensee fit in the review? They must know who is rewriting a book of business, has higher than average lapse rates, reviews of files for replacement business maybe not done correctly?, BUT no mention of there responsibility!
Words of wisdom from Brad Fox as usual. Admire his willingness to say it as it is!