While ASIC’s review of risk advice has raised concerns the industry should take seriously, “question marks” about the investigative methodology remain, says the AFA.
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.
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