ASIC has admitted it believes there is an implicit product bias within vertically integrated businesses, but says broader APLs will not solve the problem.
In its submission to the parliamentary inquiry into the life insurance industry, seen by ifa, the corporate regulator explained that its “regulatory experience” has produced evidence that “advice providers operating within a vertically integrated group tend to recommend in-house products over non-related products”.
In addition, the submission suggests that this in-house product bias is visible even when broad approved product lists (APLs) are in place allowing advisers to recommend financial products that are not linked to their licensee or owner.
While ASIC continues to support broader APLs in general, the submission suggests that any move to mandate APLs that include a multitude of products will not necessarily “improve quality of advice”.
The situation is not endemic to the institutionally-aligned sector, the submission states.
“Even in circumstances where an advice provider does not operate within a vertically integrated group, a wider APL may not protect consumers from the poor outcomes that can result where the adviser has a conflict of interest,” it said.
ASIC noted the conclusion to its review of retail life insurance advice, REP 413, saying the drivers of poor quality retail life insurance advice were adviser incentives and failure to consider the relationship between life insurance and superannuation.
The submission also suggested that an over-reliance on APLs may lead to poor advice if advisers do not conduct proper research on the client’s existing non-APL products before providing ‘switching advice’.
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