In an article published by ifa sister title Risk Adviser, Dover Financial Advisers’ managing director said that, for risk insurance in particular, APLs are better described as ‘banned product lists’ as they are, by omission, a list of products the adviser can’t recommend.
He said most AFSLs only allow two or three insurers on their APL.
“Most insurers, and therefore most insurance products, are effectively banned,” Mr McMaster said. “Many more products are not on the list than are on the list. Most AFSLs ban most insurance products.”
Mr McMaster said APLs are nothing more than an AFSL convention to control their advisers, with many AFSLs banning them from recommending most insurance products because of financial motivations.
He said most AFSLs only allow advisers to recommend insurance products where they or a related party, such as a shareholder, benefit financially from the adviser’s product recommendation.
In such situations, Mr McMaster said the adviser, as a result, is involved in “three clear breaches of the Corporations Act“: section 961B, regarding the duty to act in the client’s best interests, section 961G, regarding the duty to provide appropriate advice, and section 961J, regarding the duty to prioritise the client’s interests.
In addition, the AFSL has also breached sections of the Corporations Act, according to Mr McMaster.
“If the AFSL has deliberately set things up this way, the AFSL is breaching section 912A, which is the general section requiring it to run an effective and efficient AFSL,” he said.
“The AFSL is also breaching section 961L, which requires reasonable steps to ensure advisers comply with the above three duties.”
Well put Terry, has anyone ever looked if the Trade practises act is being breached by only offering one solution ,house brand over any other solution?It would be interesting to have some clarity on this.
The big 5 guilty of this but, one lot of rules for some . The advisers are just pawns in the game . Should get interesting once LIF starts biting us hard.
Our profession/industry needs just a tad more transparency.
Not just the “say it” type, where this or that bias is folded in amongst the moribund creases of biblical-level paperwork we aim at clients. I’m talking about open, honest, ethical transparency.
Not the “best interest” rubbish that is paraded as “best practise” when in fact, it is just another example of Gatekeeper modus operandi. APL’s are a naked example. In the auspices of research/knowledge/suitability, most APL’s stop short of multiple choices in particular areas. This is often caused by outright product direction but often just as a matter of simplicity and for ease of adviser/advice monitoring/compliance.
In fact, APL’s and Compliance has become the biggest form of Gatekeeper bias in the Australian financial planning marketplace. That’s compliance with a big “C” – the kind that is easier to regulate, easier to audit and easier to present to professional indemnity insurers.
Next in line is the extremely faulted “risk profile” analysis system. On average, it excludes the biggest asset class for most Australians – residential property – and directs client portfolios heavily towards diversified managed funds. Not saying that is right or wrong but it’s another form of bias.
Most advisers want to call themselves independent because they charge the same amount regardless of where the client’s money goes. Yet that only deals with one form of bias, and is heavily faulted as a “catch-all” for clients to be able to rely upon.
From a client perspective – there are people who want to deal with a big institution. Even when being aware of the vertical integration bias. There are people who don’t care whether fees are product-borne or direct debit or South Pacific sea-shells – so long as they get the best the adviser can offer. And there are those who want to know their advice is not being influenced. Those are the people that need a better way of balancing the bias/imperatives their adviser is operating under.
Until the discussion becomes more nuanced, it is just spitting into the wind.
On the other hand – throw away the ASIC requirement to be licensed through a dealer, and the cat would really be thrown amongst the pigeons. Unfortunately, the glaringly foolish antics going on in CPL don’t exactly benefit the direct-licensing/industry association argument..
Ah yes the world according to Terry. The ongoing problem faced may not be selection of product but rather the appropriateness of the advice. Large APLs do not guarantee advice suitable to the clients circumstance.
Banks are shocking for this. I do not understand how they still get away with it!!
If limited APSL’s are bad, then why does Terry need to insert his own personal product preferences when vetting Dover’s advisers’ SOAs?
About time someone came out and said this Terry Mac.But What happens on tour stays on tour. You’ve just broken the first law of fight club I mean dealer group land. Advisers need to read between the lines here. He said APL’s are used to allow advisers to recommend products “”where they or a related party, such as a shareholder, benefit financially from the adviser’s product recommendation.”” but it’s the “”Adviser”” that must act in the best interest and prioritise the clients interest. So the AFSL holder is off the hook and the blame is squarely on the shoulders of the adviser. Yet dealer group fees are high, red tape is up and AFSL’s are off the hook. Highlights why the dealer group model is living in the 80’s and fat dealer group heads are just getting fatter.