ASIC and the government must increase scrutiny of dealer groups when it comes to misconduct occurring in the advice sector, an industry veteran has told a parliamentary committee.
Speaking to the parliamentary joint committee on corporations and financial services: life insurance industry in a session held last Friday, a former member of the life insurance industry has called for more scrutiny of dealer groups in regard to misconduct occurring in the sector.
Bill Crawford, who joined the life insurance industry in 1969, has held a number of senior roles for various companies and who has worked for the Commonwealth Bank, discussed the issue of customer churning in the life insurance sector.
“ASIC has indicated to this committee that adviser churn has been identified as a new project and that ASIC seem to be wanting to move to a fee for service model to stop the churn. However, there is another significant party that has had little consideration – and that is the role of the licensee or the dealer group,” Mr Crawford told the committee.
“What is it that the dealer groups are doing? In my time as a dealer manager we did extensive audits on advisers and we actually reported to ASIC about any adverse findings in those audits. I just wonder if this churning is going ahead as it appears to be – why are the dealer groups doing it? They have a responsibility to manage all these situations.”
Mr Crawford said that often “the dealer doesn't care – the dealer's revenue is based on revenue earned by advisers”.
There are also questionable tactics occurring in the industry between licensees and product providers in regard to ‘training days’, Mr Crawford said, whereby money exchanges hands between the the life company and the licensee and “low and behold their product is on the product list”.
The committee requested that Mr Crawford submit further evidence to add to discussion on the issue.
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