By now, you’ve likely seen the story of James Kessel, a 46-year-old diesel mechanic from Wee Waa in NSW who suffered a severe heart attack.
Insured with CommInsure for $1 million in trauma cover, when the time came to claim, James only received $25,000.
As an adviser I felt compelled to comment on this developing story. There are so many aspects relevant to the adviser community right now, especially in light of the reforms, and it is always particularly troubling to see individuals and families being sold products that let them down when they need them most.
The independence of a bank’s in-house financial adviser
Firstly, how did James come to this policy? Did he seek it out off his own back or was it purchased through bank channels?
Banks recommend their own products. They receive bonuses for sales. You should consider the impartiality of bank-based financial advisers recommending their own products. Absolutely, it could be the best product for you, but I am curious to know what James’s Statement of Advice said in this case.
Churning versus reasonable review
Churning is when advisers review a policy unnecessarily to pocket more commission. It’s getting a lot of attention and has been cited as one of the main reasons for reform in the sector.
But when is it not churning? When is it a reasonable process, to review a client’s products and ensure that it will meet their needs if the time comes? According to the article, James had been paying premiums on this policy for ‘most of his adult life’. When was this policy last reviewed?
Advisers should be up to date on their client’s policies and, if a family history surfaces or there is a change in the market place that could affect a client if they try to claim, the policy should be reviewed. This isn’t churning, and an adviser who doesn’t in these circumstances is not acting in the client’s best interests.
Fear mongering and industry reform
The article makes the assertion that ‘… the $44 billion life insurance sector has been a problem industry for decades. It is riddled with conflicts of interest such as the generous commissions paid to advisers to flog policies.’
I will simply refer to my recent article in Risk Adviser, where I made this statement:
‘One of the downsides of the recent focus on advisers has no doubt been the impact on legitimate, principled people who, regardless of qualifications, would behave with their clients’ best interests in mind… I would say that a degree does not equal a passion for working with people or on an overall empathy for a family’s financial security.’
Yes, there are issues in the sector (no one would deny it) and I’ve been an advocate for cleaning it up for a long time. However, I think journalists have a responsibility not to frighten consumers who may find themselves thinking: ‘Well, who do I trust now?’
There are people with principles in this industry who have clients’ best interests in mind.
Mark Rando is the managing director and a senior adviser of Rando & Associates
Nice rant Natalia! But let’s get on the same page here: we all try and help clients to the best of our abilities, and we all operate within the same laws and under the same best interests duty, but let’s not shy away from it, we are all also in it to earn a living for ourselves. As an ‘independent’, you probably have more pressure on you to produce ‘revenue!’ than I do because you need to keep the doors of your business open too. I doubt you’re operating a charity providing pro bono advice: you need to pay yourself, and likely have staff you need to pay too.
As for my ‘nerve’, at no point did I attempt to put bank planners on a pedestal, in fact, I’m not the kind of person who attacks others in our industry without knowing a thing about them (although in your case I’ll make an exception). All I have done is point out that it appears there was some extremely misleading journalism engaged in. And yes, I did watch the full 4 Corners story, and I’ve read all the Fairfax Media articles too. I guess I am of the opinion that there is always two sides to every story, and the current story is sensationalist in the extreme.
I guess it’s a good thing that most ‘independent’ advisers are too small for the media to come after, because there has certainly been plenty of scandals in that part of the industry too. I have personally known clients who were severely affected by Westpoint, Brandsmart, Storm Financial, and the many, many agribusiness collapses (Timbercorp, Great Southern, etc). ALL of these people received advice from ‘independents’. So “thanks for nothing”, and please don’t place the blame for everything that is wrong in our industry solely on my doorstep.
It has been literally months and months since I last commented on this forum, and attacks like yours are the reason why. I am a good person, and a good planner. I work hard for my clients, and I appreciate the fact that my job allows me to support my family while doing something I am passionate about and fully believe in. I am not responsible for the introduction of higher education standards, and with my work and family commitments the extra study is a burden, but one I willingly embrace if that’s what it takes to improve public perception and ensure clients continue to seek us all out for professional advice.
So Natalia, now you do know a little about me. Please feel free to keep making your generalist rants disparaging me and my colleagues. It really says more about you than it does me.
Bank planner please be advised bank branch planners with Westpac can only recommend BT Protection plans so not all banks offer more then their own product. Just remember it was the conduct of bank planners such as CBA planners with additional breaches with ANZ planners , Macquarie planners, NAB planners which brought the financial planning industry in to disrepute and destroyed the industry perception with the public. You have the nerve to put bank planners on a pedestal.
Bank planners are the cancer of the financial planning industry. Acting in clients best interest is something bank planners give lip service to but at the end of day all bank planners and management care about is revenue! revenue! revenue!
What is the gift the industry gets from bank planners?
Higher professional indemnity insurance costs not that bank planners care as the bank pays
Destroying reputation of financial services industry
Greater education costs to upgrade qualifications
Thanks for nothing Bank Planner
What other dodgy things to be revealed to the public? SMSF scandal maybe? The truth about CBA advice review and its numerous flaws only implemented to give the image that CBA cares and is now the ethical bank? What a joke. What other spin stories will the banks make?
In relation to the 4 corners story it seems there is a focus on the troponin levels but no one bring ups the facts that comminsure was deleting data. Contacting claimants doctors and pressuring them to change their medical reports. This was confirmed by the chief medical officer Dr Koh. It was very disappointing that this was happening in this day and age. Please see the full 4 corners story to put in prospective. Did ABC sensationalise ? Of course Holding up retail comminsure retail pds when even though some of the cases were group insurance through industry funds is clearly misleading. Industry funds insurance in general is of a very poor standard and is putting hundreds of thousands of policy holders and their families at risk as they can change definitions and you as a member can not do anything about it. When will industry funds be exposed?
So before trying to justify how great bank planners and how they are not to blame see what has happened so far and analyse the misconduct and damage banks and their planners have sowed in the industry.
well it was their AlpBC so I guess supporting the unions is more important than any truth.
Bank advisers may not be ‘independent’, but I can assure you that we can, and do, recommend insurance with a wide range of insurers and not just the ‘in-house’ product. (I did it just this afternoon.) And I don’t think it’s been made clear exactly who advised James Kessel to take out that policy: surely if it was a CBA adviser then Ms Ferguson wouldn’t have been able to resist working that into the story! I’d actually concluded that it was an ‘independent’ adviser.
My biggest concern about the 4 Corners piece is that it neglected to clearly explain that in most of the cases shown, the insurance these clients were relying on was group insurance through industry super funds. (Although getting each of the clients to hold up a CommInsure retail insurance PDS was a nice touch.) So all it really achieved was to contribute further to Australia’s under-insurance problem.
I would say that 1.2M is a large payout for anyone, regardless of the colour of their ‘collar’.
I originally published this article on LinkedIn prior to the 4 Corners piece being aired and; while not all my questions were answered either, my main points are clear: Bank advisers are not independent (so yes, this is not just a CommInsure issue), sensational journalism doesn’t reflect well on any of us and like you’ve been quoted as saying previously: ‘You can’t regulate honesty’.
Sorry – I must have missed something – you have wandered off in a rant about well intentioned advisers –
You have not addressed the trauma claim – incidentally $1.2 mil of trauma cover is very significant for a blue collar worker. Not unheard of but very significant.
the fact the ABC article did not properly delineate between the policy definition and the client doesn’t help the perception that is presents as a very bad look feeding into the widely held perception that insurers will do anything to dodge their responsibility.
Whilst its pointless to argue the merits one way or another without being party to the claim – I would think its well understood that a significant percentage of major insurers use this definition – and not Commminsure in isolation.
Maybe this is where the efforts of the LIF review should have placed its misguided efforts. – standardisation of definitions – which we all know is a bag of slippery worms.
A reasoned and articulate article as usual Mark. However, the ALP are being lead by the nose by the ISA sector and the Libs are too frightened to upset their FSC donors to do anything but ‘blame the adviser’ for all the ills in our industry.
CHOICE was a vocal proponent for FOFA on the basis that consumers need to be protected from unscrupulous advisers (and advice) but have been notably quiet throughout this entire LIF process. Why?? Probably because the last people to benefit from this flawed action will be consumers. But they don’t want to upset their socialist masters either.
When successive Government’s finally kill off the independent financial advice sector through knee-jerk, unsubstantiated, legislative over-kill – where will consumers go to get their financial advice?? The banks and vertically integrated product providers.
But where has the systemic and widespread failings in financial advice been originating from?? The banks and vertically integrated product providers.
Welcome to the brave new world people!!