The LICG has called on the FSC and consumer groups to look at all sides relating to allegations of churn, saying the LIF reforms cannot “protect consumers from themselves”.
The lobby group says the examples used to support a churning issue by financial advisers fail to consider all aspects of a situation.
It pointed to a case where a client was considered a victim of churning by his lawyers because an adviser had changed his policy and it resulted in a claim being denied.
However, the LICG said the client had ignored medical advice prior to the change in policy and his adviser would not have been aware of any health issues.
“If the adviser had known of medical issues, they would have deferred changing [the policy] until the medical issue was investigated or kept the original policy,” the LICG said.
“Reforms cannot address client intentional or unintentional non-disclosure. Reforms cannot protect consumers from themselves if they choose to ignore medical recommendations.”
The LICG urged the FSC and consumer groups to look at all issues relating to churn allegations.
“There are no statistics to prove (churn) exists and no definition of churn. The problem for the FSC is that statistics might prove there is no problem of churn, which would spoil the story and prevent the FSC members’ self-serving ‘fixing’ of adviser remuneration and clawback provisions,” the group said.
“If the FSC and consumer groups were interested in consumer outcomes, they would consider all issues relating to this story, not use it to supposedly prove a false premise.”
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