In an opinion piece published on sister publication ifa, ClearView general manager of distribution Christopher Blaxland-Walker said the FSC and its sympathisers still don’t see advisers as professionals and believe it’s acceptable to try and influence advice by restricting product choice.
Mr Blaxland-Walker said advisers must renounce the FSC’s draft APL standard.
“Anything short of vehement opposition of the FSC’s standard only reinforces the lie that advisers don’t have the ability, and shouldn’t have the authority, to choose from all 11 retail life insurers in the market,” he said.
“Silence effectively says that it’s okay for dealer groups to minimise and control product choice.”
After decades of examining policies, providing advice and dealing with insurance companies, advisers have earned the right to choose the most appropriate solutions for their clients, Mr Blaxland-Walker said.
However, this does not necessarily mean that advisers will recommend all 11 insurers.
“In reality, many advisers who already enjoy access to the entire market stick primarily to the handful of insurers they know through experience, will deliver great value and service, and pay claims,” Mr Blaxland-Walker said.
“If the industry is serious about delivering improved client outcomes, it must advocate for open risk APLs to give advisers genuine choice and the ability to act solely in their clients’ best interest.”
A completely open APL fundamentally underpins the principle of Best Interest Duty (BID) – though only when the adviser has sufficient education and receives no commissions. The outdated model of licencee dictated APL was to afford the licencee the most benefit, and this is no longer the case for many licencees.
Any licencee providing a restrictive APL (or perhaps an APL at all) is unduly influencing the choice of product for the client and, in the broadest definition, violating the principles of BID.
It does not matter if its Clearview or whomever but the FSC did make the play and now their members are now seeing the brunt of the result. I am sure the Government will also with company tax and GST coming off, as well as the loss of Stamp duty to the State Governments (10% for every Life Insurance Premium).
The falling cash flows are now obvious across the Financial Services Industry and the FSC is reaping the results of this for their membership. Well done FSC you policy has done nothing for consumers and trashed your members business models.
In regard to the regulator ASIC, rather than have us all write instructive 27 paged clear concise SOA’s for clients, perhaps first they ought to go back to the FSC and ask them how they plan on meeting the requirements of “acting in the clients best interests” with tied advisers!
It will be of course ignored by ASIC who do not quite understand the issues, but are at the same time trying to raise fees from an industry that will have falling cash flows due to ASIC and the FSC actions.
It will also be interesting to see the Treasury reaction to all of this.
The probability of 2 Life companies in Australia failing in the next year has now become much greater and the larger companies are not immune.
I have long maintained FOFA was ultimately a missed opportunity to to achieve genuine industry credibility. A restricted APL of any nature is ultimately doomed to fall short of a Clients Best Interests by its very nature. Ultimately perception dictates, you either Sell Product or Advise on the best products the market has to offer. It’s why I moved AFSL.
Clearview were not bleating when the FSC and them were slashing risk adviser revenue but now they want the same risk advisers to lobby for them to get on more APL’s.
Yet they want Clearview advisers to be writing mostly Clearview. Total hypocrisy!
When are these idiot insurance company execs going to wake up to the fact that there won’t be a lot of new risk business written by advisers in the future because we would be writing it at a loss!
There is nothing magical about an APL. It’s not required by law or by ASIC, and is simply a convention adopted by most AFSLs.
In the context of risk insurance products, with each of Australia’s 12 or so insurers heavily regulated by APRA and others, and all products being fundamentally viable, the concept of an APL is disingenuous.
Why would an AFSL not have every life office on its APL? They are all heavily regulated and their products (theoretically at least) are sound and viable. What further approval process should be needed?
Does that AFSL know something all those auditors, actuaries and APRA experts do not know?
In this context a non-open insurance APL is in effective a list of banned products.
Why are they banned?
Well, it cannot be because they are generally not appropriate and not in a client’s best interests. If that was the case then every other AFSL that did have them on its APL would be in breach of the Corporations Act.
More probably, they are banned because it’s not in the AFSL’s commercial interests to allow its advisers to recommend these products. That is, the AFSL is placing its own interests ahead of its clients’ interests.
This means a non-open insurance APL is automatically a breach of the Corporations Act.
Every AFSL that does not have an open insurance APL is automatically breaching one or more of the best interests duty, the appropriateness of advice rule or the prioritization of client interests rule.
And any adviser who cannot recommend the insurance product they believe is in their client’s best interests and is most appropriate to their client is also automatically in breach of the Corporations Act.
There is nothing magical about an APL. It’s not required by law or by ASIC, and is simply a convention adopted by most AFSLs.
In the context of risk insurance products, with each of Australia’s 12 or so insurers heavily regulated by APRA and others, and all products being fundamentally viable, the concept of an APL is disingenuous.
Why would an AFSL not have every life office on its APL? They are all heavily regulated and their products (theoretically at least) are sound and viable. What further approval process should be needed?
Does that AFSL know something all those auditors, actuaries and APRA experts do not know?
In this context a non-open insurance APL is in effective a list of banned products.
Why are they banned?
Well, it cannot be because they are generally not appropriate and not in a client’s best interests. If that was the case then every other AFSL that did have them on its APL would be in breach of the Corporations Act.
More probably, they are banned because it’s not in the AFSL’s commercial interests to allow its advisers to recommend these products. That is, the AFSL is placing its own interests ahead of its clients’ interests.
This means a non-open insurance APL is automatically a breach of the Corporations Act.
Every AFSL that does not have an open insurance APL is automatically breaching one or more of the best interests duty, the appropriateness of advice rule or the prioritization of client interests rule.
And any adviser who cannot recommend the insurance product they believe is in their client’s best interests and is most appropriate to their client is also automatically in breach of the Corporations Act.
Should the APL’s be open like Clearview’s where no other life company attends their PD days, conference or is allowed a contact list? Their APL might be open but the Licensee and Life Company are 100% vertically integrated… They are no different or better than the Life Companies they call out.
I would argue not only do we require open risk APL but also open Investment APL’s. As an adviser I will only recommend products I understand and have researched. Having a licensee telling me who I can choose from tells me they wish to protect themselves not the client or the adviser.
Clearview are open about expecting 70% of all business written by their advisers, to be written with Clearview. What’s the point of an “Open APL” if you write all business with the vertically aligned provider?
Seems a moot point really and a contradictory statement if they believe Advisers will typically stick to a preferred handful of Insurers anyway. Having worked in the industry for a number of years and closely with advice practices & management, many retail advice products are very similar in terms of product offering and comes down to service. Common opinion is where ClearView don’t have the systems to compete with the bigger players from a technology perspective.
Does that include opening up your investment platform APL ClearView???