FPA responds to ASIC report into life insurance advisers
The Financial Planning Association of Australia (FPA) has today responded to the report from the Australian Securities & Investment Commission (ASIC) into the life insurance advice industry.
The report refers to over 200 pieces of insurance advice that have been reviewed by ASIC with the report covering lapse rates and advice quality. The report noted product innovation by insurers and age-based premium increases as some of the drivers behind high lapse rates. The report also raised concerns with training and competency for insurance advisers. This further reinforces the need to raise financial adviser education standards as proposed in the FPA’s submission to the Parliamentary Joint Committee (PJC) Inquiry.
Whilst the FPA is not sure that any of its members have been involved in the advice given, the report reinforces the benefits and need for professional standards such as the FPA Code of professional practice. FPA members are bound by a Code of Professional Practice and as a professional association, the FPA is a firm advocate for higher professional and education standards. Irrespective of remuneration models, FPA members are bound by its Code of Conduct and are held accountable to this. Specifically the FPA can point to Rule 4.10 in the Code that states:
The Member must only make a financial planning recommendation to a client requiring the client to dispose of, cancel, or replace one product or service with another where it is consistent with the requirements in Rule 4.7 and appropriate for the client having regard to any cost, benefit, risks or adverse consequence of:
(a) acquiring the replacement product or service;
(b) maintaining the existing service or holding the existing product; and
(c) disposing of, or cancelling, the existing product or service.
Any FPA member found to breach rule 4.10 will be subject to the FPA disciplinary process. The FPA has a Life Risk Specialistion (LRS®), however its disciplinary records show negligible complaints, less than one per year since 2009, made against FPA members relating to life insurance advice.
Mr Rantall stated that “The issues of product design, distribution and embedded product commissions should be looked at by the product manufacturing sector as noted in the recommendations of the report.
“The FPA is focused on advice and we will review the ASIC report and suggested recommendation to review training and the proposed checklist. We are happy to work with other professional associations in the advice space to see how the advice process, guidance or education can be improved.”
“Most financial planners do the right thing and act in their clients’ best interest, providing high quality advice to their clients.”
The FPA submits that many of the issues within the life insurance industry relate to product design, regulatory barriers, pricing, data feeds and public confidence in insurance companies.
Mr Rantall concluded by saying: “We all know that as a nation we are grossly under-insured. Australians need to have appropriate advice on their insurance needs and a professionally qualified financial planner can provide that advice.
This recent report should not discourage consumers from turning to a professional for advice – but it does again highlight the need for consumers to turn to a trusted, certified financial planner.”