AFA welcomes FSC backdown on 'churn' policy
The Financial Services Council's (FSC's) backdown on its 'churning' policy has been welcomed by the Association of Financial Advisers (AFA).
FSC chief executive John Brogden announced late yesterday that his organisation had abandoned its application to the Australian Competition and Consumer Commission (ACCC) to obtain class order relief from sections of the Trade Practice Act.
The class order relief would have been necessary to implement the FSC's industry-wide 'churning' policy.
AFA chief executive Brad Fox said he was pleased that the FSC had reconsidered its position, but he was quick to point out that the issue of sustainability was "still on the table".
"The right way forward from here is for the AFA to work with the FSC on continuing to address the issue, but find ways to work on the problem that are even-handed in resolving it," said Fox.
Pricing pressures, particularly in the group insurance space, are likely having a far greater effect on sustainability than 'churning' in the advice-based distribution channel, said Fox.
The onus is on the insurance companies and the FSC to produce the evidence that churning is a serious problem, he added.
"We would like to see the FSC provide the market with some data that shows the evidence of the problem - other than just pointing to profit or loss over a given period of time on their insurance books," Fox said.
Synchron director Don Trapnell also welcomed the FSC's decision, which came after he announced his organisation would challenge the FSC's application to the ACCC "rigorously".
"Synchron is very proud to have rallied in defence of advisers and led the debate challenging the FSC's view of the world," Trapnell said.
Trapnell added that Synchron would be willing to support a new model for adviser remuneration if it was driven by competitive forces, rather than implemented arbitrarily.
"If life insurance companies truly believe that longer responsibility periods will result in savings to the end consumer, Synchron would encourage them to build products that recognise these savings and bring them to market," he said.
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