Life/risk churn not systemic, claims AFA
The Association of Financial Advisers (AFA) is arguing that while 'churning' exists with respect to advisers selling life/risk products, there is no evidence to support that it is widespread or systemic.
AFA chief executive Richard Klipin has raised issues with a Financial Services Council consultation paper dealing with churn, and says the focus needs to be on addressing the continuing problem of underinsurance in Australia.
"Churning is rare and limited to a few isolated advisers," he said.
Klipin said that while it was important to stop the practice of churn, action needed to be focused on the actual advisers guilty of churning rather than the whole financial advice industry.
"It is also important that we clearly define what churn is and start to measure it," he said.
Klipin said the AFA believed that the introduction of the best interests duty under the Future of Financial Advice (FOFA) legislation would highlight the importance of only moving clients from one policy to another where there was a net and material benefit to the client.
However, he said the AFA also believed insurance companies had an important role to play in eradicating the practice of churn.
The AFA has produced a number of suggestions aimed at addressing churn, including an upgraded code of ethics and life insurance application forms being updated to include a declaration from the adviser that the replacement policy represents a net and material benefit to the client.
As well, it has suggested that insurers be permitted to share information to establish who the churners are and then create a 'watch list' available to key industry stakeholders.
AUTHOR
Staff Writer
Recommended for you
With Fortnum Private Wealth and Professional Financial Services now unified under the Entireti umbrella company, CEO Neil Younger has detailed to Money Management the firm’s new direction and future expansion.
The FAAA has suggested looking offshore for overseas financial advisers to ease the adviser shortage but are employers willing to take on the burden of workplace visas?
There may be a huge influx of alternatives coming to the market, but timing and access difficulties mean advisers can easily end up disappointed with their selection, according to Morningstar global CIO Dan Kemp.
An NSW individual has pleaded guilty to one criminal charge of providing unlicensed financial services after promoting crypto investments at national seminars.
