ClearView has admonished the Financial Services Council (FSC) for wasting an opportunity to tackle “glaring” conflicts of interest by compiling an ineffectual Life Insurance Approved Product List (APL) Draft Standard, and said it shows contempt for the government, financial advisers and consumers.
In response to the FSC’s draft standard released last week, managing director, Simon Swanson said the draft standard proved the industry could not self-regulate and would do nothing to promote competition, choice, and customer best interest.
“Despite being charged by the government 18 months ago to develop a new APL standard for the delivery of greater product choice and accessibility for advisers, the FSC has produced a superficial document that will fail to stamp out anti-competitive practices by the large vertically-integrated institutions and therefore won’t lead to profound, lasting change and a better deal for consumers,” he said.
“Open APLs are essential if advisers are to provide objective advice in the client’s best interest however the FSC’s dependent relationship with the dominant, vertically-integrated players means that there will be no meaningful progress in the absence of regulatory action.”
The firm said the draft only imposed two main requirements on Australian financial services (AFS) licensees.
Firstly, it required AFS licensees to apply a reasonable basis to APL construction with a “range” of insurers, and secondly it required to have a process for “off APL recommendations”.
However, the draft failed to provide guidance on how broad that “range” should be, replicating the current arrangement where large institutionally-owned licensees could employ narrow and restrictive APLs. It also ignored the controversial issue of shelf-space fees and the Trowbridge Report’s recommendation that APLs should include at least half of all life insurers, ClearView argued.
Swanson said that while advisers were more educated and skilled than ever before due to various reforms, they still could not use their judgement to recommend the most appropriate solutions for their clients because they were restricted by limited APLs created by bank executives and designed to lead clients to in-house products.
“Open APLs are critical if the industry is to better manage the conflicts inherent in the vertically-integrated model, remove the product-flogging stigma, gain the trust of consumers and establish itself as a bona fide profession,” he said.
ClearView said it was preparing a formal submission in response to the draft standard and would appeal to the Government to mandate open life insurance APLs for all AFS licensees.