APLs make advisers more efficient says FSC

Insurance approved product lists (APLs) provide efficiencies to for financial advisers, according to the Financial Services Council (FSC).

The FSC’s director of policy and global markets, Allan Hansell has used testimony before a Parliamentary Committee to defend the role of APLs and the benefits they deliver to financial advisers.

Under questioning from West Australian Labor Senator, Matt Keogh Hansell said he believed there were efficiencies which could be gained by having an APL.

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“If an adviser has to go through the process of assessing every product that's on the market each time someone presents to them, that comes with a cost,” he said. “The cost of financial advice is already making advice inaccessible to clients. We're trying to keep costs down.”

Keogh, sitting on the Parliamentary Joint Committee on Corporations and Financial Services inquiry into the Life insurance industry, asked whether what Hansell meant was that “so long as there is a product on the list that is in the ballpark of what is suitable to the client, you can offer that product. And it's only where there is no product on the APL that is in that ballpark—i.e. suitable, even if it's not the absolute best product—then that's fine?”

Hansell said that advisers had to document the fact that they'd gone through and considered the best interests of the client.

“It's really a matter for [the Australian Securities and Investments Commission] ASIC to determine whether that's taken place,” he said.

Hansell went on to say that the duty under the law was for the adviser to act in the best interests of the client.

“As I said, products will have very different features and costs associated with them, and there are lots of variables that need to be considered. So long as the adviser can demonstrate that they're acting in the best interests of the client in terms of the product that they select, then I think that would meet their obligations,” he said.

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APLs are not a statutory requirement. They are required by the PI insurers to evaluate risk.
Every product on (or off) an APL needs to be reviewed and assessed by a investment committee.
If these politicians think it is possible for a planner to assess EVERY product in the market for a client, of which there are thousands, then they are clearly demonstrating their lack of understanding of this profession.
A question: What happens if a planner identifies that one particular product best suits the client but their PI Insurer wont cover it?

Yes, but interesting that the 'management' level of the FSC was clear - we'll use APL as a filter to make sure our institutions products are best represented, as long as the product is in the 'ballpark' of appropriateness - but the adviser can wear the brunt of it in front of ASIC. Making us more efficient, nice trojan horse.

“The cost of financial advice is already making advice inaccessible to clients. We're trying to keep costs down.” Everything the FSC states is corrupt garbage. They have just via corrupt means through the LIF ensured that mum and dad customers will be unable to afford to get risk advice in the future. The FSC is one corrupt group that need to be looked into in the Royal Commission. They simply want APL's to keep out the competition and make more profit.

As a Research Analyst my primary responsibility is to manage the groups APL which I hope adds benefit to our advisers. Increases adviser efficiency in relation to product choice so that more focus can centre around strategy, it aides in meeting step 4 or the 'Know your product' requirement of safe harbour and as already stated by Peter protects our adviser group by conforming to the PI Insurer requirements.

I think in your type of role Matthew it depends on who the AFSL is. If your aligned, then you'll focus on the products available on the Wrap which are manipulated through fees to not have the entire possible market available. And, you are human i.e. vulnerable to the subtle influences that comes from having a product manufacturer readily available to let you know of the significant benefits of their product! Not to mention the rice paper thin chinese walls! Note: BT had one insurer on its APL last month.

Agreed I think the scope of the APL needs to be a talking point. Regardless though conflicts of interest may exist, but these are not necessarily bad.

Dear Matthew. I like your comments.

Do you know if FOS or ASIC have ever accepted an Adviser saying "the product was OK, because the AFSL put it on the APL"?

No I'm not aware of either body accepting this as being OK, but I believe it would help, I think there are more variables at play here such as determining whether the product is appropriate for the client. The APL is a source that reduces product choice across a vast universe, which the AFSL has done background research on, to aid the adviser in selecting the right product for their client.

Seems to me that Clients on't care about an APL, FOS does not care about an APL, ASIC does not care about an APL, Advisers have to do their due diligence because the APL is no protection, so only an AFSL and PI insurers care about the APL. In fact ASIC require advisers to compare their recommended products with other products that may not be on an APL. So I can't see how an APL makes a financial adviser more efficient.

I'd agree. AFSL's tell their advisers they offer protection - stops advisers self licensing - the fear factor - but in reality the risk sits with the advisor anyway. Many AFSL's now are requiring product accreditation completion for products used - a formal exam. This is also at the request of PI insurers who are looking for any excuse really to not pay on claims. My best advice is make sure your own asset protection plans are in in place!

People seem to forget the FAI - HIH debacle. The whole point of an APL is to avoid having a large part of your client portfolio with a mob like that. And you can argue that Insurers have obligations under the Statutory Funds and APRA prudential requirements, but its more than that. That alone is not enough.

I am paying a premium for a legal contract (policy) and a service. I expect delivery of that contract when I need it. A good APL seeks to have Insurers that are most likely to do just that. You cannot have 14 Life Insurers out there, and tell me that they are all equally capable in that sense. They are not. A good Investment Committee will have a process that substantiates their APL in that respect. Clearly 1 Insurer is not an APL, though 6-7 Insurers (top 50%) you could argue is appropriate in many cases. Also, some AFSLs will have better service delivery with certain Insurers, you can't please everyone after all.

And yes, I understand there will be off-APL for individual circumstances (medical, occupational, pastimes, etc).

Fair enough, I've always wondered how advisers who use predominately Dimensional funds under that model would fare under a PI insurer if there were a complaint, or worse, a product failure.

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