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.
Recommended for you
ASIC has launched court proceedings against the responsible entity of three managed investment schemes with around 600 retail investors.
There is a gap in the market for Australian advisers to help individuals with succession planning as the country has been noted by Capital Group for being overly “hands off” around inheritances.
ASIC has cancelled the AFSL of an advice firm associated with Shield and First Guardian collapses, and permanently banned its responsible manager.
Having peaked at more than 40 per cent growth since the first M&A bid, Insignia Financial shares have returned to earth six months later as the company awaits a final decision from CC Capital.
