FSC APL standard ‘wasted opportunity’

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.

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“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.

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Dear Mr Swanson,
The FSC are not interested anything other than exploiting the consumer and the adviser to build their own profits.
How is that done, ... well think about this.
1. Most life policy premiums are within $5 per month of each other, so there's little or no competitive advantage of having an expanded APL.
2. Almost every life company has an identical Income Protection contracts where the client has to lose 80.0% or more of their income to claim, with very few options available.
Since there is nothing to distinguish one contract from another, the government has open the door for all the members of the FSC to now offer inferior contracts so they can limit their claims.. in the future.
So how does expanding the APL on this differentiate companies and products from each other ?
The simple answer is,.... that it doesn't !!!
3. It's almost impossible to compare Trauma contracts because unless you can identify before the trauma event which contract will suit a client and assuming you have a medical background, it's almost impossible to predetermine one contract over another as to which is best.
So having an expanded APL doesn't solve that problem.
And finally the most important one of all,
4. The 2 year commission "clawback" on advisers, where the FSC ASIC and Trowbridge conned the left leaning government.
Advisers have no control over a client who loses their job and remains unemployed for a period, divorces or changes jobs where their risk insurance becomes part of their new employment arrangement.
In each instance, will most likely cancel their insurance first at the advisers expense.
The FSC have shown that they don't care about the independent adviser any more which will sound the death knell of the industry sooner than later.

Basically spot on Alleycat, however I dont think it will sound the death knell for advisers, more for the product based members of the FSC themselves. These are the ones that need us, we dont need them! We need to get this out in the open , we dont need or want the FSC, its members are only chasing profits for themselves, they dont care about this advice industry , so dont show them any loyalty either, make them compete with each other for our business, not the other way around. Tell the BDMS to go away and come back when they arent members of the FSC< this will send the signal up the chain fast. We are able to tell these instos to shove it, no sorry you are from xyz, you are members of the FSC just go away thanks, do it , it feels good! Stuff them, be independent as possible, make them play the game, put product last and then you dont owe these fat cats anything.

Dear Tj,
As noble and forthright as it may seem to you, I don't agree with you for one simple reason.
The members of the FSC will go to direct marketing through the media and online.
I'm already dealing with people who have gone down that route (such as Noble Oak) and are looking at premium first second and last.
They are getting no advice by looking at some rinky dink life company that doesn't have the capacity to provide reasonable claims service because that responsibility has been abrogated to a reinsurer.
The result is under insurance because the client hasn't asked themselves all the "what if" or "just in case" questions.
They want Trauma cover but have ignored IP.
So I asked, should you or your husband get bitten by a mosquito and contract Ross river fever or Chronic Fatigue Syndrome, (CFS) which Trauma event do you think covers that ?
I've had an accountant who ran triathelons, contract (CFS) and I've had a bus driver gone down a similar path for more than 18 months.
And the reality is,.... neither thought it would happen to them !!

Alleycat, this is our mountain to climb, to get the advised side into the public more, I take it as a personal challenge to tell my clients the companies we deal with really arent the be all and end all, our advice to them is. I tell them I have no loyalty to products , only to the client. The more people can get told this the better, you are right though about the communication in the media, we have none wheras the FSC has more than you could poke a stick at so hard to compete, but it can be done, however by us, and by person by person. You are also correct in saying they think they dont need us, agree with those points. If you are just getting clients worried about premiums I just rebate the hell out of it and take a invoice payment from the client , the instos cant compete with that if selling directly that I have seen. But the client needs to see that value coming through. There is no argument that the FSC members the instos anyway think they can go it alone, but can they this will remain to be seen, unfortunatly we are very fragmented and therefore cant band together to get changes or to be a force to be reckoned with, this is a big weakness advisers have, too fragmented as a industry. Of course there are dealerships that are members of the FSC so maybe they want robots too or what they hell are they doing ? They say the technological age will be the end of us, but really its the upper managers of the instos that should be worried, they will be the first cut if they lose profits from losing distribution by turning thier backs on us. Alleycat its interesting times and we need to show our value more than ever I think we can agree on that!

Dear TJ,
A few other things......
1. Why do you think there is a 2 year "clawback" with no discernible benefit to the client or the adviser ?
2. If "churning " was such a problem, why do you think the life companies didn't band together to name and shame them and not accept the "churned " business, because of a perceived problem.
3. If the life companies felt they were losing money on one, some or all of their risk insurances, why do you think that not one life company wanted to be the first to move to reduce commissions and extend the "clawback" period before the LIF legislation ?
4. Why do you think that all members of the FSC decided to increase most of their premiums once it was clear the LIF legislation was going to take place and not before ?
The simple answer is, they believe they don't need advisers any more after 100 + years of association.
They think the technological age will replace the likes of you and I and most others.
Food for thought !

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