ASIC announces major surveillance of risk advice
The deputy chairman of the Australian Securities and Investments Commission (ASIC), Peter Kell, has announced the regulator will be conducting major surveillance of life insurance advice.
Speaking at the Association of Financial Advisers (AFA) national conference on the Gold Coast, Kell said ASIC had served notices to a range of insurers with the aim of gathering information around how the industry is working and what sorts of policies are being provided.
"These notices require insurers to give us information about policy types with a focus on distribution channels, remuneration models, commission types, and so on," Kell said.
"This work will then be followed by major surveillance of retail life insurance advice, that covers both pre and post-FOFA advice, but certainly with an emphasis on advice in the FOFA landscape."
The purpose of the project, he said, is to lift standards over time by working with the industry.
"We will be talking to you further about this - some things are already being the subject of some of our discussions," he added.
"We will be releasing a public report on our findings next year to make sure we can give feedback to everyone about what we've seen and the areas that might need improvement."
Kell used AAA Financial Intelligence (AAAFI), a dealer group which had its license cancelled by the regulator earlier this year, as an example of some of the failings currently happening in this space.
"The problems I'm highlighting here you might say are related to a poor performer [licensee], but we have found them in varying degrees repeatedly and commonly across licensees over the years," he said.
ASIC had reviewed 100 advice documents from AAAFI, 80 of which we're related to life insurance.
Around 80 per cent of those, Kell said, contained inappropriate advice.
There was evidence of poor and inadequate fact finds, no proper consideration of clients' personal circumstances, the quality of cover was not considered and there were multiple examples where a super rollover was used to write new cover.
"These are the things that I'm sure people in this room can avoid very easily if they focus on the needs of the client," Kell said.
"We found conflicted advice with respect to life insurance can cause real, meaningful harm to the consumer and this is not limited to AAAFI, though it was a particularly poor example."
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