Recent comments made by the Australian Securities and Investments Commission indicating that it may pursue action to address churning have been labelled ‘baffling’ by Synchron’s Don Trapnell.
Responding to statements made by ASIC Commissioner Peter Kell at an industry function this week, which indicated he felt the practice of churning was widespread and needed to be addressed, Mr Trapnell said there did not appear to be any statistical evidence to support this argument.
“One of the reasons Synchron was so opposed to the introduction of a Financial Services Council (FSC) churning policy was that we believed there was no evidence to support that a culture of systemic churning exists amongst advisers.
“We are obviously very concerned that ASIC believes churning is a problem and also a little bit baffled,” Mr Trapnell said.
We are obviously very concerned that ASIC believes churning is a problem and also a little bit baffled
An outspoken opponent of the FSC’s life insurance replacement business framework (which was abandoned by the Council earlier this year), Mr Trapnell said in an industry driven by statistics, compiling evidence of churning should be a relatively simple task and yet, to his knowledge, no life company has yet run the numbers.
“In September last year I attended an industry forum at which FSC Chief Executive, John Brogden, apologised to advisers for calling them churners and acknowledged there was no evidence to support that a culture of churning exists,” Mr Trapnell said. “If the FSC or the industry has since provided the evidence to ASIC, advisers need to see it.”
In a statement to riskinfo last month, an ASIC spokesperson said the regulator was “… considering issues raised by recent developments with industry initiatives around churn and the implications for dealing with it.” Industry stakeholders have responded to the latest comments from the regulator by saying it now appears ASIC is has its attention firmly focused on the issue.
ASIC needs to clarify how it came up with enough information to determine a closer investigation is warranted around churning.
We all live under the ” know your client rule ” and that involves proper analysis with clear, concise advise.
It would make it easier to fix any percieved problems, if we knew what they are and how previous attempts to remedy them, have been conducted and the results collated.
Once all stakeholders are properly involved, we can remedy what ever problems arise, instead of being treated like mushrooms and kept in the dark, then given ultimatums by the FSC who clearly are out of their depth with little ” on the ground ” experiance to know what to do.
Dealer Groups are very easily able to audit advisers and see how much of the new business that they write is genuine new business, and how much was churn !
They can cross referrence new business commission statements for each practice, against the same information over last few years. This will show if clients are being constantly moved around.
No one is better placed to prove or disprove the churn debate than the Dealer Groups, as they see all transaction per adviser, irrespective of the life company.
Why dont the dealer groups produce the statistics around this to support their arguement ? I think we know why they dont.
Here we go again! Who could possibly be feeding this rubbish to ASIC? Lets see…industry funds, surely not, banks – could they make even more money if the insurance companies they own kept all the insured clients, even though they may be paying too much and have sub-standard cover..NO WAY banks arent greedy!
Once again Don Trapnell will probably be the only one who says or does anything. ASIC will inevitably come after all the smaller IFA’s as they are the easiest targets, meanwhile banks will continue to sell conflicted advice to their hapless customers. Well done, the client loses again!
Elements I agree and disagree with.
Completely agree that our industry does not have a culture of churning, however individual churners remain.
One planner that I cross paths with here frequently churns and the client experience is the same… poor. He is associated with “smaller IFA’s” and churns his dealer group almost as often as he does his clients.
Dealer groups benefit from churning as much as individual advisers through revenue sharing. As long as it is kept in balance across the dealer group I struggle to see logically why a dealer group would deal with the issue of individual churning advisers.
Perhaps the organisations best placed to deal with the issue are the insurers who know how long each individual adviser keeps policies for and has a true vested interest in keeping the industry honest. If they only offer level commissions to churning advisers this removes the incentives for these immoral advisers who have no idea about their fiduciary duty.
Perhaps instead of having an issue with the regulator, the industry should focus on the individuals that cause the issues for the bulk of us. If this was so the regulator with have little to do
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