Narrow APLs Not in Clients’ Interests

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A narrow approved product list is not best practice and should be viewed as an ‘advice quality warning sign’, ClearView has argued in its submission to the Life Insurance Advice Working Group (LIAWG).

ClearView Managing Director, Simon Swanson
ClearView Managing Director, Simon Swanson

ClearView said it believes it is time for the industry to crack down on anti-competitive behaviour and to focus on driving innovation and improved customer outcomes. The life insurer used its submission to call for a ban on self-space fees and scaled volume bonuses, and to propose that the industry’s default position should be for open architecture APLs.

“We believe there is an irrefutable case that the default position should be for an open architecture for APLs so that advisers are not unduly restricted and customers can have confidence that their adviser is genuinely meeting their best interest obligations,” said ClearView Managing Director, Simon Swanson.

“Shelf space fees are inequitable in the financial services industry and we believe they should be banned. A number of dealer groups require upfront payments, which start from around $100,000 and rise to over $300,000 per annum for life insurance products, to be placed on their APL. This means that customers are often recommended a product not because it’s the most suitable and appropriate, but because of an insurance company’s willingness and ability to pay shelf space fees.”

…experimental changes to adviser remuneration could severely impact and strangle the independent financial planning community

ClearView warned against making major changes to the remuneration of financial advisers, as this would severely impact the profitability and sustainability of independently-owned advice practices, forcing many advisers into institutionally-aligned dealer groups with narrow APLs.

“Poorly thought out, experimental changes to adviser remuneration could severely impact and strangle the independent financial planning community which is essential for the industry’s vibrant long-term future,” Mr Swanson said.

In addition, while the Trowbridge Interim Report did not identify the language used to describe adviser remuneration as a significant issue, Mr Swanson said it was time to abandon the words ‘commission’ and ‘incentives’. He said these words had negative connotations and drew attention away from the industry’s real issues. Instead, Mr Swanson proposed they be replaced with alternative terms such as ‘adviser service fee’ or ‘financial support’.

“Whenever change in attitudes are called for in society, changing language to focus on the desired outcome is always an important element. This would also potentially help advisers better explain their value proposition and remuneration structure without the discussion being overshadowed by the negativity surrounding the word ‘commission’,” he said.



5 COMMENTS

  1. My clients do not have an issue with the word commission. It means i am paid top provide a solution. The media/self interest groups/lefties do. My clients have a problem with paying a fee when no solution is implemented, as do. If you go and see a product provider about your insurances, why is ASIC/anyone surprised that they are advised to switch to their own product???

  2. Couldn’t agree more! My dealer group has an open all for risk providers. It makes providing appropriate advice easy, particularly for some hard to place clients as I’m not restricted to 4 or 5 insurers

  3. It seems that within the last four years or so that we’ve had more enquiries, reports and proposals about trying to ‘fix’ our industry than in the 25-30 years before it, combined.

    Governments may be trying to do the right thing, but like introducing cane toads to control the cane beetle and introducing myxomatosis to control the rabbit population, they get it horribly wrong sometimes.

    It seems to me that this is what’s happening within our industry. All the reforms proposed will finish up diminishing it to the point where only a few will make a living (probably a very good living because many will exit) and the under-insured public will be worse off than ever they were. Do we never learn from past mistakes?

  4. Jam… yes it is. Does anyone really think the nominal amount contributed by advisers to conferences, PD days etc really pays for them? Part of an APL tender process always includes a monetary component. Clearview’s stance is interesting given they have a number of their advisers with their hands out to product providers asking for a little bit extra to be on their own ‘APL’.

Comments are closed.