February 7, 2017
Wider approved product lists (APLs) will do little to reduce the risks of poor quality advice, according to ASIC, which has claimed structural bias and adviser incentives have been the key drivers of poor advice to date.
The regulator made the claim in its submission to the Parliamentary Joint Committee Inquiry into Life Insurance and added that while it agreed with the contention that wider APLs could improve competition, they would not, on their own address the risks of poor-quality life insurance advice.
“…a wider APL may not protect consumers from the poor outcomes that can result where the adviser has a conflict of interest…”
The regulator stated problems with advice were not unique to vertically aligned advisory groups and that existing wider APLs did not reduce the likelihood of poor advice either.
“Our regulatory experience suggests that advice providers operating within a vertically integrated group tend to recommend in-house products over non-related products even where their APL includes a wide range of non-related products,” ASIC stated.
“Even in circumstances where an advice provider does not operate within a vertically integrated group, a wider APL may not protect consumers from the poor outcomes that can result where the adviser has a conflict of interest,” the regulator stated.
Instead, ASIC referred back to its Report 413, from late 2014, pointing out that report found poor quality retail life insurance advice usually stemmed from adviser incentives that were not in the best interest of clients.