The FSC has defended the use of Approved Product Lists (APL) of life insurance products by financial advisers telling a Government inquiry the lists are required to allow advisers to provide affordable advice.
Addressing a hearing of the Parliamentary Joint Committee (PJC) Inquiry into Life Insurance last week, the FSC was questioned by Western Australia MP, Matt Keogh as to why advisers used the lists when they should have an understanding of the products they used.
“I struggle with the concept that a professional group of people will need to be somewhat restricted in what they can look at in determining what’s going to be in the best interests of their customer or their client, when there are just not that many (life insurance) providers,” Keogh said.
Keogh also questioned why APLs were being considered as a ‘safe harbour’ for dealing with best interest requirements when products outside the list may be better suited to the needs of the clients, but were unexamined by an adviser.
Responding to the comments, FSC Director of Policy and Global Markets, Allan Hansell said advisers still retained the ability to search for products that were not on an APL, but those that were on the list had been researched, reducing the time and cost it took to provide advice.
“The cost of financial advice is already making advice inaccessible to clients. We’re trying to keep costs down.”
“In terms of the products that are on the list, there would be research that stands behind that, and then, in terms of the conversation that’s had with the client, they would be able to determine whether or not that product would be in their best interests,” Hansell said.
“If a product that is on that list is not in the best interests of the client, there is an off-APL process whereby the adviser can go off the APL and do the research on a product that it believes is in the best interests of the client,” he added.
Keogh also queried the purpose of an APL if advisers could go outside them if they felt there was no suitable product available on the list to meet best interest requirements, saying that by doing so negated the reason for having an APL.
In response, Hansell said, “…there are efficiencies that can be gained by having that approved product list. If an adviser has to go through the process of assessing every product that’s on the market each time someone presents to them, that comes with a cost. The cost of financial advice is already making advice inaccessible to clients. We’re trying to keep costs down.”
‘Just not that many (Life insurance) providers’ therein lies the problem, ignorance. I find that comment so very insulting. We have politicians passing legislation on industry they know nothing about. I would like to see Mr Keogh sit down and research every available life insurance product in the market, including the General insurance products, to find an appropriate provider to be the ‘Financial Safety Net’ that families need in times of such pain both emotional, physical and financial. Just I don’t know how politicians can comment and make decisions on an industry they know nothing about, I suppose they just have to tow the party line. And as far as the FSC standing up for the adviser, please pull the other one, it plays ‘what a fool believes’ – I have a little bit of vomit in my mouth reading that.
Product is product and they are constantly being tweaked; today’s fave is yesterday’s untouchable. The product discussion is almost (note ALMOST) passé. Please let’s push to the front the other valid elements that form the criteria driving any well-constructed APL: response and support (e.g. platinum-type service categories), admin efficiency, varying range of underwriting avenues for differing occupations etc, and most of all capacity for & attitude towards excellence in claims management. Note nothing described along these lines by the FSC – do their commentators even know what a robust APL construction process looks like?
Correct me if I’m wrong, but aren’t APLs part of our PI requirements?
As the Responsible Manager of a non bank owned licensee we would not be able to control risk effectively if there was not an APL. I would note that this relates to the risk incurred by the client, adviser and ultimately the licensee. In other words we would have to seriously consider leaving the industry and I suspect we would not be alone.
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