FSC Defends APLs as Cost Saving Measure For Advisers

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.

Matt Keogh MP, Member for Burt (WA)

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.”