Vertical integration will come to an end at the hands of the institutions which benefit from it the most due to adviser scandals and a realisation the model is not supported by advisers according to Synchron director Don Trapnell.
Pointing to the recent decision by Suncorp to walk away from providing advice via Guardian and Suncorp Financial Planning, Trapnell said this was an obvious flag the vertically integrated model was no longer working for some groups.
“It is worth noting however that according to the acting chief executive Suncorp Life Jeremy Robson, the decision was made to simplify its distribution model in line with its strategic priorities ‘and in the best interests of advisers and consumers’,” Trapnell said.
“Read into this and it looks like it is an admission that it can’t be made to work.”
He also claimed the more open Approved Product List (APL) for risk insurers required under the proposed Life Insurance Framework will remove the benefit of owning a planning group, which he described as “being able to move product within their own licence”.
“This is a great development for consumers as they will now have more access to a greater range of products than ever before. But play this out even further, and will this be the force that finally loosens the grip of large financial services who have long had very limited insurance offerings on their APLs?,” he said.
He said these forces, as well as those created by vertically integrated groups themselves such as conflicts of interest, biased advice and poor consumer outcomes were more likely to bring an end to the model than external forces.
“The key concerns on vertical integration have always focussed on conflicts of interest, biased advice and consumer outcomes – which through various Inquiries and Commissions and scandals, have captured the attention and understanding of government and regulator.”
“Roadblocks along the way in the form of banking scandals, regulator imposed EU’s, media scrutiny, and the entrepreneurial spirit of the financial services practitioners themselves, have made it difficult for the model to get too comfortable.”
Why do you keep printing Synchrons rubbish “Media releases”?
As far as I am aware Guardian had an APL with 10 insurers on it and Suncorp FP had 6, but don’t let that get in the way of giving them an opportunity to plug their supposedly watertight business.
Would ASIC want that? It is so easy now for them to concentrate their efforts on the big four banks and AMP. It gets back to the point that ASIC does not have the resources to supervise advisers. The simple remedy is a proper Adviser professional body like the Law Society or AMA who control their members not mickey mouse organisations like the FPA. A proper professional body where membership was mandatory to be an adviser and unethical behavior was responded to by expulsion would fix the poor conduct within our industry with no lead to amend a multitude of laws that take our focus away from our clients to defending our position. Ie. We should be self regulated. We seem to be one of the few industries where the government makes laws about every little aspect. Doctors & Lawyers need to abide by a code of conduct – if they don’t they are out – not a bad model. Its about time some of the organisations such as FPA, AFA, etc… stop worrying about there membership revenue and we form a proper professional body. One problem who will drive this change? Not the FPA as they are worried about themselves, not the banks or AMP because they are worried about vertical integration. Only the advisers can do it but we don’t have access to the bureaucrats and do not have a consolidated voice.
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