ClearView Managing Director Simon Swanson appeared before the Senate Joint Committee on Corporations and Financial Services last month to talk about the importance of open Approved Product Lists for life insurance and the value of objective, client-centric advice.
Chris Blaxland-Walker provides a summary of the parliamentary hearing on February 24 in Sydney.
Financial advisers today are better educated and more professional than ever yet many are unable to utilise their experience and exercise their professional judgement to choose the best life insurance product for their clients, due to the restrictive nature of some dealer group APLs.
Open APLs are critical if the industry is to better manage the conflicts inherent in the vertically-integrated model, remove the product-flogging stigma, gain the trust of consumers and establish itself as a bona fide profession.
That was the key message delivered by ClearView Managing Director Simon Swanson at a parliamentary committee hearing last month.
“Many parts of the industry are characterised by restrictive practices that stifle competition and innovation, and there are in many instances glaring conflicts of interest,” he said.
“The vertically-integrated nature of the dominant players means that significant movement (regarding open APLs) is highly unlikely in the absence of regulatory action. This is because APLs are a key to the big verticals controlling and forcing sales flows into their own products.”
ClearView was one of a select group invited to appear before the Senate Joint Committee. Others included the Public Interest Advocacy Centre, CHOICE, Financial Rights Legal Centre, Life Insurance Customer Group and Stephen Perera, financial planner at Perera Crowther Financial Services.
The CHOICE presentation reinforced that life insurance was a complex product unlike any other making it difficult for the average person to accurately assess and compare products and policies.
Based on comments made by CHOICE Chief Executive Officer Alan Kirkland, Member for Mackellar, Jason Falinski MP concluded that life insurance was a particularly complicated and “dense” area which was “ripe for professional advice”.
Queensland-based Member for Forde, Senator Bert van Manen added that CHOICE’s presentation made “an enormous case for people to seek financial advice”.
One potential solution raised during the hearing was a requirement on advisers to publicly disclose their life insurance APL to clients, given people naturally assumed that their adviser had the ability to recommend the most appropriate solution in the market.
Another recommendation was for every insurance SOA to include a comparison of the product recommended versus at least one other comparable product.
When challenged by National’s Senator John Williams to explain the importance of open APLs, Swanson said it seemed counterintuitive to ask advisers to be degree qualified, meet continuous professional development obligations and professional standards but dictate to them the products they could recommend, adding that ClearView’s aligned dealer groups had open APLs.
“Our products will not be the best for every circumstance. We have a 100 per cent open product list, we pay no (volume) bonuses… no shelf space fees and that’s why we have been excluded from a number of companies’ approved product lists,” he said.
“We’re now on 293 boutique licensees’ approved product lists but we can’t get onto the big ones because we refuse to pay shelf space fees.”
“In reality, of the 1300 dealer groups in Australia over 1200 are able to recommend all the insurers in the market. If you think about life insurance, there’s a different premium for each by age, by gender, by occupation and by smoker and non-smoker so there’s no company that can hold themselves up as the best provider. You have to have choice because the circumstances of each individual are different and that’s why I suspect the boutique dealerships are more successful than the bank-owned groups because they have open architecture.”
Christopher Blaxland-Walker is General Manager of Distribution at ClearView.