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FADC case shows RFAs face big challenges under new laws

While it has been no surprise with the passing of FSLAB, we now have confirmation that the light at the end of the tunnel is, in fact, the oncoming train.

Thursday, April 11th 2019, 9:09AM

And while that statement often has more sinister connotations, my meaning is the change that has been talked about for so long, and we have been waiting for, is now about to break and wash across all of us.

Also, while we have all had a pretty good idea what this all means and looks like, it's come with a more recent plot twist most of us probably didn't anticipate, even though it has been written in the back and white for the better part of a decade.

What I'm eluding to is the recent FADC decision against an AFA doing insurance. Here's my two cents and some of it won't be appreciated. I get that. At the same time, we RFA's have been operating based on a loose expectation that we would be measured by the AFA standard if called to account.

Though the expectation of measurement against the AFA Code and the reality for RFAs, has seen that the FMA to date has had little in the way of traction to pursue RFA’s. This has somewhat muted the noise and association to the AFA standard if called to account as an RFA.

However, the latest FADC judgement is quite some words of warning that we in RFA land need to take heed of. Yes, while this is focused on an AFA, it has been an opportunity for the FMA to put a typical risk process through the mincer and make an example of it for us to see how this may play out with the future and FSLAB.

And an example it is, with no names published and commentary that this is at the low end of the scale, it's not book throwing just yet. However, with the decisions made we all are going to have challenges meeting the bar laid out with how we operate based on what we consider good practice to be.

What I mean by this is we are operating under the assumption that ’best practice’ from the industry is good enough for the regulator and the law, and potentially we are a little complacent when it comes to what that really means.

I've had the same opportunity as you to read what's been published, and the adviser concerned has had their two cents too with helping understand things. Which has been appreciated and the comments have been helpful with context and without being overly emotive or critical.

As I said in a similar comment on one of the articles, I'm not going to comment on the evidence, it is what it is, and I don't have access to it to review it though I have had the opportunity to reflect on a number of opinions around this since I made my original comments.

On the whole, reading through this I side with the respondent that the interpretation of the adviser requirements is potentially unreasonable when measured against present conduct expectations for insurance.

So if this is unreasonable for an AFA, then most RFAs have some significant issues to be concerned about with what is coming under FSLAB now that it has passed.

From what I have read and discussed, there appear to be some key learnings that we as insurance advisers are going to have to take into account looking forward:

  • Context and environment
  • Professional conduct expectations, practice vs law
  • The measure of suitability

Also, I appreciate that most of what follows is based on the current AFA standard and not the new code, which we are yet to see.

First off, I picked up on some potential red flags in context and managing the environment. Did this contribute to the situation?

The process described in the report suggests that time and impatience was a contributory issue; what I did not get from this is the context of the environmental situation.

If in the workplace, were there ears listening? Did this have a bearing on the quality of disclosure for the respondent, or was it purely an issue of haste?

We've all had clients cagey about information for various reasons, and the environment is often one of the issues. Is this tantamount to breaching CS8, I wouldn't think so, but here we are...

I'll leave you with this for now, as a few have commented, like the stories, they're just a bit long. I'll cover my thoughts on these key points in my next rambling article.

Tags: FADC FSLAB Jon-Paul Hale RFA

« Churn keeps coming up in discussions, everywhere. In the insurers, with advisers, and with regulators.Part 2: FSLAB & FADC and what it means for us RFAs »

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