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Russell Hutchinson
Russell Hutchinson
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Insurance

Blame the Adviser?

Monday 13th of January 2014

The Australian Prudential Regulation Authority is reported as stating in its publication Insight that “increased disengagement of advisers” is contributing to high lapse rates but also blames advisers for high lapse rates because of “churning” while providing no definition of exactly what that means.

As one adviser wrote on the story, advisers are pretty much ‘damned if you do and damned if you don’t: either you give advice and move clients, or you disengage and you don’t…’ either way, APRA seems to be blaming your colleagues across the Tasman Sea.

Any good regulator would look at the impact incentives may be playing as part in any judgment – and APRA’s incentives are aligned with those of the insurers because they are concerned about insurers’ pricing and reserving decisions being prudent.

Those decisions are heavily dependent on lapse assumptions and they are worried about the ability of insurers to make predictions about lapses with confidence.

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FMA outlines its latest expectations for advisers
Paul Flood: The danger is that the 'goalposts' (regarding what is acceptable or unacceptable adviser conduct) may be susceptible to change. Our 'Principles based' legal/regulatory environment lends itself to “prevalence-induced concept change” over time, perhaps not so much in the written laws and Code, as in the interpretation of the prescribed principles.
3 days ago Steve Wright
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Just a tip, if you use more than six, six letter words in a sentence you lose most Kiwi's. So avoid client/adviser confusion when writing your post or article if you would like it read and understood. Ironically, my last sentence was not likely read.
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FMA outlines its latest expectations for advisers
All things said are great aspirational goals for a great financial advice industry, it mirrors what both the legislation and the code requires. However, like most things discussed it talks about what's expected not how it's done. The hardest aspect of financial advice today isn't what it is, it is how it is done. The how only comes from those that have done it, the how is only provided with examples. Guidance documents that spell out what's required along side how it it done. We’re still dealing with the same issues we started with in 2021, figuring out the how. And figuring out the how in every advice business is consuming resources that could easily be shortcut by the FMA demonstrating what they are expecting. It's not about “do it this way” its about this is the sorts of things we’re looking for. In the absence of standards and expectations, guesswork prevails. That represents significant risk to FAPs and the result is onerous overcooked advice processes for multiple advice operations and undercooked she’ll be right for single operators focused on getting the work done. Both approaches have potential for harm and as its been said earlier, leaves advisers open to explain they haven't been speeding with the authorities have pulled them over. The advice industry needs guidance on the how we know the what already.
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To correct errors in my previous post: "policies, templates, and controls" should read "policies, processes, systems and controls", and "is more conductive" should read "is more conducive".
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