Associations: Act on dodgy advice

Adviser associations are hoping the Financial Markets Authority will act quickly on any instances of bad behaviour among insurance advisers.

Monday, July 4th 2016, 6:00AM

by Susan Edmunds

Fred Dodds

It released a report last week that identified 200 risk advisers with worryingly high levels of replacement business.

It pointed to upfront commissions and incentives, such as trips, as bigger factors for some advisers choosing to move clients to new policies, than the quality of the policies themselves.

The report only looked at advisers, not QFE staff, because it said only advisers could churn clients from one provider to another.

Fred Dodds, chief executive of the IFA, said it was another report that did little to promote confidence in advisers.

"High replacement, commission, freebies do little for public confidence. My issue is that by it being an AFA/RFA survey, which surprised me, with advisers being 40% of the market it does leave a lot out and I don't think that remaining 60% should get a 'get out of jail free' card."

He said the number of problem advisers would be far smaller than the 200 identified as replacing a lot of business. "Hopefully the FMA will put their proposed actions into action ASAP and the public and the vast majority of the good guys and gals can see that they have powers and more importantly a willingness to use them."

But his counterpart at the PAA, Rod Severn, said the report was good and anything that would weed out advisers who were not working in clients' interests should be welcomed. "I want to be in a position to support good advisers to help them become better. If hey are not doing the right thing they should get in line or get out of the industry."

But he said the report could have been better.

"There are a couple of areas they could have spent a bit more time on. They only targeted the adviser channel and completely bypassed QFEs. There's nothing to say that if some advisers are doing the wrong thing, some QFE staff aren't too."

Anyone who was working on the basis of bonuses and incentives could be tempted not to put their clients' needs first, he said.

But he said it was also important to point out that the report did not necessarily say there was anything happening that was strictly wrong. "Even the adviser who had 10 trips could be absolutely doing the right thing by his or her clients."

There was a temptation to draw the conclusion the industry had a problem, he said. "Maybe we do, maybe we don't but the report doesn't say that. There's a lot more information to come out of this. It's the start of the journey for this document."

Tags: Churn FMA PAA