Who should worry about the FMA's focus on churn?

The headlines focused on RFAs but it is not just RFAs that need to worry. Any organisation or adviser that replaces business and doesn’t follow the recommended process, designed to protect consumers from the harmful effects of churn, should be concerned.

Take KiwiSaver as an example. Ask any advisers that have many KiwiSaver clients who replaces most KiwiSaver business. It is QFEs. KiwiSaver and Insurance mis-selling are essentially introduced into the FMA’s recent report in the same breath. This was covered in more detail in the report in September on QFE monitoring.

I do not mean to suggest that an individual cheerfully churning a book of clients at the cost of their benefits and underwriting should relax. Anyone selling in a way which can harm the client should watch out. It is just that the more you do, the more likely you are to get caught. In other words, a risk adjusted approach may be taken to the review.

If a QFE or other organisation transfers a thousand clients from one policy to their own without an advice process, without a comparison, and without adequate disclosure of the risks that entails, will be far more likely to get caught than an adviser that misses out on the right paperwork in one or two cases.