Tarred by a broad brush
Another week, another rash of adverse publicity for the financial services industry and financial planners in particular.
It does not matter that last week's media coverage of alleged malpractice within Combined Insurance did not actually involve qualified financial planners and advisers; the coverage simply served to add to the public's negative perceptions of planners and advisers.
And that is why, despite its many critics, the Financial Planning Association (FPA) has been right to pursue its campaign to have use of the term financial planner/adviser restricted by law to those actually qualified to use it.
The media coverage of the allegations against Combined Insurance makes little distinction between the life/risk insurance industry and the general insurance sector and the role played by qualified life/risk specialist advisers. Financial planners, of course, know the difference but ordinary consumers do not.
It is impossible to know whether those alleged to have been involved in inappropriate conduct related to the sale of insurance products on behalf of Combined Insurance even held RG 146 qualifications, but it seems likely that they are better described as "agents" than "advisers".
Sadly, while the allegations levelled at some within Combined Insurance seem to be at the extreme end of conduct in the insurance sector, elements of what has been reported are not that unusual and should suggest to the regulators that they have an obligation to focus on more things than the activities of life/risk advisers.
But it should have been obvious to anyone from the Australian Securities and Investments Commission (ASIC) who viewed the Combined Insurance web site what sort of model the firm had in operation.
Under the heading of, "Are You Ready to Take the Opportunity", the company states, "Our partnership offering has been designed to enable you to become a Corporate Authorised Representative (Principal Agent) of Combined Insurance; where you can add value to your customer offering with support and services provided by Combined Insurance.
As a Principal Agent, you will be able to build your own operation and engage Sub-Authorised Representatives while being authorised under the ACE Australian Financial Services Licence to advise on, distribute and sell the Combined Insurance Accident and Sickness products.
In return you will receive competitive commissions, whilst building equity in your partnership with us."
In other words, it is a model which owes more to the insurance industry of two decades ago than it does to the type of life/risk sector which was discussed in many of the submissions to the Trowbridge Inquiry and, indeed, the Financial System Inquiry (FSI).
The problem for the financial services industry is that while there has been plenty of talk about moving away from commissions-based remuneration structures and sales-based cultures, progress has not been uniform across all segments and consumers are not capable of discerning the difference.
In the absence of clear differentiation, the financial planning industry seems destined to continue suffering collateral damage from the bad practices of others.
Mike Taylor
Managing Editor
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