ASIC warns on vertical integration and APLs

ASIC vertical integration conflict of interest APLs

7 February 2017
| By Mike |
image
image
expand image

The Australian Securities and Investments Commission (ASIC) has again pointed to vertical integration as an impediment to the delivery of unconflicted advice.

In a further submission to the Parliamentary Joint Committee on Corporations and Financial Services Inquiry into the life insurance industry, ASIC suggested that while open approved product lists (APLs) might lead to more competition and better consumer outcomes, problems would still remain.

Further it claimed that even if ASIC had the power to mandate an expansion of APLs, this would not necessarily deliver an answer.

ASIC said that over-reliance on APLs might lead to poor advice if advisers did not conduct proper research on the client's existing non-APL products before providing ‘switching advice'.

"In ASIC's view, an expansion of APLs can contribute to greater competition and better consumer outcomes," it said. "However, a mandated expansion of APLs will not, of itself, address the risks identified."

"This is because:

(a) Our regulatory experience suggests that advice providers operating within a vertically integrated group tend to recommend in-house products over non-related products even where their APL includes a wide range of non-related products; and

(b) Even in circumstances where an advice provider does not operate within a vertically integrated group, a wider APL may not protect consumers from the poor outcomes that can result where the adviser has a conflict of interest."

ASIC cited the example of an advice provider receiving remuneration to recommend one product on their APL over others, stating that this "might provide an incentive that is not aligned with the adviser's obligation to the client, i.e. the best interests duty".

The regulator said that its Report 413 had concluded that the drivers of poor quality retail life insurance advice were adviser incentives and failure to consider the relationship between life insurance and superannuation.

"Therefore, while ASIC supports the recommendation for broader APLs, we note that this move on its own is unlikely to improve the quality of advice," it said.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

1 month 2 weeks ago

This verdict highlights something deeply wrong and rotten at the heart of the FSCP. We are witnessing a heavy-handed, op...

1 month 2 weeks ago

Interesting. Would be good to know the details of the StrategyOne deal....

1 month 3 weeks ago

SuperRatings has shared the median estimated return for balanced superannuation funds for the calendar year 2024, finding the year achieved “strong and consistent positiv...

6 days 10 hours ago

Six of the seven listed financial advice licensees have reported positive share price growth in 2024, with AMP and Insignia successfully reversing earlier losses. ...

3 weeks 4 days ago

Specialist wealth platform provider Mason Stevens has become the latest target of an acquisition as it enters a binding agreement with a leading Sydney-based private equi...

3 weeks 4 days ago

TOP PERFORMING FUNDS