Conduct, consumers, advisers, and insurers

What links these forces?

Monday, October 29th 2018, 11:44AM

Russell Hutchinson

With all the talk about potential change in the advice industry, the announced changes in the provision of financial product have been far the greater.

The challenging questions being asked around conduct, consultation on further law changes, that could result in a new regulator – or at the very least, new powers for an existing regulator.

Follow that up with the news about AMP, added to the sale of OnePath, and before that the sale of Sovereign, and you have an incredible passage of change. It all affects the provision of advice, and the future for advice.

There is a debate going on between regulators and insurers about what constitutes good conduct. There is some blurring of the lines between product provision and advice provision in this discussion.

Insurers are being asked how they ensure that clients receiving their products as a part of your advice consultations are receiving good advice. Regulators are worried that through commission payments insurers’ own conflicts make could affect advice recommendations for their product.

That is worth testing, of course, as events in Australia underline.

The discussion is important to you too, however, as there is a risk of an unintended outcome: the loss of independence in advice. That could occur if insurers become responsible for too much of the advice process, and the scope for innovation, difference, and freedom to advise in different ways is reduced.

I think that there is plenty of room to work on good conduct outcomes without compromising your freedom to advise, but this is a discussion you may have a view on.

The areas you might take an interest in the overlaps between, say, Financial Advice Code and insurer conduct include:

Commissions and incentives
Protections for vulnerable clients
Affordability and eligibility issues
Helping clients to understand the value of different products
Services provided for fees received

There are probably more.

In the midst of all that, corporate decision-making is re-shaping the face of insurance advice provision for 2019 and beyond. Three of the largest names in the insurance industry have changed.

The loss of AMP’s life offer to the New Zealand market is one which I find particularly saddening. AMP was number one in this market when I started work here.

To think it will close to new business shows that no-one is insulated from the forces of market change. Recent events, perhaps the Australian Royal Commission, may be cited as contributing factors.

It is probably more important to name the long-running consumer themes – the relentless shifts occurring in health, wealth, consumerism, awareness, and changes towards more living benefits.

These are really the cause of most of the change we see in the market. Whenever we see a big change for someone else, the big question is ‘what changes should I be making?’

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