Saw this in the news this morning. At least ASIC have acted this time but raises serious concerns over the quality of advice provided through the banks in particular. Was only last year that dodgy practices were exposed at CBA with CBA managemnet turning a blind eye in favour of sales volumes. I'm sure there are plenty who do the right thing but makes it difficult for the client.
THE financial services watchdog has put a leash on a life insurance advice firm after an investigation uncovered poor standards.
Suncorp-owned Guardian Advice will have to appoint an independent consultant approved by the Australian Securities and Investments Commission for the next two years to ensure it is complying with its obligations under the law.
Guardian Advice currently employs 257 authorised representatives and has 130,000 clients across the country.
ASIC said it was concerned the company was not complying with its general obligations as an Australian financial services (AFS) licensee, including failing to properly supervise its advisers.
Specifically, ASIC was concerned that Guardian Advice did not “properly assess and monitor its representatives’ competence to provide financial services”.
According to the watchdog, Guardian Advice also failed to meet its record-keeping obligations, did not adequately respond to identified breaches by its representatives, nor have in place adequate human and technological resources.
“The weaknesses in Guardian Advice’s systems and controls show that there was an ongoing risk that unsuitable advice could be provided by Guardian Advice and its authorised representatives,” ASIC Deputy Chairman Peter Kell said.
The ASIC-appointed expert will report regularly to the watchdog over the next two years, and ASIC says it may publish the results of the reports.
The move is the result of an investigation launched in 2013 after a number of former employees of AAA Financial Intelligence Limited and AAA Shares Pty Ltd — both of which had their AFS licenses cancelled by ASIC — joined the company.
Consumers are in a particularly vulnerable position when purchasing life insurance. Source: Getty Images
In a statement, Guardian Advice said it takes ASIC’s findings very seriously and would work “to ensure the necessary improvements are implemented by the business”.
“The life insurance and advice industries are undergoing widespread reform and GFP accepts that it is appropriate that there is greater scrutiny of these industries,” it said.
“GFP is confident it can seize this opportunity to improve our business, including improvements in adviser recruitment, training and adviser audit processes.”
The determination follows a review of the industry last year, which found what ASIC described as an “unacceptable level of failure” with more than one third (37 per cent) of advice received by consumers failing to comply with the laws relating to appropriate advice and prioritising the needs of the client.
David Leermakers, a senior policy officer at the Consumer Action Law Centre in Melbourne, said consumers were in a particularly vulnerable position when purchasing life insurance, and so had a right to expect advisers act in their best interests.
“When someone buys life insurance it’s an important decision, but it’s also very confusing. A lot of people don’t have the expertise or the time to do a good job themselves, so they put a lot of trust in advisers,” he said.
He added the entire remuneration model of the industry needed to be looked at with a view to banning upfront commission outright.
“We’ve said for some time we don’t think upfront commissions are appropriate,” he said. “Clearly we want advisers to be out there and to be able to make money, but they need to be paid in a way that encourages them to help consumers.”