Financial adviser conductIssue 15
The role of a financial adviser is complex by nature. There isn’t a standard one-rule-fits-all approach to quantifying a lifestyle, and there are a great number of variables that need to be considered before an adviser can recommend cover, and the best implementation strategy. Whether you have no children or ten, own your own business, own a house or live with your parents there are endless combinations of factors that advisers consider when recommending appropriate cover. The needs analysis an adviser undertakes considers not only what you and your family’s potential risk is, but also the most cost-effective and efficient way to mitigate the risk. Often this is by using a combination of insurance products, each covering a different financial need and objective.
Enshrined in law, through the Financial Advisers Act 2008, financial advisers are obligated to act in a client’s best interest and the Act promotes customer-centric conduct. Section 33 of the Act stipulates that a financial adviser must exercise, “care, diligence and skill” in the practice of providing financial advice. These three words ensure that all financial advisers should be operating and acting with your best interests first – and driving positive industry conduct and behaviour.
The Financial Markets Authority (FMA), acts as both the regulator and enforcer of the Financial Advisers Act in the financial services industry. Their role is to ensure that the Act is being followed accordingly, and to monitor this through proactively auditing financial advisers' client files, their businesses, product providers and other market participants.
The biggest risk drivers of potential poor adviser conduct are that they prioritise their own revenue above a customer’s best interests, and/or that they are incompetent to give appropriate financial advice to their clients.
The risks of poor advice to clients include:
- Selling clients policies that are not suitable to their circumstances
- Recommending a product provider who does not provide the best value for the client’s needs
- Encouraging a client to move their cover from an existing product provider when they would be better served by retaining their existing policy
- Exposing clients unwittingly to new disclosure risk.
Disclosure risk happens at the time of application when an insurer underwrites and assesses an applicant for cover. There is a real risk, every time that you change insurers that your health has changed, and this can have a significant impact on your cover and ability to claim. Partners Life is proactive in its approach to try and eliminate disclosure risk as much as possible and we provide comprehensive adviser training which stresses the importance of client disclosure. The impact that health and medical disclosures have on a policy can be complicated and complex, and Partners Life provides all financial advisers with access to a specialist underwriting team so they can compare and understand the impacts pre-existing health conditions and occupational risk applies to new cover or a replacement policy. This helps your financial adviser to understand possible cover implications and how to weigh these against any existing cover already in place.
The Financial Advisers Act also requires that all financial advisers are registered through the publicly available Financial Services Provider Register. This open registry is available online and provides a list of services a financial adviser is authorised to provide. Further to this, all financial advisers, and product providers, are required to be a member of an independent Dispute Resolution Scheme tasked with mediating disputes between a financial adviser and their client. There is no cost to the client for utilising this service and if a ruling is made against the adviser, it is binding and not contestable.
Many financial advisers are also part of an industry body or member association which promotes client-focused conduct and customer driven values. Some industry associations will require the member to sign up to a code of ethics and list of obligations to gain membership, which are usually principals based, and drive ethics and customer value proposition above all else. The associations and membership bodies will also usually provide audit services to their members to ensure that their advisers are operating in an ethical, skilful and prudent fashion.
Great conduct is when a financial adviser independently and competently assesses your financial risks and recommends the best solutions to those risks for your family whilst disclosing to you how their remuneration works, providing you comfort that their advice has not been conflicted by their remuneration or incentives, and demonstrating to you why they should be considered competent to provide financial advice.
Partners Life has strict criteria for the quality of the advisers whom we allow to represent our products. We proactively monitor the behaviour of our advisers to ensure they maintain those standards over time. As a result, we are confident that your risk protection needs are in good hands with your Partners Life adviser.
One of Partners Life’s cornerstone value propositions has always been to offer the best insurance products in the market, to best protect you and your family when it is time to claim. If your financial adviser is recommending reviewing your financial situation, fantastic. Everyone’s financial situation changes over time and ongoing reviews are an essential part of a solid financial solution. If you are concerned about your situation it is important to get in touch with your financial adviser, so they can update your policy accordingly.