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BoQ pushes for ‘product sales advice’

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By Tim Stewart
  •  
3 minute read

The Bank of Queensland (BoQ) has called for the creation of ‘product sales advice’ as well as the expansion of the ‘Tier 2 Product’ definition to include MySuper products.

In a submission to the Senate inquiry into the FOFA amendments, BoQ chief operating officer Jon Sutton said the government should reconsider the concept of product sales advice – something that was proposed by the Corporate and Financial Services Regulation Review (CFSRR) in 2006.

“When a consumer engages with a financial institution with respect to financial and wealth products, they would have an expectation that the financial institution will offer its own products,” said Mr Sutton.

Consumers draw “no distinction” between credit cards, mortgage products or superannuation funds, he said – and they would expect to receive advice on the suitability of the financial institution’s product.

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“BoQ believes it is highly unrealistic to expect that there would be no bias towards an organisation’s own products or that the organisation’s own products would not feature in the recommendations made to consumers,” Mr Sutton said.

The current requirements around financial advice make it complex and costly to provide consumers with advice about the use of an institution’s own product, he said.

“The proposals for scaled advice will alleviate, to some degree, the cost and complexity issue. But we believe that consumers will still be precluded from gaining economical access to potentially valuable information and advice,” Mr Sutton said.

Product sales advice could assist consumers with quantifying an adequate amount of life insurance, as well as the potential difference to retirement outcomes by making addition superannuation contributions, he said.

The BoQ submission suggested modifying the CFSSR proposals so that this type of advice could only be dispensed by representatives of financial institutions that are appropriately licensed and prudentially regulated.

The consumer would be provided with a short form summary of the advice, and a 14-day ‘cooling off’ period would be put in place, said BoQ.

Finally, APRA-regulated superannuation products (which were excluded from the CFSRR proposal) should be included in ‘product sales advice’, said the submission.

“BOQ recommends that Product Sales Advice should only be provided by representatives of the financial institution where volume-based payments are precluded,” the submission said.

“It should also only be in situations where the sales representative is only able to recommend the financial institution’s own products.”

The BoQ submission also argued for the expansion of ‘Tier 2 Products’ to include “straightforward” products such as term life and total and permanent disablement (TPD) insurance, as well as MySuper products.

“MySuper product design is governed by tight regulation and licensing requirements and has resulted in uniformity across the industry in general features and specifications with the price being the main differentiator,” said BoQ.

“With uniformity across the industry, these products are suitable for Tier 2 classification. MySuper products are already distributed without advice via the default system,” said the submission.

Term life and TPD insurance products are “very straightforward” and are “less complex” than general insurance products, said the submission.

“The ability to offer TPD/Term Life insurance over the counter could assist a consumer with the principles of how to quantify an adequate amount of life insurance and important issues to consider,” said BoQ.

“In the context of Australia’s underinsurance dilemma, this would be a welcome outcome.”

BoQ pushes for ‘product sales advice’

The Bank of Queensland (BoQ) has called for the creation of ‘product sales advice’ as well as the expansion of the ‘Tier 2 Product’ definition to include MySuper products.

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