Most AFSLs adopt limited life insurance approved product lists for financial motivations, breaching the Corporations Act, according to financial planning dealer group Dover Financial Advisers.
In a blog on InvestorDaily sister publication Risk Adviser, Dover Financial Advisers managing director Terry McMaster said that, for risk insurance in particular, APLs are better described as ‘banned product lists’ as they are, by omission, a list of products the adviser can’t recommend.
He said most AFSLs only allow two or three insurers on their APL.
“Most insurers, and therefore most insurance products, are effectively banned,” Mr McMaster said. “Many more products are not on the list than are on the list. Most AFSLs ban most insurance products.”
Mr McMaster said APLs are nothing more than an AFSL convention to control their advisers, with many AFSLs banning them from recommending most insurance products because of financial motivations.
He said most AFSLs only allow advisers to recommend insurance products where they or a related party, such as a shareholder, benefit financially from the adviser’s product recommendation.
In such situations, Mr McMaster said the adviser, as a result, is involved in "three clear breaches of the Corporations Act": section 961B, regarding the duty to act in the client’s best interests, section 961G, regarding the duty to provide appropriate advice, and section 961J, regarding the duty to prioritise the client’s interests.
In addition, the AFSL has also breached sections of the Corporations Act, according to Mr McMaster.
“If the AFSL has deliberately set things up this way, the AFSL is breaching section 912A, which is the general section requiring it to run an effective and efficient AFSL,” he said.
“The AFSL is also breaching section 961L, which requires reasonable steps to ensure advisers comply with the above three duties.”