There is currently no legal requirement for product providers to move legacy clients into cheaper products, but that could change in the wake of last week's royal commission hearings, says NMG Consulting.
Product providers could be the next in line for an explicit 'best interests' obligation following the revelations at the royal commission hearings last week, says NMG Consulting.
In its latest 'Trialogue' article, NMG Consulting noted a distinct "adjustment" at last week's hearings when it comes to product providers.
"It relates to the test that we should use when making ‘conflicted decisions’, where the interests of consumers are at odds with the commercial interests of the firm," said NMG.
Counsels assisting the commissioner delved into examples where product providers had a range of products, said NMG – "the more contemporary of which are unambiguously known to be better and cheaper than the older, legacy products."
"An adviser might be expected to shift the client into the better product, but as a product manufacturer many have declined the opportunity to carve up their own revenue line to ensure clients are shifted to the more contemporary product solution," said NMG.
One example came about in evidence of AMP head of platform development John Keating, who failed to explain why clients had not been moved out of platforms AMP's own benchmarking guide rated as 'uncompetitive' with the broader market.
It is unlikely product providers would fall into legal trouble for this kind of behaviour, said NMG – "until now".
"There is a test of ‘community standard’ being applied to decisions made by for-profit institutions," said the consulting firm.
"Regardless of where this all lands, it’s clear any attempt to walk-back the standard from the new high set by the commission will not help the industry’s reputation."
"One thing is clear – change is coming."
The review into the capabilities of APRA was released this week and it found that APRA required a cultural change among a host of other chan...
The Finance Sector Union of Australia has urged government action on consumer credit insurance and bank cultural issues following ASIC’s r...
Consumer complaints relating to investment and advice rose by 69 per cent in the first six months of the Australian Financial Complaints Aut...