Do you have any inclination one way or the other? Minister Bowen: The same principles apply to risk insurance as other financial products. You should try and minimise conflicts, but I need to be very clear about the mischief I’m fixing. There are unintended consequences both ways. One of the things that worries me about Australia generally is under-insurance. I think it’s more a problem in terms of some other parts of insurance rather than life and risk, but it’s nevertheless an issue. But also, if you don’t touch risk insurance at all, are you opening a loophole for people to put commissions on other types of financial advice by stealth? In other words, yeah, sure, we won’t have commissions on any financial products, but geez, we’re going to have a huge commission on the risk insurance part of our product. So risk insurance is the one bit I’ve carved out for further consultation. Steve Helmich (director, financial planning, advice & services, AMP Financial Services): What you tend not to see in the risk area is the amount a planner does when a claim’s in process – which you don’t get paid for. So whether it might be insurance companies then put in place some sort of payment for that.

Planners do often walk clients through that claims process, and I think it’d be very hard to go up to a grieving widow or someone on disability and say, ‘I now need you to pay me this to monitor your claim.’ The conversation then turned to the vexed issuing of defining ‘fiduciary duty’ under the new arrangements for financial advice. Chris Bowen: The majority of people accept the need for a fiduciary duty. It’s how you frame it. And we did look at various options. One of the concerns that was raised at one point in the development of our thinking was, well, if you put a fiduciary duty on to act in the best interest of clients, that means that the adviser then has a fiduciary duty to assess all of the 16,000 products available in Australia for every single client. And clearly, nobody thinks that’s workable. And that’s the reason for the “reasonable steps” defence, that you will need to show that you took reasonable steps.

And the courts will interpret what “reasonable steps” is. But it’s a fairly well established and understood term in jurisprudence. Yes, it does mean that firms will either need to expand their approved product list, or, from time to time, say ‘I can’t help you.’ I don’t think it means a NAB planner saying ‘You need to go and see Westpac’ in particular. But it may mean the adviser’s fiduciary duty is to say, “Look, for your needs, I don’t have a product in my approved product list which I think is in your best interest, and you need to see another adviser, or make your own arrangements”.’ I think advisers will be reluctant to do that, so they will be trying to improve what they’ve got. Garry Weaven: Or you may need to point at the label on your head saying ‘I am a salesman, not an adviser, this is NAB. You get what you expect.’ So the issue here is, are you holding yourself out as an adviser? That’s the key issue. If you are an adviser, or holding yourself out in any way to be giving advice, then you should act in the best interests of the client. Steve Tucker: Let’s be careful.

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