Originally published June 2019
In past communications I have discussed our commitment to taking the time to dig a little deeper to fully understand our clients’ individual situations, to ensure we are providing the best advice to meet those circumstances. Regulators are ramping up efforts to make this kind of attention to detail the norm for our sector.
The Hayne Royal Commission has lit a fire under both, the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA), with both agencies seemingly keen to demonstrate they have increased the intensity of scrutiny right across the financial services sector. The Federal Government and both agencies’ recent actions and public utterances have featured much “sabre rattling” as they ratchet up the pressure on the sector to adopt higher standards of behaviour and practice.
Recent examples include:
APRA’s, 2 May 2019, letter to insurers calling on the life insurance industry to urgently address concerns about the sustainability of individual disability income insurance
ASIC’s banning of several financial advisers in April and conduct of criminal charges against others through April and May
APRA’s 29 March launch of its inaugural Life Insurance Claims and Disputes Statistics
ASIC’s 29 March launch on the MoneySmart website of its life insurance claims comparison tool for consumers
The Federal Government’s passing into law of the Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No. 1) Bill 2019 on 5 April 2019, granting APRA with significantly boosted powers to act against superannuation funds
APRA’s media release welcoming the above development, saying it will help it “weed out underperforming funds”; and
APRA’s publication, on 16 April 2019, of its new Enforcement Approach, detailing how it will be “adopting a ‘constructively tough’ appetite to enforcement”
As if all these actions don’t make it abundantly clear the whole industry has to up its game, it is worth noting The Financial Adviser Standards and Ethics Authority’s (FASEA) Code of Ethics, released in February 2019. The Code of ethics comes into effect from 1 January 2020 and is “designed to encourage higher standards of behaviour and professionalism in the financial services industry.” The level of thoroughness the Code requires when advising and also questioning clients during a review underscores the importance of the work AFRM has been doing to ensure we always “go the extra mile” to ensure we understand our clients’ individual circumstances to ensure we have helped them in every way we can. For example, according to the Code’s official Explanatory Statement, Standard 2 of the Code: “requires, as an ethical duty, that you act with integrity. It also requires you to act in the best interests of each client.” Further expanding upon expectations on advisers, Clauses 31 to 33 of the Explanatory Statement state:
The ethical duty in Standard 2 to act with integrity is a broad ethical obligation. It is based on a more professional relationship between the relevant provider and the client, where the relevant provider has a duty to look more widely at what the client’s interests are.
This means that you will need to work out—and, if necessary, help the client to work out—what the client’s objectives, financial situation, needs, interests (including long-term interests), current circumstances and likely future circumstances are. To comply with the ethical duty, it will not be enough for you to limit your inquiries to the information provided by the client; you will need to inquire more widely into the client’s circumstances.
You are not relieved of the ethical duty merely because the client does not provide enough information, even when asked.
At AFRM, we could not agree more. As mentioned at the outset, our philosophy has always been to fully understand our clients’ individual situations to ensure we are providing them with the most appropriate advice. We do this to ensure the best possible claims outcomes, when the time comes that one of our clients needs to make a claim. We started 2019 by sharing case studies to illustrate the kind of service AFRM provides and to engage more closely with all our stakeholders in a bid to encourage genuine dialogue that would ultimately help our team on our path to continuous improvement. We are extremely encouraged by – indeed proud of – the quality of feedback we have been receiving so far this year. It inspires us to do all we can to help more people. In response to our Q1 Client newsletter, a referral partner reached out to us with a deeply moving message of thanks. To protect the privacy of all concerned we have changed the names in the case study that follows.
Until next time, live Your Life well!
Sincerely,
Nicholas Hatherly
Managing Director AFRM
Case Study
“Not only were Rob and Bev willing to see if they could help with a critical illness claim, they never gave up trying to help someone that was previously not their client despite any difficulties experienced along the way.” “This in my mind speaks volumes about the ethics of AFRM and your focus on helping people, clients or not, when they need it.”
Client, Emma, was referred to AFRM by Accountant, Michael, last year. Michael had been assisting Emma through Family Law court proceedings. Emma suffers from a range of seriously debilitating chronic illnesses manifesting complex symptoms, combined with mental health disorders. The cumulative effect of all these issues made communicating with Emma challenging, if not extremely difficult, at times. Michael was aware of this, having worked with her, seeking directions from her for the legal proceedings he had been assisting her through. Her previous adviser had lodged a trauma claim on her behalf, but it had been declined because the insurer deemed she did not meet any policy definition for a specific illness. After becoming aware of this information, Michael approached AFRM because he had had previous positive dealings with us and was aware of AFRM’s expertise in claim management. AFRM team dedicated to providing support to Emma soon learned that supporting Emma was indeed quite challenging because she was struggling financially, mentally and physically. Subsequently, AFRM’s team reviewed all of Emma’s medical reports and the claim forms which had previously been submitted to MLC. These reports were quite extensive. AFRM re-opened Emma’s claim with MLC and requested that MLC assess the claim under “activities of daily living.” This was significant because it was a different approach to that considered by the insurer at the time it initially denied the claim. It is the depth of AFRM’s knowledge of insurance policy terms and conditions which enables us to develop unique solutions on behalf of our clients. Through the course of managing Emma’s claim, AFRM’s team had numerous phone meetings and exchanged a vast amount of email correspondence and text messages with Emma, addressing her ongoing concerns re her health and the status of her claim.
Accordingly, AFRM’s team escalated the claim assessment with MLC’s senior management seeking for it to be fast-tracked to resolution. In March this year, we finally got her claim approved and paid. AFRM is continuing to support Emma; helping her to restructure her life insurance policy so she can leave her estate to her children in a tax-effective way.
Within 40 minutes of the distribution of our Q1 Client newsletter on 29 March, which had highlighted feedback we had received from clients, Michael sent us the following response:
"Hi Nick, "I will echo the comments in your email. "In case you were not aware, Rob and Bev Murray took on a client of mine a year or so ago. "She is going through Family Law proceedings, has very little in the way of financial resources and a long list of health issues. Her health issues mean that sometimes she can be a difficult client because she is often hard to get instructions and responses from. "Not only were Rob and Bev willing to see if they could help with a critical illness claim, they never gave up trying to help someone that was previously not their client despite any difficulties experienced along the way. "This in my mind speaks volumes about the ethics of AFRM and your focus on helping people, clients or not, when they need it.
"I was really happy to hear that she [Emma] recently received a critical illness payout from her policy. Whilst not an overly large payout, it is enough to provide some relief and options.
"To Bev and Rob, thank you both for not giving up and getting a successful claim through. "Michael."