With the move of the legislative to preserve the best interest duties of financial advisers beginning July 1, 2013, it’s no longer enough for these advisers to recommend holding life insurance in super based on funding efficiency alone. However, according to Martin Breckon, the technical services manager at IOOF Holdings Ltd, some issues have to be considered and explored before this should be fully implemented.
For one, taking life insurance cover in superannuation is convenient. The client no longer has to worry about due dates and paying premiums themselves because here, premiums are paid by regular contributions or by debiting them from the member’s super account. Plus, this offers group life options with auto-acceptance and more affordable premiums and a retail cover that provides customized solutions, which have more detailed benefits and superior claims payment philosophy.
But these are all just funding efficient strategies—advisers must always look into ways where clients are left in a better position. And “in a better position” here means not just monetary improvement but also risk protection, future preparedness, and easy access to product features.
So instead of just recommending clients to hold life insurance in super, here are the specific steps that one is required to do as stated in the Corporations Act s961B(1) and s.961B(2). Advisers must:
1. Identify objectives, financial situation, and needs of client.
2. Know the subject matter of the advice being sought by the client.
3. Identify client’s needs, financial situation, and objectives that are relevant to the advice being sought.
4. Make reasonable inquiries to get accurate and complete information.
5. Assess if the one providing the advice is an expert because if not, better refuse to give advice.
6. Conduct investigation before recommending a financial product.
7. Make judgments according to client’s relevant circumstances ONLY.
8. Take other necessary steps as long as they are in the best interests of the client.
Best interest duties may seem complicated, but with a positive mindset, this change will sure create opportunities for our clients.