Speaking to the parliamentary joint committee inquiry into ASIC oversight, ASIC deputy chairman Peter Kell said the consultation process is “a genuine attempt to consult and start a conversation” about how it can improve the life insurance SOA.
He said ASIC deliberately took “a bit of a different approach” to what it would normally take on such matters.
“We asked a consultant to help us in looking at some behavioural work around how consumers actually digest that sort of information, how it can be presented to them in a way that it’s going to make it easier for them to understand the advice and other issues around life insurance,” Mr Kell said.
“I suppose our starting point was that given there’s a perception that these statements of advice have not necessarily been that useful for consumers. That’s actually who they’re supposed to work for, first and foremost.”
In regard to the length of the SOA, ASIC noted one of the behavioural insights was that key information needed to be situated in various places, and that “repetition is something that assists consumers’ understanding”.
Mr Kell said he was aware of the criticism the life insurance SOA has received from across the industry.
“That’s fine from my perspective,” he said. “This is a genuine attempt to say, ‘Let’s not try and do the same old thing. Let’s look at what is actually going to work here for consumers’.
“We are very happy to receive even highly critical feedback saying we think it doesn’t work in this area or in that area.”
ASIC too often confuse disclosure with understanding. A long repetitive document will seldom be read by consumers and even if read, it will generally not be understood and recalled. I’ve seen too many SoAs that comply with the law, and are signed and acknowledged by clients, that deliver appalling outcomes. The industry needs to move beyond boilerplate advice templates to delivering short, sharp and engaging advice. The challenge is that being concise requires a great mastery of your craft, so you can understand why institutional models, and some advisers, prefer uninspiring templates that can better conceal their limitations. The approach can change but advisers need to understand that breaking away from the uninspiring status-quo requires imagination, courage and an understanding that they are 100% responsible, accountable and liable for the advice they produce. Personally, I think the industry is ready for this change and there are some great advisers already living this dream – only time will tell whether the balance of the industry is prepared to trade “security” for clarity.
Paragraph 185(c) of RG 175 says advisers should avoid repetition to avoid adding unnecessary length to their statements of advice and, elsewhere, ASIC has stated its research shows the average consumer cannot properly comprehend more than three pages of materials…
Clearly they are struggling. “We asked a consultant to help us…”. Let me guess, they gave the consultant a copy of a big SOA and they made it even bigger. Here’s my invoice. Money well spent ASIC. Repetition…laughable. If the advice was a simple summary we wouldn’t need repetition would we? One page for advice, one page for replacement product info (if any), one page for summary of recommended cover. How easy can it be? You’ve created so many RG’s you can’t even remember what you’ve written.
ASIC is not interested in making it easier for clients. They need to keep things complicated, overly processed and heavy on compliance. This way they can justify their existence. Listening to real clients and asking what they want (i.e a simple and sensible approach) gets them out of a job. Maybe advisers aren’t the only ones who can have a conflict of interest.
“Repetition aids consumer understanding”?? Maybe if it’s repetition of the really important stuff in isolation. But repetition that lengthens what should be a digestible, focused, 4-5 page document into something larger just turns people off. It doesn’t matter how many times you repeat something in a 20+ page SoA. Clients won’t read any of it if they think it looks like a long complicated documented designed for lawyers and compliance bureaucrats rather than consumers. It just gets filed away with the PDS which they don’t read either, for the same reason. ASIC employees and consumer advocates need to wake up to the fact that how they would behave as consumers themselves, is not representative of the population at large, and there is nothing they can do to force the other 99% of the population to be more like them. Try adapting to reality instead. If you want people to actually read an SoA, figure out the most important things that will fit into 5 pages, and ditch the rest.
Absolutely spot on!. Kell’s comments once again confirm how out of touch ASIC are. Rather than speaking to a ‘consultant’ they should grow up and speak to financial planners for once. I am sick of this mob regulating us like we are little children. If they engaged with us in a professional way, they might actually get something right for once and improve outcomes for consumers