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Conflicts of Interest An Overview for Staff Prepared by MSM Compliance Services P/L.

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Presentation on theme: "Conflicts of Interest An Overview for Staff Prepared by MSM Compliance Services P/L."— Presentation transcript:


2 Conflicts of Interest An Overview for Staff Prepared by MSM Compliance Services P/L

3 Who Are MSM Compliance? MSM is a national professional services business focused on the general insurance industry. Your company has engaged MSM to assist in the management of its obligations as a holder of an Australian Financial Services Licence. MSM helps to ensure that you and your company comply with your AFS Licence obligations with the least disruption to your core business.

4 Conflict of Interest - What Is It? Where the interests of our clients and ourselves are different. We operate a business to make money for the owners and to pay expenses. Vs Clients want the cheapest cost for their insurance.

5 Conflict of Interest – Is there really a problem ? Not as much an issue for General Insurance as for Life/Planners/Stock Brokers Industry Public Perception is poor Recent survey ranked insurance brokers 5 th least trusted group Slightly better than car salesman, real estate agents, politicians !!!!!!!!!

6 Examples of Conflicts of Interest We get more commission the higher the premium. Some products pay more commission. Our buying group has products that pay higher commissions to us with overrides to the buying group. We have a binder which requires us to act in the best interests of the insurer.

7 Examples of Conflicts of Interest We have an arrangement with an insurer involving Profit Share or Premium targets for higher commission. We charge clients fees for services provided. Some staff/consultants/sub agents may get paid partly/solely on a commission basis. We can adjust our income on premium funding contracts. We receive gifts and presents from insurers.

8 Why worry about Conflicts of Interest? Do the right thing by our clients. To be a good corporate citizen. Our License & The Corporations Act requires us to provide our services efficiently and fairly. ASIC Regulatory Guide 181 requirement to manage Conflicts. Requirement applies to both Retail and Wholesale clients.

9 How do we manage Conflicts of Interest? Identify all conflicts the business faces. Assess if the conflict is material Develop a management plan for each material conflict. –Control / Minimise the conflict by policies and procedures. –Avoid the conflict if commercially practical. –Disclose material conflicts.

10 Identification of Conflicts - Review Remuneration deals with all insurers. Incentive/payment deals with all staff/reps. Buying group arrangements. Binder arrangements. Broker Fee structures. Premium funding loadings. Relationships with underwriting agencies.

11 Control Processes Conflict of Interest Policy and Procedures. Conflict of Interest Table which includes all conflicts and a management plan. Nominated a Conflict of Interest Officer – on our Organisation Chart with code CIO.

12 Our Control Techniques Build conflict of interest into all Policies & Procedures. Advise staff that clients needs are not to be compromised due to remuneration issues. Review existing deals and restructure / renegotiate to remove or reduce conflict. Adjust fees to compensate for increased commissions. Other control techniques.

13 Possible Avoidance Techniques Only accept income from client, not insurer (accountants approach). No preferential/sweet heart supplier deals. No volume / profit share deals. Don’t pay staff / reps on commission basis.

14 Our Disclosure Techniques Always disclose before the buying decision. Advise all fees at time of quote and in all facsimiles, emails, letters and invoices. Include Remuneration in Financial Services Guide & send Financial Services Guide to all clients. Include Remuneration in Statement Of Advice when provided to clients.

15 Our Disclosure Techniques Provide Binder information on all quotes and in all facsimiles, emails, letters and invoices. Buying Group information in all Financial Services Guides/Statements of Advice. Declare at quote stage all - non standard income to client.

16 Conflict – The Golden Rules Cheapest (best value) comparable product recommended regardless of income earned by the business. Disclose all fees all of the time. Disclose special deals, where the price to the client is increased. Applies to Retail and Wholesale Clients. If unsure refer to our Conflict of Interest Officer.

17 Bribery – What Is It? A bribe is defined as: giving someone a financial or other advantage to encourage that person to perform their functions or activities improperly or to reward that person for having already done so.

18 Bribery – What is It? Involvement in transactions that include personal as well as company profit. Significant benefits provided to individuals without company consent by suppliers etc. Outside interests in competing firms / businesses.

19 Bribery The business has a zero tolerance to any act or involvement in Bribery. Specific requirement when dealing with UK Companies – e.g. Lloyds (U.K. Bribery Act 2010) Bribery will usually involve instant dismissal. All staff are required to report any suspicions of Bribery to senior management.

20 What Now? Find out who our Conflict of Interest Officer is by referring to our Organisation Chart. Read our Conflict of Interest Policy and Procedure Read our Conflict of Interest Identification Table Refer your queries to the Conflict of Interest Officer.

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