woman regretting what she saidCan you say that?

Landlords and agents alike can benefit from agents offering landlord insurance, but with that benefit comes responsibility. Do you know what you can and can’t say?

There’s a Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry underway at the moment, and if you think that has nothing to do with the real estate industry, it’s time to think again. It’s not just banks and financial planners under the spotlight, but anyone who provides financial advice or a financial product – and that includes insurance.

All companies or individuals who provide financial advice or deliver a financial service to consumers must be licensed under the Corporations Act 2001 (‘the Act’).  The Act (regulated by ASIC) is hundreds of pages long, but in a nutshell when it comes to real estate, anyone who sells an insurance policy needs to do so under an Australian Financial Services Licence (AFSL).

If an agent arranges an insurance policy for a client (such as landlord insurance), they need to either hold an AFSL or be appointed in writing as a representative of an AFS licensee – this may be as a distributor, authorised representative or corporate authorised representative.

If an agent simply provides insurance paperwork on request from a client, they do not have to be licensed so long as they are not giving advice about the insurance policy and what it covers, and they refer all questions or queries regarding a policy back to a licence holder.

At EBM RentCover, our partner agents can be authorised in a variety of ways – Distributor, Corporate Authorised Representative (CAR) or Referrer – to offer our landlord and tenants contents products. The different types of authorisation have different levels of responsibility for ensuring compliance with the Act.

A Distributor does not need to be registered with ASIC but is authorised to provide a financial service under EBM RentCover’s AFSL. A Distributor is authorised to:

  • supply brochures, flyers and other marketing material from EBM RentCover to clients;
  • arrange insurance for a landlord; and
  • pay the premiums.

A Distributor can provide factual information (see break-out) in both written and verbal form but cannot provide general or personal advice of any kind in relation to EBM RentCover (the Financial Service Provider or FSP) or associated products.

EBM RentCover provides relevant training (and on-going monitoring and supervision) to our Distributors on the services that they are authorised to provide to their clients.

We also extend cover to the Distributor under our Professional Indemnity (PI) insurance policy for financial services related to EBM RentCover and associated products.

Corporate Authorised Representative
A CAR must be registered with ASIC as they are able to provide general advice to a client.

However, EBM RentCover’s distribution model works on a strictly ‘no advice’ basis and therefore CARs are not permitted to provide general advice about our products. This means Distributors and CARs cannot provide a recommendation or opinion about EBM RentCover or our products, or even present factual information about us or our products in a way that is intended to recommend the client purchase the insurance.

EBM RentCover provides training, monitoring and supervision, and extends our PI cover to our CARs.

Referrers are not authorised by EBM RentCover to provide a financial service or arrange insurance cover, and do not work within our AFSL. However, a Referrer can still supply our brochures, flyers and other marketing material to customers. Referrers can also provide factual information but cannot provide general or personal advice of any kind in relation to EBM RentCover or associated products.

EBM RentCover does not provide training, monitoring or supervision of Referrers and Referrers are not covered by our PI insurance.

RentCover’s obligations
As an AFSL holder, EBM RentCover has obligations defined by the Act in relation to any Distributors or CARs who are authorised under our licence and the information provided by them to a client.

We must:

  • Ensure that our representatives are adequately trained, and are competent, to provide financial services.
  • Take reasonable steps to ensure that our representatives comply with the financial services laws.

As such, it is important for our Distributors, CARs and Referrers to understand what they are and are not able to say and do.

Action (do or say)DistributorCARReferrer
Make the client aware that there are insurance products availabletickticktick
Advise the client that they work with EBM RentCoverticktickcross
Advise the client that there are alternative productstickticktick
Provide brochures that include information about what the insurance coverstickticktick
Provide factual information about the products, such as the standard contents cover limit or legal liability cover limittickticktick
Answer any hypothetical questions regarding the coverage of the productcrosscrosscross
Provide a recommendation to purchase a product from EBM RentCover (the FSP)crosscrosscross
Provide a recommendation to purchase any associated productscrosscrosscross
Provide an opinion about EBM RentCover crosscrosscross
Provide an opinion of any associated productscrosscrosscross
Compare one product with anothercrosscrosscross
Compare one FSP with anothercrosscrosscross
Present factual information in a way that is intended to recommend a client purchase the insurancecrosscrosscross
Provide a quoted premium for the clientticktickcross
Arrange the insurance policy for the clientticktickcross
Refer the client to EBM RentCover for any additional product informationtickticktick
Co-brand any marketing material with a combination of the Distributor/CAR/Referrer’s and EBM RentCover’s logos*crosstickcross

*Co-branding is a form of advice as it can potentially influence a client’s decision to purchase the insurance product.

EBM RentCover has always been focused on compliance with our AFS licence obligations and doing things the right way. We believe both landlords and agents can benefit from the agent being able to arrange insurance cover and we ensure that our partner agents operate within the boundaries of their authorisation. If you have any queries, please contact us.

What’s what?

ASIC provides a comprehensive guide that details the differences between giving factual information, giving general advice and giving personal advice.

What is financial product advice?
Financial product advice[1] generally involves a qualitative judgement about, or an evaluation, assessment or comparison of, some or all of the features of a financial product. If a communication is a recommendation or a statement of opinion that is intended to (or can reasonably be regarded as being intended to) influence a client in making a decision about a particular financial product, it is financial product advice. If you give financial product advice, you need to hold an AFSL (unless an exemption applies).

What is the difference between giving factual information and giving advice?
ASIC defines ‘factual information’ as ‘objectively ascertainable information, the truth or accuracy of which cannot reasonably be questioned’. This means as soon as a recommendation or statement of opinion is made, it is no longer factual information and enters the realm of advice. In addition to this, if factual information is presented in a way that is intended to, or can reasonably suggest or imply an intention to, make a recommendation about what a client should do, it would also likely be considered advice.

[1] If real estate agents are providing advice rather than factual information, they may be carrying on an unlicensed financial services business in contravention of the Corporations Act.

ASIC warns:

  • If a person does not hold an AFSL or is not authorised by an AFS licensee, they can only provide factual information to consumers.
  • Where an AFSL is required, real estate agents must immediately cease offering and providing financial services or advertising the provision of financial services until such time as an AFSL is obtained or they become a representative of an AFS licence holder.
  • A person convicted of carrying on an unlicensed financial services business may be subject to a fine of up to $34,000 or imprisonment for two years or both. If a company is convicted it may also be liable to penalties, including a fine of up to $170,000.