What to Do If Your Adviser Keeps Switching Your Products

Why Frequent Switching Is a Concern

If your financial adviser frequently recommends switching products — moving you from one super fund to another, changing insurance providers, or replacing investment platforms — it is worth asking why. While legitimate reasons exist, frequent switching can generate additional fees and commissions for the adviser without providing real benefit to you.

What Your SOA Should Show

Every time your adviser recommends switching products, your Statement of Advice should clearly explain: the reasons for the switch, how the new product is better suited to your needs, any costs or penalties associated with leaving the existing product, and whether alternatives to switching were considered. If this reasoning is missing or superficial, it is a red flag.

Check for Replacement Product Analysis

Under Australian law, advisers must conduct a replacement product analysis when recommending a switch. This analysis should compare the existing product against the recommended one across key features, fees, benefits, and risks. If your SOA does not include this comparison, the advice may not be compliant.

What You Can Do

Start by asking your adviser to explain the reasons for each switch in plain language. If you are not satisfied with the explanation, consider getting an independent compliance check on the advice you received. You can also raise your concerns with the adviser's licensee or contact AFCA for free dispute resolution.

Understanding Product Churn

Product churn occurs when an adviser recommends switching products primarily to generate fees rather than because the new product provides genuine benefit. Each switch typically generates application fees, potentially exit fees, and ongoing trail commissions. Common examples include repeatedly switching super funds or replacing insurance policies.

Churn harms clients through: costs from buy/sell spreads and exit fees, potential capital gains tax events, time out of the market during switches, and new insurance policies having new waiting periods or exclusions. Under the best interests duty, advisers must only recommend switches that provide a net benefit after all costs.

Questions to Ask Your Adviser

If your adviser recommends switching products, ask: What are the total costs of switching? What specific benefits does the new product offer compared to my existing one? Why was the existing product selected initially, and what has changed? Have all alternatives been considered, including staying with my current product?

If multiple switches have been recommended over a short period, ask for a cumulative cost-benefit analysis. Request written justification for each recommendation. A good adviser should clearly justify each switch with reference to your circumstances and goals.

Your Rights and Recourse

You have the right to refuse any product switch. You can also request advice on an ongoing basis without product changes. If you believe churning has occurred, lodge a complaint with the licensee's internal dispute resolution process, report to ASIC, or escalate to AFCA for compensation.

If churning caused financial loss, you may be entitled to compensation including refund of fees, compensation for tax consequences, and lost investment returns. AFCA can award up to $1 million ($5.36 million for superannuation complaints).

Frequently Asked Questions

How do I know if my adviser is churning?
Warning signs include: frequent switches without clear justification, switches generating significant adviser fees, recommendations to switch to products with similar features, and pressure to make quick decisions.

What is the difference between churn and legitimate switching?
Legitimate switching occurs when the new product provides a clear net benefit after costs. Churn primarily benefits the adviser through fees with little benefit to the client.

Can I get compensation for churning losses?
Yes. Lodge a complaint through the licensee's IDR process or AFCA. Compensation may include fees paid, tax consequences, and lost investment returns.

Should I change advisers if I suspect churning?
If you no longer trust your adviser, changing advisers is reasonable. Gather your advice documents and records first. A new adviser can review the previous advice.

AFCA Complaints — What to Know

If you have a dispute with your financial adviser, AFCA provides free independent dispute resolution. In 2023-24, AFCA received 3,559 complaints about investments and advice. The most common issues were inappropriate advice, fees disputes, and poor disclosure. AFCA can award compensation of up to $1 million (with a $5.36 million cap for superannuation complaints). Complaints must be lodged within 6 years of the issue arising.