“A legacy insurance product refers to an old insurance policy that's closed [to new customers] but remains in force,” even if there are new and better policies available, Burgess said.

“Regulators are stretching out to areas we've never considered. If you don't look at it [the legacy product] the regulator could decide that's you saying that product is suitable for your client,” he said.

“It's getting harder to disclaimer out of acting in the client's best interests.”

“Overall, advisers have a good understanding of what a legacy policy is, but only about half have confidence in giving advice on legacy products,” he said.

“There's a lot of frustration for advisers for a lot of different reasons.”

But some legacy products have features that are difficult or impossible to replicate with new policies.

Advisers can get themselves in trouble if they put a client into a new policy that doesn't have the beneficial aspects of the policy they're replacing.

“If you replace automatically, that feature's gone for that client.”

Burgess said there are about 3.3 million active life insurance policies in force in New Zealand, of which about half are legacy products, and about 1.4 million health policies but about a million of them have less than $20,000 cover for non-Pharmac medicines.

For many newer drugs that Pharmac doesn't cover, the cost is considerably higher than that.

“In 2017, the FMA went pretty rogue on replacement busines,” Burgess noted, but said replacement business isn't necessarily bad.

“There are some advisers who don't do replacement business and others that do too much. There are some instances that you should consider doing it”

It can be very difficult at times to get information on legacy products – Burgess said he knew of one instance when it took the provider six months to respond to an adviser's request for information.

Where it usually goes wrong for advisers is lack of adequate record keeping, he said.

Advisers should use the tools available to them, including using AI to transcribe interviews with clients, customer relationship management (CRM) software, which are getting better and better,  and services such as Quotemonster, which provides details of more than 180 legacy products.

Only about 40% of the advisers on Quotemonster currently are using its research on legacy products, Burgess said. “This isn't five years ago when all this information was hidden.”

He said advisers should always personalise their records and avoid using generic terms and templated wording to describe their advice because every client is different and has different needs.

“The FMA will ask, why isn't this personalised?” And the FMA often sees advisers listing the advantages of a replacement policy but it rarely sees recording of any disadvantages and insufficient documentation of the reasons for changes.

“It should read like a book and people shouldn't have questions at the end,” Burgess said.

“If you provide both good and bad aspects, you can't be held responsible.”