Are life advisers expected to recommend the ‘best’ product?
[OPINION] Steve Wrights asks whether advisers should recommend the "best" product and asks what is best anyway?
Wednesday, May 14th 2025, 9:22AM 
8 Comments
by Steve Wright
“Advisers must recommend the best product” is a sentiment I often hear while discussing what I believe are weaknesses in advice allowing clients to make ‘convenient’ complaints in the future.
I was on a panel at the past FSC conference in September 2024 where I raised the issue of advisers believing the law requires them to exclusively sell the ‘best’ product, as rated by independent services, and how that might actually be against client’s best interests. I urged the FMA and Disputes Resolution Services to debunk that view.
Here is my opinion. First, we must consider what ‘best’ product means? Is it:
- The least expensive product of the type (Life, Trauma, Income Protection, etc)?
- The best product of the type as rated by a product rating service?
- The product that provides the greatest number of benefits?
- The product that best suits the specific client’s needs?
As far as I can tell, neither the Financial Markets Conduct Act, nor the Code, requires advisers to recommend the most highly rated product. While advisers are expected to know their products and give advice with due care, diligence and skill, the best clue to what is required appears to be Code Standard 3, which requires advisers to recommend products that are suitable.
I believe this means that the ‘best’ product is the last one on the list above, the one that best suits the client’s specific needs, even if it is not the most generous or highly rated.
Naturally, recommending the most suitable product requires a thorough understanding of the client’s circumstances, risks and goals and then combining those identified needs with the most suitable product, in a recommendation.
The recommendation must be sufficiently detail rich that the client can understand the advice and the products (and product parameters) recommended. Clients need this level of detail so that they can make an informed decision on whether or not to accept the recommendation.
Don’t get me wrong, I’m not suggesting that product rating services don’t have value, I believe they have immense value. They are an essential tool for adviser product research, comparison and education, but one size doesn’t fit all.
I’m also not saying advisers should refrain from recommending the most highly rated product, very often those will be the most suitable.
Great advice requires knowledge, skill and a very good understanding of the client’s needs. I doubt advisers can simply abdicate their Code Standard three obligations by blindly recommending the top-rated product. This may not be suitable for any number of reasons!
Steve Wright has qualifications in economics, law, tax, and financial planning. He has spent the last 20 years in sales, product, and professional development roles with insurers. He is now independent and helping advisers mitigate advice risk through training and advice coaching.
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I have seen many young advisers over the past 10 years who have swallowed the story from one version of research that a particular insurer's product rates high and therefore its the best. Often, they have become caught up in mob mentality, and it is a very lazy default. They reinforce the marketing stories believing perhaps their is only 1 insurer that does this or that and selecting tales to rationilse this view.
A rating model does not rate insurer suitability. Does an insurer have better-skilled underwriters who can, with great skill, determine a better solution for a client who may have a specific condition?
Many young advisers over the past 10 years have almost become "tied agents", defaulting to a marketing story and little shiny features, many quite meaningless. They have become myopic fanatics and have not taken time to consider the whole market defaulting to a version of research.
With most of our insurance suppliers, their products function at the core and claims are paid.
I know the FMA will not accept an adviser using the, "well, they rate the best" as sufficient rationale for suitability and marketing only 1 insurer. Also, using that same phrase for changing a client's insurer.
Keep going with this subject Steve, there is more in this.
Advisers must give financial advice that I'd suitable.
End of story.
And suitability has a lot more to do with the client circumstances than stars.
As I see it, our role as professional risk advisers is not to play product reviewer or echo the conclusions of rating houses. We are not (or at least should not be) in the business of copy-and-paste recommendations. Our job is to assess and help the client understand the actual risks they face, clarify their objectives, and then recommend solutions that best fit those.
Just this morning, a bank manager at BNZ asked me, “Who has the best products in the market?” My answer was simple: “Best... for what?” A product might have bells, whistles, and a gleaming gold star from a ratings agency, but if it comes with exclusion’s or loadings it’s hardly a ‘best’ anything.
Suitability is everything. And that includes knowing how a client is likely to be underwritten, which is often where the rubber hits the road. It’s not much use recommending a policy with exceptional cancer benefits if the client is going to be excluded for cancer due to a history of polyps.
In short, I don’t believe that we should be looking for who’s the “best.” I believe we should be looking for the “best fit.” And that’s a very different thing!
That's an interesting thing to 'know' with such clarity.
It's a good discussion point, but if you want a more realistic glimpse of what is likely to happen here in the future, speak to those involved in the Australian market about the removal of the 'safe harbour' provision in their financial advice regulation.
Not only is it likely that product research into features and benefits likely to become more necessary, not less, but it also seems more and more likely that the actual underwriting terms offered across the entire market will need to be considered.
Sounds good, right? In theory this might be true if all insurers were roughly of equivalent standard in underwriting and product with minor divergences. In practice, this will likely mean it's actively wrong to NOT market only one insurer for the majority of cases - whichever insurer currently has the best product to price to underwriting ratio, and marketing any insurer other than that one will be actively breaching regulation.
Mentat’s point on considering all of the market variables is what we all should be considering. Yes, its more work, but that's what we’re paid for.
This is also where good scope definitions are critical. Its fine to state you only consider one insurer; you could go as far as saying you only provide $500k life cover contracts from one insurer.
If its scoped and disclosed appropriately and the client accepts that scope of service, then go for gold. But don't expect that client to remain one, because another adviser explaining all of the above will pick them up in a heartbeat.
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This was also a discussion point with the code working group before our code of conduct was finalised.
The premise of choosing the best product based on external research, product, premium, service, etc., misses the point that, dare I say it, direct and vertically integrated providers have a place in the market.
On the premise that cover on a shoddy bank policy is better than no cover at all, and this is a suitable place for people to be while they wait to find an adviser to give them real advice.
By the same token, someone wanting a basic policy after having a comprehensive cover, trading a cheaper premium for fewer features and a smaller scope of claim is also perfectly fine. However, in this case you better damn well document it if you're advising this sort of change!
There is nothing to say an adviser has to offer the best product features, the best price, or the best anything else. It comes back to the adviser providing a well-informed client with options for their particular set of circumstances, needs, risks, and preferences. This is where the best option(s) for the client lies.
This goes along with the outdated idea that you have to present three provider options to clients; this is also rubbish.
It would be unusual if you are tackling advice as I've outlined to find more than one provider that suits. TBH, if you have more than one option, you're probably not asking enough questions!
Also too, with the limited number of providers in the market if you are advising a menu of 50-60% of the options, are you really doing your job as an adviser?