Researching the Researchers

Being able to point to an external third party to explain product recommendations is seen as an attractive way to minimise the adviser’s risks and the effort required to ensure client recommendations are based on the principles of ‘best advice’.

But did you know……

Relying heavily on the recommendations from a research house will not deflect compliance responsibilities away from the adviser. If the adviser is using research information as the principal basis for his/her recommendations then that adviser will in all probability be required to justify this reliance by proving that they have thoroughly researched the researcher.

So what questions need to be asked of a research house to satisfy the regulatory bodies that reliance on the research information will deliver the best advice to the client?

How about…..

• the research house truly independent and without bias? Are there financial connections to industry players that might influence this independence?
• is the competence of the researchers? What qualifications do they have to make judgements about very technical product differences? How do they find out what is important to advisers and clients in order to judge the merits of one product over another?
• research process is followed? Are the processes followed when comparing products and companies well documented, made publicly available and applied consistently?
• many competing companies willingly participate in the research? Does the research truly represent the market?
• the research recommendations robust or can they be easily manipulated to deliver different results in similar circumstances? Reliance on easily manipulated information will not offer any compliance protection.
• recent is the information provided? How long does it take for participating companies to get their information updated? Is this timing consistent across all participating companies or is there the potential for time bias towards selected companies?

These are just examples of the kind of questions that, when answered, will give the adviser a clearer picture of how robust and reliable the research provided is. The next question for the adviser might be:

“Am I confident enough in this research that I can justify my reliance on it in a court of law?”

If the answer to this question is “No” or “I don’t know”, then perhaps that adviser should revisit the way in which they give their client’s advice.

There are no ‘easy and completely safe’ ways out in this business. It is still the responsibility of each adviser to demonstrate ‘best advice’.

Club Life has participated in industry research purely because of demand from our advisers. We have been a reluctant participant for the following reasons:

• Discussions with a number of Reinsurers has identified that many of the features and benefits included in income replacement benefits were introduced by competing companies purely because of the way in which research houses awarded ‘points’ to these features i.e. in order to look competitive in the research comparisons, participating companies all jumped onto the same band-wagon. Many of these features and benefits are now being identified as the drivers for the industry claims issues associated with these products.
• New and unique features – something that Club Life prides itself on – are not easy for research houses to deal with and consequently we do not have confidence they will get the attention we believe is warranted.
• Because research outcomes can be manipulated, participating in such research can mean that companies may be used purely to give the illusion that the market has been researched, even though the research “outcome” has already been pre-decided by the user.

While we understand the difficulties involved, Club Life’s recommendation for advisers is still that they personally select their preferred product providers on the basis of product difference and client services. This way they can be truly in control of the recommendations made and can clearly demonstrate best advice to their clients.

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