More than insurance advice

Imagine an adviser presenting a large per-mile loading for motorbike racing. The client is looking at the choice between the exclusion and the eye-wateringly large cost with the loading. How do they respond?

Tuesday, July 25th 2017, 1:45PM

by Russell Hutchinson

Maybe take the exclusion, maybe take the loading. Conspicuous by its absence is the option, “Uh, wow, I never thought it was that dangerous. I’ll stop. Sell the bike. That’s me done.” The option of giving up the racing is rarely on the table.

Imagine, perhaps, other life changing moments, all brought about by the presentation of the offer of terms: “Really, just for having a BMI of 55? Okay, I’m going to change. I’m not even going to finish this pastry”. Claims sometimes have that effect, but the premium alone - rarely. For better or for worse, we assume, mostly, that our clients have chosen their lives and current circumstances: rich or poor, fat or thin, sick or well. After all, if lugging around all those extra kilograms didn’t convince them, why would a few extra dollars on the premium?

That’s the view if the role you defined for yourself was just ‘insurance adviser’. Partly because of the separation of insurance product from investments in the 1990s, and partly because of the regulatory split between RFAs and AFAs since then, that has been the default approach for many for some time. If you see yourself offering only insurance advice, then talk about risk management is superfluous. The role is about education, arguing for budget, setting cover levels, identifying the right contracts, comparing, selecting options and reviewing the cover while in-force. These are all really valuable tasks. Good insurance advice is good to have.

But there are some advisers that define it differently.

You could define the role so that it stretched across more financial sectors. I have some friends who have a true full-service financial adviser. They are young, still in their first home, and money is still tight. But their financial adviser did a budget, a cash management plan, sold them the home loan, their insurance, and offers them tips on saving money – and regularly reviews their progress on fast-paying down the home loan.

You could define the role so it covers health as well as wealth – wellness, risk management, and a direct connection to life goals by that route would fit in well there, too.

Of course, not all of these services come with a handy, in-built, mechanism to remunerate you. Fee-only work can be scary. But the truly wonderful thing about the price signal is that it constantly expresses a view on the quality of your supply and the quantity of demand for a service. That helps you find the clients. Once you have found a market for a fee-based service you are suddenly free to concentrate on getting better and better. The greater the revenue derived from that, the more resilient your business.

Tags: financial advisers Insurance Advisers risk management