New way to do overseas trips

Jon-Paul Hale defends overseas trips for life insurance advisers and comes up with a new way of doing them which would kill all the bad press around them.

Tuesday, May 8th 2018, 6:00AM

by Jon-Paul Hale

With all this talk of regulation, the very predictable discussion around soft dollars creating a bias for advice has been raised.

Now for me, the trips have never been a driver, the last two I have qualified for, one last year and one this, I have turned down.

However, that is not to say they do not make up an important part of the whole picture of providing good financial advice.

Moreover, what I mean by that is the role of the life insurance adviser, that is professional, involves a significant level of, as Jeff Tobin put it to me one-day, compassion fatigue.

This is where we spend a good part of our lives getting to know our clients. Knowingly, and ultimately, resulting in us being there and helping them through some of the most difficult times that they will experience. It takes a certain sort of person to be able to cope with that level of emotional challenge.

Add to that, as life insurance advisers; we do spend an awful lot of time away from family, particularly night work and seeing clients at times that most suits them.

No, that is not to say that trips have not been used as incentives to drive product provider sales.

Understand my point they are also an excellent way for advisers to ensure that they have that rest and relaxation away from the business, to recharge, and to ensure they can continue to offer that ongoing level of service to their clients. It is also a time to share ideas, be reassured that what they are doing is helping, and learn from others.

It too can be the saviour of relationships, which I have seen over the years have some significant challenges.

I get the possible bias from the client perspective. I place your cover with X; I am going to get a trip with the possible discount of other good and possibly better providers.

What I am proposing, and this is something as an industry we need to think long and hard about, is ensuring that the trips still happen without the external perception, and reality, of bias; because they are a valuable part of the overall picture of a good financial adviser as well. More so before the government and regulators move to ban them entirely, as we have seen in other markets.

What I see are two key issues around trips that need to be addressed; the perception of bias and the need for continuing professional development within an appropriate environment, and no I am not talking another junket.

What I am suggesting, however, is instead of the insurance companies being able to run the trips, the budgets of the insurance companies are used to fund them independently.

I do understand I cannot expect their whole incentive budgets to be used in this way. However, a portion could be used as credits to our central professional body for providing conference based CPD.

The idea here is, by having the insurance companies provide that credit to the central professional body, we will have sufficient funding for them to have the budget to run an effective CPD conference program. This could well be offshore because it will not matter with the way this is proposed.

And this is where the regulator can help without necessarily banning them or coming in heavy-handed about it.

So the regulator stipulates that X dollars of production, across the various disciplines, qualify for an agreed level of funding from the providers. This means that irrespective of whether you put a dollar of business, to Asteron Life, Sovereign, Partners Life, or AIA, ASB, ANZ, Macquarie, Fisher, etc., that credit towards your incentive trip for your national conference is going to be the same.

Because this is an independent third party and professional body, we have less perception of bias; we remove the ‘you put it here because of the trip’ view. The trip will happen if the business proceeds, but not because of the particular provider. It puts it in the same category as a commission with the difference it has to be spent on the conference and CPD.

Though deals on the commission will likely need to be looked at, that is also disclosure and more likely to be noted by a client, provided it is managed properly.

Add to that the conference details, regarding qualification to go, are published in advance, so you know what you need to do regarding production to get there across all providers. Also, you can see what it is going to cost you, regarding top up, if you do not make the full qualification.

It also means those that aren’t performing will slowly get the message maybe this is not the career for them. No, I am not talking about advisers sitting on a pile of renewals servicing their clients, they can afford to pay as they go, it is part of that model.

Frankly, the FMA wants us servicing our clients and moving them to better products and positions, in a professional way. So including renewals is not going to drive the right behaviours desired by the regulator either.

Now I get provider reluctance to look at this sort of thing because they like to use the incentive budget to drive production in their direction. However, this in the future is going to become a challenging thing for them, but they still have the budget for production.

For the providers, this still correlates directly with business with that provider, so in someways, it is still delivering to the base principles. Some providers may not have to contribute a lot, because of the production. You are still going to have sponsorship as credits do not get you branding, that is part of the point of the exercise.

Yes, there’s an argument why pay more for business they would have already got. Maybe, though there’s still the incentive to the industry conference to bang on about.

The reality is the providers will be at these conferences, and they will still do their best to influence adviser choice, in some ways they will get a bigger bang for the buck, as they will have all advisers there, not just their usual suspects.

It will also drive those less than competitive tied-type businesses to move in the desired direction of providing better products and services too.

For the advisor, they get to attend an effective professional conference that is focused on their professional development with the best possible speakers

Moreover, we genuinely get to have all advisers mix and mingle together to get a better outcome.

Yes, sure, we will see the providers providing trade stands and all the usual sales stuff that they do alongside this. We will have transparency in an area that has perceived bias, and the regulator and the public can have some confidence that it is being used positively for the betterment of the industry, client outcomes and ultimately society.

Now for the storm that is; which industry body should this apply too... as a member of PAA and becoming Financial Advice New Zealand, it would be my pick, but there are others that will want to put their hand up.

Whoever it is, maybe multiple associations, they need to have regulatory approval as an independent industry body(s) otherwise we will see the predictable ‘Industry body’ created by the insurers to circumvent the whole approach, as we have seen in the past.

And, no the irony of the history of the PAA is not lost on me.

Tags: Insurance Advisers