Hunters v gathers in the new world

Jon-Paul Hale provides his thoughts on how hunters, gatherers and game-keepers will survive in the new financial advice environment.

Wednesday, October 7th 2020, 1:42PM

Kicking on from my last brain dump on serving something else tickling away in the back of my brain has filtered to the top. And one of the potential strategies of the future for many.

Hunting and gathering vs farming vs game keeping.

I first saw this in action with my time at NZHL, where they have distinct roles for those that find clients and those that service clients. And on the whole, it works quite well. It has its challenges, and it has some distinct advantages.

The challenge is the hunter has to live on what they catch and kill (so to speak). So a dry well or low consistency sees these people come and go quite regularly. They are the advisers we see 95% of the time who don't make it five years.

The advantage is the servicing of clients is far more consistent, and this is usually done with someone who wouldn't cut it with the hunters. So there is a need for the 'farm' to be fully stocked all the time for it to work well and typically is pretty stable on the existing cover, but not great on finding the gaps.

Then there's the game keeper. This one is a fickle one as they work as a hunter but in a defined patch, aka large client base. They are excellent at finding the gaps and sorting problems but aren't so interested in the mundane and time-sucking admin. So they need excellent admin support.

Looking out over the sea of noise we presently have there's a lot to be considered with how we prepare our businesses for licensing, how we're going to operate, what resources we need, and what is viable to do, or not do.

One thing that is starting to creep through is the distinction between businesses that hunt and businesses that farm. And taking this to its logical conclusion where businesses that hunt don't service and businesses that farm doesn't hunt. They could well become very very different operations.

And from a commercial perspective, they make a lot of sense. Also, this is where the structures of Authorised Bodies and Interposed Persons really has some traction.

For example, the hunter wants to build their business but outsource their servicing. They don't want to "sell" their book, or give it away either. So they might contract another adviser business to look after their clients.

Another approach might be to say "stuff it". The upfront is good enough and take a sales and someone else services approach by 'gifting' the renewal to a servicing business. Clawbacks would need to be managed, but also potentially a workable model.

The more traditional approach is to go hunting and hire a bunch of people to do the servicing. Though this also takes management and up to now most of the time, you have been training your competition. As the lack of service with good hunters are easy pickings for those doing the servicing.

It would be highly remiss of me as an adviser not to explain these differences to clients.

Some of these implementations are going to drive unwanted behaviours, though with the right people could well drive some significantly helpful behaviours and client outcomes too.

I talked in a previous article about the Partners piece and product changes, in that I suggested that when comparing the product detail on an apple for apple basis product and price in the industry was pretty flat. And it is.

When the rubber meets the road, there are a couple of things that go on that will differ with adviser approaches. One is the advice and replacement on the label and a level of omission vs another that is advice on an outcomes basis.

One is sales, and the other is advice. Sales will always have the answer that fits the move, advice will have the solution that fits the client. We need to be focused on the later, not the former. Sales will happen; at the same time, we need to be careful about replacement and how we go about advising on it.

And I get the 'simpler' product can that is being kicked around, more we need to ensure that 'simpler' doesn't mean significantly worse.

Sure I can present the AIA, Cigna, Asteron Life, and Fidelity Life disability products much much cheaper than the Partners Life product, however, that comes at the expense of the injury benefits, trauma benefits and to a lesser degree the TPD benefits.

Now given that the majority of my client's claims have been either injury or trauma claims, and Partners Life have echoed this in their public comments, it would be highly remiss of me as an adviser not to explain these differences to clients. Especially when these benefits help mitigate the extension of wait periods to provide comparatively cheaper premiums.

Everyone has a view, and sure, if they can get through a 13-week wait for a back strain, then they can get through this for a broken leg or traumatic event like cancer. But these 'sudden' events also come with unpredictable time off work that doesn't meet normal claim criteria either, which is why the extension benefits are so useful to have.

And this ball of wax on how to skin an income protection policy has many answers. The reality is premiums are increasing, and they are likely to increase with all providers, not just the new kid on the block.

What does this have to do with how I run my business?

The approach taken for the provision of servicing advice with clients is going to be critical to how you structure and negotiate servicing with your clients. You need to understand your limits so that you can be clear in your client servicing agreement with what you will and will not do.

And this will be frowned upon if you have an approach of "I do the sale, and you're on your own for servicing."

So how are you going to service your clients?

Especially if you have more than 500 households on your books and you have a meet every 24 months minimum requirement?

Tags: Opinion