The positive that we do
Many people reading my articles might think I'm grumpy and cynical, and sure, what you see here usually points out some problem or issue.
Friday, August 9th 2024, 6:58AM
by Jon-Paul Hale
That's deliberate and intended to highlight issues and help drive change, and it's working.
We have seen significant changes in how providers operate with many of the issues I have raised in my articles.
However, what you see here is a small part of what I get up to daily.
I get many comments on where I find time to write? Most of these missives are written in my downtime.
Time while waiting for appointments when I'm out and about, time where I'm waiting for my kids to do their thing as I'm the taxi. Time where I have something scratching my brain that needs to be written down. It helps that I'm a reasonable typist too.
Sometimes while I'm driving, it's surprising what you can get written with voice recognition while you're sitting in traffic.
I guess that's part of the point of what I'm about; how we do what we do better than we have done, and how we do more in the time we have.
We have requirements with FAP reporting, one of which is number of clients we look after. With a guideline, choose your approach and stick to it.
This could be number of people you look after, it could be number of policies, it also could be number of relationships.
Personally, I've taken the approach of number of relationships.
Households is a common vernacular from me to describe a client in this space. It represents the "review" impact on my business.
I could be talking to a business owner or group of directors, a group scheme, a person with a business and personal coverage, a single person starting out, and everything in between.
The useful part of this approach is I can then look at my financial reporting and work out exactly what it costs (on average) to service each client.
I can also examine resource provisioning to determine if I am taking on too much, and I usually am.
This also highlights how the evolution of processes and technology has improved efficiency and delivery in my business.
In the past paper-based days, I would have said 250 clients was the maximum number of clients an adviser could deliver a high-touch full advice service.
With technology, support people and good processes, this can be increased while maintaining the same high-touch support and service to around 450-500 households per adviser.
When I talk high-touch, I'm not talking about a letter annually and a phone call.
I'm talking about monthly to bi-monthly phone contact from the adviser or the team, a quarterly newsletter, birthday and significant event recognition, policy anniversary contact, and more formal annual or more frequent review contact if needed.
Additionally, clients can access the adviser or team for policy administration, questions, claims, and life changes.
Plus, there is a bunch of ad-hoc contact through email or social engagement. It gets damn busy!
What's the outcome of this?
Better client engagement and client retention. More claims can be paid, and longer tenure of policies for those claims to be paid by.
One of the most significant issues new advisers face when taking on a client base they purchase is the drop-off that happens when clients are contacted because the clients "forget" they had a policy and often forget why it is there.
The new adviser reminded them of something that should have been reviewed years before.
Some will say that's a good thing; they forgot about it, so they had cover if they needed to claim. True, to some extent.
The other side of that argument is that those same clients reviewed and engaged with regularly would likely have made changes earlier that benefited them more than the premium spent on a policy that is now cancelled.
This is where our advice needs to have flexibility and endurance. Where the discussions on wealth creation need to be part of the consideration, it's not just about spending money on insurance.
It is also about making sure there is financial accumulation to remove the need for insurance. Especially knowing that insurance premiums will continue to increase to the point of unaffordability.
It assists in evolving coverage to suit needs, reducing life coverage as the need subsides, and ensuring that income support and medical treatment access are appropriate.
This strategy is also borne out for my clients with less trauma and life claims than I would have otherwise expected from my clients.
As wealth increases, it is discussing the evolution of medical coverage with an increase in excess and moving to hospital-only coverage as both wealth and premiums increase.
Instead of the mass cancellation of no excess S&T option included medical coverage at age 65 when they retire with no advice,
This is a common behaviour with a Southern Cross policyholder who doesn't have an adviser, and it is both fundamentally wrong and lacking client knowledge and understanding. It also happens with the rest, while the rest are more likely to have an adviser helping.
This isn't a slight on Southern Cross they just have the most people in this position, more that I'm saying that the importance of a good adviser with good review engagement is critical to those clients making the best decisions for themselves.
From my nearly quarter of a century in this industry, I know that we can do better.
We know the industry average claim decline rate is around 7-8%, with the reasons being 50/50, no cover for the claim and non-disclosure. No cover being exclusions or not having the benefit.
Yes, insurers deal with a significant number of claims here the client thinks they have cover but never took the cover.
My claim decline rate, including medical claims, has been under 1% over the last six years. Last calendar year, 292 claims landed on my desk, and I'm on track to have a similar number this year.
That's a full 3/5 households I look after claiming!
That's the good we are doing, delivering on the promises made with our advice when they took the cover.
Have some missed? Yes, mostly for reasons of exclusions, where I have argued the claim on a circumstance that may provide a path forward. I have been successful with most of these. Also, it is not my decision to make a claim not being valid if it is not black and white against the contract.
Have some been non-disclosure? Yes, and interestingly, most of these have been paid after a fashion. The bulk of my claim declines have been exclusions already in place, not new exclusions from non-disclosure.
I have even had a few where retrospective underwriting has resulted in loadings for the claimed condition and the claim being "paid". Most of these have been the claim paying for the imposed loading and the client retaining coverage with the loading rather than an exclusion.
Demonstrating that insurers are being reasonable with the issues created by clients to ensure that coverage responds rather than walking away at the slightest provocation.
About a third of the country's advisers are doing an excellent job; the other two-thirds of the population either don't know we exist or don't trust us.
That is the problem, one where everybody in the industry needs to do better.
The FMA needs to help promote consumer engagement; as the regulator, their job is to pull up the bad actors; at the same time, the FMA also needs to highlight the good. Otherwise, consumers get a biased view that all advisers are bad.
* With the FMA missing this point from the start, there is a lot of work that needs doing here by the FMA to improve it's perception with advisers.
* Highlighting only negative messaging engages the public's 60% cognitive bias toward bad news and inflates the perception that all advisers are crooks and cowboys.
Professional bodies need to do more public awareness activities. Advisers are not coordinated and connected well enough. They are focused on doing client work.
Professional bodies need to drive the industry's marketing to ensure that the positive message of engagement is out there. Advisers need to support our professional bodies by being members.
* The noise of "what do they do for me?" that I hear needs to appreciate that the market we operate in has been shaped by the work of our professional bodies.
* It is better than it would have otherwise been despite your view that it's bad or could be better. The government makes the rules, and they want the rules to be harsher than they are.
Dealer Groups have a dual role. Similar to professional bodies, they need to help with the public message while also being group advocates for advisers with their providers.
* The creep of agency contracts to undermine the security of adviser businesses is a significant risk for everyone.
* We know fee-based advice leads to less engagement in the life insurance space, which means that agency agreements with advisers are a critical infrastructure component of a well-functioning advice industry.
* The erosion of valuations and increased cancellation provisions make for a more precarious and antagonistic adviser relationship.
* We have CoFI adding to this with increased scrutiny by insurers and less security of contractual relationships. This equation does not bode well for driving customer outcomes in the way the Government and FMA desire.
* An example is the Southern Cross agency agreement, 10 days notice and they can turn the whole thing off. That's not a secure way of doing business. Most aren't that bad, but they all have their sharp edges and potholes.
Much of the bad behaviour seen in the life market comes from permissive products and arrangements with providers. The commercial advantage of a relationship often outweighs the provider acting on the bad behaviour.
* The independence of dealer groups with providers should be a platform to call into account poor practices and bad actors without financial incentives, creating barriers to preventing bad behaviour.
There is a potential conflict here where the dealer group operates a FAP as well.
* We see that clearly in the way the banks manage mortgage advisers and the control they exert on mortgage advisers who call out shady bank practices.
* When one bank acts against a mortgage adviser, the rest of the banks do the same, irrespective of the cause of that response.
Advisers also need to do better; we need to ensure we are singing from the same hymn sheet, working for the collective good of advisers and not just for self-interest.
* It is the self-interest deals and shady crap that has got us to this point with the external intervention and regulation everyone is complaining about!
Lastly, everyone needs to be engaged with the FMA to call out shady crap across the industry so we all have a better place to work. This is how a profession becomes a profession.
As a profession, we have significant value for society.
As a profession, we enable society to work and function.
As a profession, we deliver safety, security, and opportunity to our communities in ways most don't see or appreciate.
Being a financial adviser is both a calling and a privilege that we need to remind ourselves of when we step out the door every day.
Every interaction we have has a profound impact on someone's life every single day.
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