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Protection Products Too Hard to Understand

The ABI has done a survey showing that protection products are hard to understand. This is no surprise, fulfilling the rule of thumb on old boss of mine always had "I hate research" he grumbled "it only ever tells you what you knew already".

But it is useful for highlighting a problem, and follow up research can help you see if you've made any headway.

And there is a problem - people don't trust us because they think our policies are deliberately confusing. Our lawyers think they are deliberately precise.

That's a problem.

At the moment the lawyers are winning and the clients, the sales team, and marketing are all losing.

Is New Zealand any different?

Nope. I've been ploughing through documents for the development of our new product research and they are complicated. Most require a reading age well above the average for New Zealand for example. But more on that subject will be in my next column at www.goodreturns.co.nz

Product Provider Direct Sales With No Advice

There are going to be product providers offering their product to clients direct and attempting to do that without offering any advice. Advisers will spot these and complain about them, feeling that they compete with properly Authorised or Registered advice processes. The FMA will keep an eye on them, especially when an information-only process is applied to a category one product.

But they will exist.

The process is essentially and information-only one, there is no advice is merely helping a client to review the product features for example, or find the information that they seek in a prospectus or investment statement.

You can spot them because they will have statements like this somewhere in their website or sales information:

"Please note that XYZ Ltd only offers ABC products and we can provide you with information about those but we cannot provide you with any advice regarding the suitability of these products for your personal circumstances"

Of  course, you could also just mystery shop them and see what happens.

Variations may emerge. Third-party information-only channels for example. Like a call centre or marketing outfit that offers answers to questions that are found in the prospectus and may refer or simply decline to assist in any other way no-matter how nicely the client asks.

Therein lies the problem. The risk of 'accidentally' offering an opinion or recommendation based on personal information a client may offer during the course of the sales interaction.

Clients don't want to pay much for advice

Nic Cicucci at Money Marketing reviews the Coredata survey of what British consumers say they are willing to pay for advice, and forms the critical conclusion:

"But what is worrying is that in so many cases advisers somehow have failed to demonstrate any worth in their relationship with clients."

Read the rest too, it's useful if you want to charge any fees in your business (even only as an option, or perhaps for only a narrow range of services).

Unhappy Valley - The Recruitment Trap for Advisers

I've spoken with so many advisers that have tried 'incremental' recruitment, because it is seemingly low risk - who have subsequently been baffled by the poor results. It's a well known phenomenon, and it's because you simply cannot change from being a sole practitioner to managing a team one person at a time. We call it "unhappy valley" where the time impost to manage a couple of struggling new advisers reduces your income by more than the gain from their production.

Unhappy Valley


Sovereign and The Warehouse

So, some advisers are upset with Sovereign for offering their product through the Warehouse, which the Warehouse is discounting.(refer to this piece by Benn Bathgate, over at Goodreturns).

Sovereign is defending the decision saying simply - anyone can do it, just discount your commission. Which is certainly true.

Also, you know there is simply no comparison between the service that would be received by a client working with a adviser versus The Warehouse. I would remind advisers that life insurance isn't very price sensitive and they should focus on service differentiation if they are feeling competitive pressure. 

Our industry is at half it's potential - there is plenty of room for lots more distribution! 

Lot's more.

So if you want to run a big advisory business then forget about the Warehouse - give us a call, we'll help you build one.

Cavalcade of Risk 149

The folks at The Notwithstandingblog have run the recent Cavalcade, which they have used a great format for. Here is a sample:

Which of the following behaviours of financial advisors correlates with the lowest risk of defrauding investors?
a) Claiming to have secret/exclusive insider tips that “your broker doesn’t want you to know.”
b) Counseling clients that investments with higher expected returns tend to be riskier.
c) Offering to move your money offshore to avoid taxation.
d) Pressuring you into making a hasty decision on an “exploding offer.”
e) Charging abnormally high membership fees.

Do check out the rest of the Cavalcade of Risk as soon as you can.

Introducing Kerry Wood

Kerry Wood is now working with us to offer sales leadership consulting. Kerry has successfully built large sales teams at Quicken and at Fletcher Healthy Homes and is now ready to help advisers that want to move beyond the 'Sorcerer and apprentice' model into running a real adviser business.

Some of Kerrys previous sales management successes include:

•  Designed  and implemented product and service distribution through accountants channel
•  Set up and managed nationwide book selling network through 50 commission agents
•  Conceived and implemented 38 seat Telemarketing and Direct marketing operation
•  Moved commission agents numbers for 18 to 72
•  Drove new IT system to cement sales process and reporting
Kerry Wood

Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT)

If this all seems rather distant and unecessary, then ponder this story, which alleges that New Zealand companies have been implicated in the export of arms from North Korea. Goodness knows where they were going or what they were going to be used for but, you don't want to be involved in that.

In fact, perhaps New Zealand is more of a target because we are perceived as being a nice, sleepy, peacable place where one might be able to get away with something dodgy, like picking up a couple of spare passports.

But that's not your worry, you need to be concerned with what to do when Sheik Ya Booty's cousin pops on down to get some advice on how to launder, ahem, I mean invest his money. What money? Why, the money in this case right here!

Well, the FMA has produced a handy guide, well worth a read, on how smaller advice businesses can help by managing their compliance responsibilities with the AML / CFT Act.




The Evolution of Social Media Law

The Risk Management Monitor has this:

"We’ve spent a lot of time — both on this blog and in our magazine — trying to better educate risk managers about the risks of social media. The long and the short of it is that, for most industries, social media opportunities far outweigh the potential downside. There must be a policy in place and there is the possibility of self-inflicted reputational harm that never would have occurred otherwise. But in 2012, not having any social media presence, for most companies, is like not having a website in 2002."

Read the full article here.