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State Your Requirements Clearly

Talking with a group of advisers today we covered the importance of stating your requirements clearly. Life would be made so much easier if their clients knew exactly what they needed - they usually don't - so they accept that clients need to be led through a process of analysis, diagnosis, and developing solutions.

Advisers, on the other hand, often have a good appreciation of what they want from life insurers. But often they don't tell the companies, business development managers, underwriters, and customer service people exactly what they want. It is hard. We like to be polite, to be liked, and we appreciate that they have their agenda too.

A good part of business planning consists of simply being clear on what we are seeking.

A good part of carrying out your plan consists of working for your goal - and forgetting about everything else.

Given a moment's reflection, most people agree that they aren't in business for their ego - yet many actions (point scoring, giving up time for corporate entertainment, seeking to win fruitless arguments with supplier admin staff) are actually ego driven, or at least based on pride.

We tend to have more fun and make more money shrugging off the day-to-day distractions and focusing on our goal. Share it with people, tell them what you want them to do, and stick to that.

Succession - is it an Issue for Family Farms?

Lately The National Business Review published an article outlining concerns of NZ farmers after the annual business barometer survey was completed by ANZ Bank. 

The survey shows that of the 750 farmers surveyed 71% of them want to sell the business to the next generation, but only 47% have family working in the business. ANZ agribusiness and strategy general manager, Ross Verry says very few had a plan to make that happen. "Although 91% of them highlighted it as an issue, there was only 10% who had a formal plan, I guess a lot of them know what they want to achieve but they don't know how to get there".

The survey reveals that perhaps the biggest issue in succession planning is that the high price of land is making it harder for farmers to raise the capital they need. Concerns including volatile commodity prices, exchange rates, and regulations and compliance costs were also named as issues.

Verry warns that "many farmers need to get their finances in order and take advice". The survey shows that only two-thirds of farmers budget and only a third of those that do monitor their performance against budget and use that information to help them make decisions.

Financial advisers of all kinds should be interested in issues of succession. Equity issues, capital availability, and shareholders agreements for all kinds of business often demand fast access to capital under some circumstances which only insurance can provide.

Click here to read the full article.


Quotemonster Statistics

Here are the latest weekly statistics from Quotemonster:

  • The average amount of life cover quoted in the last 7 days: $374,233
  • The average amount of trauma cover quoted in the last 7 days: $133,370
  • The highest Annualised premium quoted in the last 7 days: $35,607.60
  • The average amount of time the monster takes to quote in last 7 days: 6.67 seconds

Insurance Replacements are the focus of Care, Skill, and Diligence Examples by the FMA

While the light is shone hard on the recent KiwiSaver report, I'd like to draw attention to a document which was announced through the FMA's RSS feed at the same time (although it may have been written earlier). That is "Care, Skill, and Diligence Examples" - these are almost all about insurance replacements.  Tht's interesting in itself. Perhaps the FMA sees two areas of sales practice that it is concerned about as KiwiSaver and Insurance replacements.

"In addition advisers should keep records demonstrating how they have fulfilled the care, diligence and skill requirement in providing advice, and how they have disclosed and managed any conflicts of interest arising from commissions or their remuneration."

There's a bit of work to do to achieve that, and I suspect many advisers may not be disclosing or managing any conflict of interest created, for example, by commissions. Disclosing full commission is the easiest way to raise a red flag around a possible replacement policy.

It also highlights the sale of payment protection insurance, probably a consequence of the miss-selling scandal in the UK, combined with local experience of sales of PPI alongside things such as car finance here in New Zealand.

It goes on to explain how product replacements should be managed, including:

"For personalised advice, the adviser should...

Make an appropriate comparison of the client's existing arrangements with the new recommended product. This will require knowledge of the terms of the client's existing product. The comparison should be clear, reasonable and balanced. It should not just focus on the benefits of changing, for example, "the new product is cheaper". Highlighting only the benefits could be misleading."

Then specifically it states:

"If recommending replacement of an insurance policy, the comparison should include: the material differences in the policies relevant to the client, including any loss of benefits such as value or type of cover."

Given the need to meet such requirements having the ability to compare products in a reasonable way looks particularly important. It also highlights that the comparison must be relevant to the client. Merely comparing a laundry list of benefits not relevant might be misleading.

Botched up Biopsies

Lately Jeremy Bernstein from Crombie Lockwood forwarded us the link to an article of interest in the NZ Herald. The article discusses the recent incorrect diagnosis of brest cancer in a number of New Zealand women. Pathologist Ian Beer has openly admitted to being one of the specialists whose incorrect diagnosis lead to the removal of a breast for one women in December last year to later find out she never had cancer in the first place. Beer has come forward and warned that "more are likely as long as unnecessarily tight deadlines for diagnosis remain".

The article discusses the turnaround standard goals and other information about the testing process. It is well worth a look and provides some insight into the whole process of managing competing pressures on resources in the public system.

Not only have three women lost breasts for no health reason whatsoever but the mix up with some results also left two women who did have cancer being untreated after being given the all clear by their Doctor to later discover they were also misdiagnosed.

Jenny Engels, who was one of the patients incorrectly diagnosed, states "the most important thing is to get a correct diagnosis" after sharing her story with NZ Herald.

Little wonder, then, that private medical insurance (enabling, for example, a second opinion) is valued a great deal by many people. Some things you may want to think about when buying or renewing insurance your are:

Would you like the option of private tests?
Would you like to be able to afford to take time off work if you were diagnosed with cancer?
How good is the cancer cover in your insurance?

Click here to read the full article.


Research Informs Advice, It Doesn't Replace It

I was delighted to read this article at goodreturns which quotes Andrew Logan talking about research. Although he works for a a competitor I am happy to say that I agree with his main point: that research is not there to make the product selection decision for you. Advisers are legally charged with the responsibility to give advice: slavishly following a 'who's best' approach would not appear to fit the bill.

It is novice research users that look only at rankings - I have often said in our workshops that it is not the job of research to annoint a winner. It is there to enable better comparisons, to help you compare better, and identify the features and benefits of particular interest to your clients.

But research can be helpful in the following ways:

  1. Framework: providing a reasonable framework in which comparison can be made,
  2. Identifying meaningful differences: it can help the adviser to identify products and features available in some products and not others
  3. Providing detail: our research effectively creates a standard index of policy wordings mapped to the feature or item names -  in one click from the quote report directly to looking at the relevant section of the policy wording
  4. Sorting: our tools autmoatically cut out of the rating report things that don't apply to the particular client quote - such as benefits not bought, or those things that apply only to the self-employed, diseases that only apply to one gender, and so on.
  5. Creating a 'fit for purpose' set: you decide where you draw the line and end up with a basket of acceptable products depending on the list of companies you have access to and the appropriate product to offer.

Having focused on a fit-for-purpose approach you can then add in all the other factors you may consider as an adviser, such as: claims experience, service levels, underwriting, and so on.


Building Trust in Financial Services

Seth Godin, who's blog I was only recently introduced to, reminds us that trust is formed by the difficult projects and the tough times - not the easy things to do. That's an opportunity for financial advisers, particularly my closest concern, insurance advisers, right now.


Because for many clients, and the financial services sector now is a tough time. Wrangling over difficult claims, scrapping for good treatment, and taking names when it comes to improving service - financial advisers have more opportunities right now to prove that they can be trusted and relied upon.

It is now that you have the best possible opportunity to develop a group of advocates for your business from within your client base. So next time a client phones up to complain, swallow your pride, remind yourself that the customer is your first concern, and grasp the opportunity.