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Are Advisers Compliance Fears Costing Them Clients?

Tony Vidler writes this article explaining that advisers are often so fearful of compliance that they are losing clients due to the documents they are presenting them with.

There are layers to this problem: 

  • The client you do not approach because you are worried about the compliance burden
  • The service you do not offer because you are worried about compliance processes
  • The client you lose because your compliance documents are so complex
  • The client you lose because even though your documentation is great your process around presenting the compliance process is filled with resentment, annoyance, and un-needed complexity

The short answer is, yes, advisers are losing clients. The long answer on how to avoid that is the hard process engineering work to develop a compliant process that is simple and easy to use, and easy to sell too. 

Rob Stock on Insurance Claims

Rob Stock has this article on insurance claims which quotes FSC data on life and personal lines claims. Hat tip to Regan Thomas for bringing this article to my attention. 

If you want an insight into the views of consumers you need to read the comments. 

The first thing you notice is the confusion. Life, health, and general are all confused. It isn't clear to them what this claims figure is about. Of course if you include general insurance and health insurance in a normal year the claims figure is multiple billions. In a really bad year (post-earthquake, for example) over ten billion. 

The next thing you notice is that some consumers think that they are only 'winning' when the insurer 'loses'. This is fundamental. Unless insurers can convince people that they get value from insurance even when they aren't claiming, the relationship will always be deeply flawed. I was always taught that the moment I sign up for insurance I am getting value - the value is peace of mind. That's worth something even if I never claim. 


From Cash and Churn to Crash and Burn

Australian website Professional Planner wrote this article  "The roar of disapproval that greeted John Trowbridge’s review of the life insurance sector in March this year has died down to a hum of dissatisfaction."

"Some have suggested that generating intense debate was Trowbridge’s aim all along in recommending level commissions; that it was designed to soften up the industry for revised measures. These would still prove unpopular, but less so, when compared with the initial options."

One Couple Denied Insurance Quote After Adopting a Dog

US website KIMT wrote this article on the struggle one couple faced when trying to take out homeowners insurance in the US after adopting a dog. Apparently it is not uncommon practice for insurers to deny even giving a quote once they are aware consumers own a certain breed of dog.

It all comes down to insurance companies not wanting to deal with a potential lawsuit if the dog was to bite someone in your home, which is why some companies blacklist certain breeds they deem “dangerous.”

RFAs Regulated as AFAs - There is a Trade-off Possible

Nobody likes the prospect of an increase in regulation. RFAs are the same. Some have recorded their opinion that they would rather not be regulated as AFAs. (see Susan Edmunds' article on Goodreturns at this link). 

The issue here is closely aligned to labeling. Third-party advisers - whether AFA or RFA - generally hate the idea that a person registered in a QFE may have a business card which includes the magic words 'financial adviser' but have little or not scope or experience to provide anything other than execution only services. Put another way, they don't provide any personalised financial advice, so why are they allowed the use of the term? In the UK terms like "restricted adviser" are used to flag some limitation clearly to the consumer. Here in New Zealand our FSC asked in its submission on FAA/FSP review that "sales" be used in stead of "adviser". 

I know many hundreds of RFAs and thousands do business with Quotemonster. Most of them are what I would call 'AFA-ready': they are part-way through or have passed virtually all of their level 5 qualification, are members of a professional body, do continuing education, and have well-developed concepts of advice. Overwhelmingly the work they do is personalised financial advice and most of them would not object to being categorised as AFAs - after grumbling a bit about the cost and record keeping. Some of them even wanted to be regulated as AFAs and were told that they cannot unless they advise on category one products. 

Still a few RFAs may be unhappy with the change, but if it was part of a package of changes that saw the QFE advisers lose the right to use the coveted term 'financial adviser' unless they were actually providing advice, I suspect most would think it was worth it. 

The other issue that is overlooked by the people commenting on Susan's article is that you remain free to offer a class or execution-only service, provided the client understands and agrees.