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Consumer Capability and Preference

The words "Consumer Capability and Preference" are used like a mantra by our compliance guru, Rob Dowler, in describing the customer input into the advice process. I like the phrase and I think it underlines some imbalances in current thinking around advice. 

A lot of customer input is gathered around their personal situation, especially financial situation, but also objectives, in most good risk planning processes. The element of capability which tends to get less focus, is literacy, but even this has had more attention recently. More advisers are adding a formal review of cover types, for example, into the start of the risk planning process. A neglected aspect of capability assessment is perhaps the testing of assumptions: a recent media case highlighted that an older client thought that insurance 'always' had a surrender value. Of course, it may have done 30 years ago, but it rarely does now. A good case of the need to test assumptions, a dimension of capability.

But the most-neglected area is preference. Although customers can always choose not to buy that is an extreme form of expressing their preference. Most advice processes still lack a polite question such as 'Can you please tell us any providers you would prefer not to deal with and why?' Even at the level of product features, provided the client has been properly informed about the value of features relevant to their situation and goals customers are allowed to exercise their preference. A good adviser warns them when it might get them into trouble or mean the proposed plan fails to meet their goals. But accepting that ,it is safe for them to exercise a preference provided it is properly recorded in the implementation documents.

Customers are, after all, allowed to simply prefer something. 

 

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