When projecting how long a nest-egg will last in retirement financial advisers often have different approaches. Some simply ignore the ugly question of when you will die, and opt for a 'safe withdrawal rate' which preserves capital. Others will put in an expected age of death (sometimes dimly using life expectancy at birth, the better ones at least looking up the correct age-adjusted mortality, and still others adjusting for factors specific to you). But the approach illustrated here neatly shows probability, while keeping it all simple: two dots are added to the chart, "1 in 2 people will die by this point" and "1 in 8 people will die by this point". Are you thinking about mortality in your investment planning and how to you show your clients the variability they need to plan for?
Apparently this is new, but I suspect most people that have been in sales, or professional advice, for more than a couple of years will have already figured this out. People first need to trust you before they can respect you. That initial liking, of the kind where they know you sufficiently well to rely on you, precedes competence. When you think about it, its obvious really. If someone is super-competent, but untrustworthy, then they are more likely to do me harm than someone trustworthy but less competent. Nevertheless, this post is worth a read: link.
When people cannot work out why poor advice is tolerated it is often because they have overlooked the value the customer placed on their trust in the adviser. When some people look at sales processes and break them down into mechanical steps that, at first glance, it looks like anyone could perform, they are overlooking the necessity for trust.
RBNZ NEWS RELEASE
Date 30 March 2017
Input sought on insurer law review
The Reserve Bank today published an issues paper for its review of the Insurance (Prudential Supervision) Act 2010 (IPSA).
Head of Prudential Supervision Toby Fiennes said: “Public consultation is an important element of the review.”
Mr Fiennes said that the review will look at how well IPSA has performed in achieving a cost-effective supervisory regime for the insurance sector.
“The first phase of the review focuses on identifying potential issues for more detailed consideration. The issues paper outlines the rationale, terms of reference, intended process and issues identified by the Reserve Bank. We are keen to hear from stakeholders, including whether we have identified the right issues,” he said.
Key information web page: Review of the Insurance Prudential Supervision Act 2010
How do you put customers interests first? Strategi has this guide for AFAs, based on compliance with current Code Standards. Taking a ground up approach to demonstrating how you put clients first in your business may be a great way to conduct a thorough review of your systems and processes. Here is an imagined process for insurance advisers looking to meet the requirements for Client First:
Vision: what represents a good outcome for the client in your process? How might you test that with clients? How do you know that is working for them? How does your service compare with other similar services? What evidence can you find to support your vision of a great insurance advice service for customers? How often does your board or management team review that process? If you are a sole trader, what training or education, or collegiate industry groups provide you with ways to review the process?
What possible conflicts between the client's interest and your own interest can occur? Make a list and consider each potential conflict: scale, frequency, what interests compete and describe them. Consider Code Standard one and five. What methods for resolving the conflict exist? Can you eliminate it? Can you disclose it? How will you ensure that you place the client interest before your own in the advice process? Under what circumstances would a conflict become too hard to manage - and you therefore choose to withdraw from the engagement.
The origin story you have all been waiting for - Income Protection - the earliest version of which was created in 1878 and formed the basis for a new kind of mutual. There are some other good nuggets in the article too, at this link.
The continual growth of wearable devices and smartphone apps used to generate personal health and lifestyle data is becoming an issue for privacy. Click here to read an article by Ross Campbell, Life/Health Chief Underwriter for Gen Re.
New Zealand has tough laws on the insurance of minors. This case from the United States shows how insurable interest may, or may not, have been applied by insurers there. Link.
Interesting to see more insurance advisers now commenting on the new draft law - see this link on Goodreturns. A reminder that submissions close at the end of the week.
David Chaplin has this report on the number of AFAs and their business composition. Although a small uptick in Authorisations has occurred, this is not enough to make much of a dent in the ratio of population to advisers. More is required. You may also consider the age of advisers, growth rates of their businesses, and composition of the advice market. Link.
ANZ has added a life insurance sum insured calculator to their website. It can be reached at this link. If you publish a calculator or conduct sum insured calculations for customers, you may be interested to compare your view with theirs.