AFA/Zurich Round Table: Making Life Insurance Future Ready – Part 2

Riskinfo joined with the AFA and Zurich Financial Services Australia at this year’s AFA National Adviser Conference to conduct an industry Round Table discussion looking at how advisers, associations, insurers and other stakeholders can innovate across insurance products and services, while also making the provision of advice more efficient.

Read Part 1…

Table of contents (Click these links to move directly to those topics)

Part 2

  1. Business Efficiency
  2. Specialist Advice

Panelists (L – R)

  • Jason Spits: Senior Journalist, Riskinfo, Editor, Riskinfo Magazine
  • Peter Sobels: Publisher, Riskinfo
  • Phil Kewin: CEO, Association of Financial Advisers, Co-host
  • Glen James: Managing Director, Fortify Financial
  • Andrew Rataj: Senior Financial Planner, PFG Financial Services
  • Phil Anderson: GM Policy & Professionalism, Association of Financial Advisers
  • Rod Severn: CEO, Professional Advisers Association, NZ
  • Peter Mitchell: National Sales Manager, Life Risk, Zurich Financial Services Australia, Co-host

Business EfficiencyBack to top

Following the discussion on innovations to products and services (see Part 1), the panel considered a combination of factors that it believes will lead to advice businesses operating in a more efficient manner. For both Andrew Rataj, Senior Financial Planner at PFG Financial Services and Glenn James, Managing Director at Fortify Financial, it comes down to good housekeeping and not an off the shelf solution from a third-party provider.

“Going forward, advisers and advice practices are going to have to be much more organised and on top of their client base”, said Rataj, adding that the key is to retain clients and provide an ongoing service that clients value and continually understand why they’re in a policy. “We’re competing against the direct channels and the other channels where there may be cheaper policies, but as long as clients can understand the features and why they’re in the policies, then they’ll stick around,” Rataj said.

just do one thing well

James said his approach comes from a different angle and that he has set up his business as if he had one client “…and I service them well, and then just duplicate that with all my clients.

“At any one time a business owner should be able to print a report to see what stage every client is at in the new business pipeline, and many can’t do that. But if you set up those efficiencies to become more compliant, nothing gets missed. My challenge to any adviser who might be reading this is: just do one thing well,” James said.

As for the role of a licensee in assisting advisers, James believes they should empower their authorised representatives to have a profitable business and be compliant, but he questions whether the help advisers need is what is being supplied by their licensees.

His message to licensees was: “Don’t come to me and help me with my client value proposition. Come to me and help me deliver advice efficiently.”

AFA Chief Executive, Phil Kewin sees common traits among practices and advisers who have efficient business models. He said for authorised representative licensees these traits usually include coaching of the adviser and an active engagement with the advice businesses under its banner.

“There is often a correlation between some sort of active management from the licensee and the advisers building a business plan, setting a clear value proposition and having the clear view of what the client looks like,” Kewin said.

His counterpart in New Zealand, Professional Advisers Association Chief Executive, Rod Severn said he continues to see successful advisers who run their practice on a very low-tech basis, with some not even having a website, and who instead rely solely on referral business.

“They say, ‘I’m not interested in technology. I do all my business on referrals, and I use the phone, and I’ll text and I’ll go and knock on the door and I’ll see them personally’. And that’s the way they do business. But I’m not sure how sustainable that model will be into the future,” Severn said.

“Having said that, people still want to sit across the table from somebody, and receive validation from somebody who has got a heartbeat and can look them in the eye, and I think that’s where these advisers will still do business for some time yet,” he added.

For Peter Mitchell, National Sales Manager for Life Risk at Zurich Financial Services Australia, technology has become a ‘catch-all’ concept for business efficiency that does not always live up to the hype.

“Technology has become an all-encompassing word that gets bandied around as the big innovator but it’s not necessarily the panacea. Technology should be viewed like electricity, in that it will not define businesses but enable many of the processes within them. We’ve observed that in our industry technology is often utilised piecemeal but the key to maximising efficiency is to ensure it runs throughout the entire production chain. Your clients’ behaviour and your buying behaviour are constantly evolving, and unfortunately they do not delineate the experiences by industries,” he said. “This means the experiences they are demanding are becoming more onerous and in an environment where margins are getting squeezed technology is the only viable enabler. In short the way clients interact with you is also evolving” Mitchell said.

He continued, “We found from an inter-generational research paper we just completed that of your current clients only two per cent of their children will maintain their connectivity with you. So, from a sustainability and profitability perspective, if you can’t make the technology work and are unable to give the right type of client engagement, via the appropriate channels being demanded, then poor advice is going to be at hand for everyone.”

advisers should be adopting new forms of communication but should use the same rules around providing advice they use with older forms of communication

So far, the discussion has been about business efficiencies in servicing existing clients, but is there a way to become more efficient in sourcing and contacting people who may need or want advice for the first time?

Advisers have turned to social media and some are using online tools to educate clients or provide financial literacy, but will 21st century efficiency interfere with 20th century legislation still trying to catch up to the new realities of advice and information?

AFA General Manager Policy & Professionalism, Phil Anderson does not see this as the case and said advisers should be adopting new forms of communication but should use the same rules around providing advice they use with older forms of communication. As such, Anderson says posts on social media should not be considered non-compliant unless specific advice has been given.

“I don’t see social media as necessarily something that prevents you from doing business. It has to be something that promotes business, and if you communicate with a client via social media, how is that different from communicating with them over the phone?” Anderson said.

“You have to be careful about giving personal advice and make sure that there are disclaimers. If there are particular issues that advisers are experiencing with the use of social media then we need to go to the regulator or the government and say, ‘how do we solve this?’,” he added.

Anderson believes there is a role for regulators and government in helping advice businesses be more efficient but it requires an understanding of how advisers work and what each can achieve for the life insurance and advice sector.

ASIC’s role, according to Anderson is to implement and enforce the law and provide guidance on how that takes place while the Federal Government set the terms of the law at a higher level.  As a result of this any dialogue around modernising the financial advice or life insurance sectors should take place at different levels with both the Government and ASIC, Anderson said, pointing to the ongoing work taking place on a life insurance Example Statement of Advice (SoA).

This work, which has yet to be concluded, requires input from the advice sector, Anderson said, because while ASIC is aware of the need for efficient processes, it has to work within the law and ensure consumers are protected.

“In this case, when ASIC goes away to design something, there is so much complexity to consider in terms of the production of an SoA. For example, the law simply says you’ve got to have these things. It doesn’t say you’ve got to let the message flow in an SoA, or the order that things have to be in. You can have them in completely the wrong order, but still be compliant. So, designing an SoA is a huge job and a huge challenge, and you’ve actually got to manage all sorts of variables,” Anderson said.

“They’re very focused on the client outcome, and the client’s understanding of the advice. We’re equally focused on the efficiency of the production of the SoA and I’m certain advisers will be much more satisfied with the next version of the example Risk SoA than they were with the previous version,” he added.

Specialist AdviceBack to top

Specialist advice may be considered as a personal form of efficiency and innovation with a leading US adviser stating “…true success comes when you have developed extensive expertise to establish a niche.” But is this where advisers can add value into the future and where they should be spending their time improving their knowledge and skills?

For Rataj there are benefits in having specialist knowledge within an advice practice but he regards moving in that direction as a response to his client needs and not a path to head down first to attract clients.

“Our business is a hybrid approach where 90 per cent of our advisers are generalists but when we felt the need we specifically hired a self-managed super fund specialist and that’s all he does. He doesn’t do risk but has got his niche within an overall general practice and that’s a good way to tackle those specialities that you need to provide within a generalist business,” he said.

“I don’t think we’re going to have to go from one extreme to the other by any stretch, but if we need to bring in more specialty, if that makes sense, then we will,” he added, pointing to aged care as an area where more advice is likely to be required in the future.

For James, using technology and co-operation between advisers allows him to move beyond his own niche as a risk specialist and work with other clients. He said that while he has a particular process and advice philosophy, working with two other advisers means he regards his business as generalist but considers himself and his peers to be specialists.

“I’ve got two other advisers under my brand: an older adviser who is very good with older clients and an adviser who is younger than me who doesn’t want any clients over 30. It doesn’t matter what they are because the business process can be used for a small business turning over 20 million dollars or for a mum and dad because at key steps in the process we can do different things,” James said.

“People talk about specialists going narrow and deep. But why not be a generalist that goes narrow and deep? Do what you want as long as you’re efficient, you’re helping people, and you’re not biting off more than you can chew,” he added.

Specialisation was also taking off in New Zealand but in a very different way than the Australian market according to Severn, who said small adviser firms, particularly those with mortgage books were under threat from a collapsing market.

“We have a lot of ‘one-man bands’ operating in New Zealand, and if they were in the mortgage space they would be very nervous as that market is tightening. Any adviser who has been in the game for the last couple of years who hasn’t had a chance to establish their referrals, or to build their book and networks is probably not going to make it,” Severn said.

“We’re already seeing some members getting out because it’s just too hard and the baby boomer effect is also kicking in and advisers are selling their books and retiring. There is a place for specialisation, but I think in a small market like New Zealand it’s a challenge,” he said.

The Australian market was also likely to find that specialisation has been useful for some advisers but has worked against other advisers, according to Anderson, who points to advisers who used to work in the corporate super space and those who are likely to leave because of the Life Insurance Framework.

Kewin said it was rare that any one adviser can cover all bases when it comes to meeting client needs, which is ok as long as the clients are being told that when dealing with an adviser.

“Advice clients have to be made aware there are a range of advice needs that can be met, and it may or may not be met by the individual adviser they are seeing. The needs may be met by that adviser, by a cooperative of others, or through their business, but as long as the client is aware of the full scope of risks, what their needs are, and how advice can satisfy those needs, I think that is the best way of looking after clients,” Kewin said.

Wrapping Up

In bringing the discussion to a close, the panellists generally agreed that innovation, efficiency and specialisation should not take a front seat at the expense of the need for the adviser to remain relevant to their clients and to those prospective clients they want to attract.

The key most businesses don’t understand is they don’t know what their clients actually value

Putting it succinctly, James said to his industry peers, “Get out of your bubble and put yourself in the client’s position. Don’t overthink everything or make things too complex because most clients come for one thing and will walk out confused.” He added, “There is a lot of noise out there and your clients actually don’t hear any of it. So, stay focused on what they want”.

Picking up on James’ point, Kewin said advisers who are pushing ahead are taking the best of what they have already built and are developing new ways to do those things by sharing with each other and collaborating and creating businesses that are dynamic because they’re focused on their clients.

“We can tend to get hung up on the big picture of the universe whereas, as Glen said, the clients don’t see all the noise. They just ask ‘Can I relate to this person?’, ‘Can he help me?’, ‘Can I see myself working with this adviser and do I feel better going to bed at night as a result of seeing him?’.”

For Rataj, the advice businesses that will thrive in the future will be those that remain relevant to their clients by continuing to add value “…and as soon as we stop adding value to our clients we’re in trouble as a business.”

“The key most businesses don’t understand is they don’t know what their clients actually value, and what they might have valued five or ten years ago might not be relevant now. The ones who understand what they value and continue to provide it will thrive and be stronger in the future,” Rataj said.

It is not only advice businesses that will do well with this approach, according to Mitchell, who sees a benefit for the whole life insurance advice chain.

“From a product provider’s perspective I see an opportunity for both insurers and advisers to be honest about what they do and, as long as you are sustainable, as long as you are able to add value to your clients to the point where it improves your lifestyle, you will continue to maintain your relevance,” Mitchell said.

“And, that’s a salesperson’s comment, but it applies to a salesperson, to an adviser, to staff and even to products – if you maintain your relevance, you will always continue.”

Expanding on this Severn moved the focus a little further out towards consumers seeing advice as having a value for them and those who provide it.

“It’s all about the value of advice at the end of the day and it is the value of advice for consumers, for product providers, and advisers. All of us around this table, whether you’re a direct adviser or running associations, or with manufacturers – if we just focus on getting the value of advice out to clients, with the sole aim of making their life more financially viable down the track, then we’re all doing the right thing,” Severn said.