moneyblog

Unhappy Valley - The Recruitment Trap for Advisers

I've spoken with so many advisers that have tried 'incremental' recruitment, because it is seemingly low risk - who have subsequently been baffled by the poor results. It's a well known phenomenon, and it's because you simply cannot change from being a sole practitioner to managing a team one person at a time. We call it "unhappy valley" where the time impost to manage a couple of struggling new advisers reduces your income by more than the gain from their production.

 

Sovereign and The Warehouse

So, some advisers are upset with Sovereign for offering their product through the Warehouse, which the Warehouse is discounting.(refer to this piece by Benn Bathgate, over at Goodreturns).

Sovereign is defending the decision saying simply - anyone can do it, just discount your commission. Which is certainly true.

Also, you know there is simply no comparison between the service that would be received by a client working with a adviser versus The Warehouse. I would remind advisers that life insurance isn't very price sensitive and they should focus on service differentiation if they are feeling competitive pressure. 

Our industry is at half it's potential - there is plenty of room for lots more distribution! 

Lot's more.

So if you want to run a big advisory business then forget about the Warehouse - give us a call, we'll help you build one.

Cavalcade of Risk 149

The folks at The Notwithstandingblog have run the recent Cavalcade, which they have used a great format for. Here is a sample:

Which of the following behaviours of financial advisors correlates with the lowest risk of defrauding investors?
a) Claiming to have secret/exclusive insider tips that “your broker doesn’t want you to know.”
b) Counseling clients that investments with higher expected returns tend to be riskier.
c) Offering to move your money offshore to avoid taxation.
d) Pressuring you into making a hasty decision on an “exploding offer.”
e) Charging abnormally high membership fees.

Do check out the rest of the Cavalcade of Risk as soon as you can.

Introducing Kerry Wood

Kerry Wood is now working with us to offer sales leadership consulting. Kerry has successfully built large sales teams at Quicken and at Fletcher Healthy Homes and is now ready to help advisers that want to move beyond the 'Sorcerer and apprentice' model into running a real adviser business.

Some of Kerrys previous sales management successes include:

•  Designed  and implemented product and service distribution through accountants channel

•  Set up and managed nationwide book selling network through 50 commission agents

•  Conceived and implemented 38 seat Telemarketing and Direct marketing operation

•  Moved commission agents numbers for 18 to 72

•  Drove new IT system to cement sales process and reporting

Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT)

If this all seems rather distant and unecessary, then ponder this story, which alleges that New Zealand companies have been implicated in the export of arms from North Korea. Goodness knows where they were going or what they were going to be used for but, you don't want to be involved in that.

In fact, perhaps New Zealand is more of a target because we are perceived as being a nice, sleepy, peacable place where one might be able to get away with something dodgy, like picking up a couple of spare passports.

But that's not your worry, you need to be concerned with what to do when Sheik Ya Booty's cousin pops on down to get some advice on how to launder, ahem, I mean invest his money. What money? Why, the money in this case right here!

Well, the FMA has produced a handy guide, well worth a read, on how smaller advice businesses can help by managing their compliance responsibilities with the AML / CFT Act.

 

 

 

The Evolution of Social Media Law

The Risk Management Monitor has this:

"We’ve spent a lot of time — both on this blog and in our magazine — trying to better educate risk managers about the risks of social media. The long and the short of it is that, for most industries, social media opportunities far outweigh the potential downside. There must be a policy in place and there is the possibility of self-inflicted reputational harm that never would have occurred otherwise. But in 2012, not having any social media presence, for most companies, is like not having a website in 2002."

Read the full article here.

Out of date...when it was written

Heh. The Statistics Department has this page as an introduction to the insurance industry, and it includes such gems as: 

"The life insurance market is dominated by AMP, National Mutual, Colonial Mutual, and by New Zealand Insurance Life,..."

To be fair to them, it has a header which states:

"Source: New Zealand Official Yearbook 2000. Please note, this information may now be out of date."

But, given that was 2000, it was well out of date before it was published. I mean, Colonial was already being merged into Sovereign, to name just one inaccuracy, and NZI Life?

Bringing the Orphan Client in from the Cold

This article at LifeHealthPro offers a series of good suggestions for financial advisers that receive 'orphan policyholders' or which purchase books of business and need to think of ways to engage with clients that have no personal relationship with the new owner. It's well worth a look.

The suggested use of the guaranteed insurability option as a way to grab attention and create some urgency to engage through a time-limited option strikes me as particularly useful - perhaps even more-so than life events, because as a new adviser you may be unaware of life events and therefore unable to tap into those.

 

What Makes A Difference In Underwriting?

There is a fashion for high non-medical limits in New Zealand. I've had two underwriters in the last couple of months tell me that reinsurers say that our non-medical triggers for additional tests are high compared to other countries, although I don't have a public reference handy right now.

Then there is also the NZ Society of Actuaries paper by Jonathan Eriksen reviewing experience improvements for various products over time. It notes that the experience improvements for Term insurance have been very slight, compared with other products, and relative to population improvement.

On the other hand I have advisers say all the time that our underwriting is tougher - refer to your copies of Beaton, or the feedback you have from your BDM team for evidence of that.

What is going on?

• The product mix has changed over the years, with an increasing dominance of term insurance coupled with the almost disappearance of with-profits business.
• Most term insurance is being written in flexible bundled products with a lot more income protection and trauma business than in the past - both products that require more underwriting, and where underwriting requirements have changed as the products have become better understood by the companies offering them.
• Those products cover more today than they have ever covered in the past: a modern Trauma product covers many more conditions, modern diagnostic procedures make the discovery of those conditions easier, and modern treatment makes them more survivable. All that means more underwriting too. Sovereign's original trauma product (Recovery Power) had eleven conditions listed, today they cover more than 40. Sure, many are rare, but the cover is definitely broader.
  
  
• Then we have some big societal trends to cope with: New Zealanders are fatter and more depressed today than they were twenty years ago when I started in the industry and it is these factors which are now contributing to more deaths.

Put like that you might think one was related to the other... but I'm no medical expert.

All of those add up to big reasons why our underwriting is tougher today than ever before.

But not why we love high non-medical limits. That's partly because the insurers desire to limit new business costs suddenly places them alongside the adviser who also wishes to reduce barriers to the client purchasing.

We also note that there is a substantial population of 'never insured' people. They are, younger, fitter, and have fewer pre-existing conditions. It would be better for us all - brokers, insurers, and all New Zealanders, if more of these people were insured.

The Insurance Guaranty Association System: A Safety Net for Policyholders

The state-based insurance guaranty association system provides a safety net to provide benefits, subject to statutory restrictions, to policyholders of impaired and failed insurance companies. This article describes how it works.

Read full article here.

Financial Bloggers Workshop

I am by no means the last word on the subject, but I am happy to share with any current or budding blogger in the financial services space, and the risk space in particular, what I have learned over five years doing this. Call me. The water is warm, hop on in.

Half of all Britons are Injured by their Biscuits

Danger lurks everywhere, including in the humble biscuit for morning tea: http://www.telegraph.co.uk/news/newstopics/howaboutthat/6153518/Crumbs-half-of-Britons-injured-by-their-biscuits-on-coffee-break-survey-reveals.html Goodness know how the poms would cope if they stepped up to the deadly meat pie beloved of so many kiwis.

Choice in Healthcare - what happens when funding is up someone else...

I think this is an important story about choice in healthcare. Take 2 minutes to read it - if only to feel grateful that it isn't you facing this situation.

Whoever is paying the bills ends up making a decision about which treatments to fund and which not to fund. That's always the case. Don't forget it, and don't try to hide it.

I've read a lot about people who say that talk of "death panels" is deliberately meant to scare individuals in the US away from the idea of a state provider of treatment.

Maybe it is. Maybe it should.

You see, far from being an rarity of outlier in the debate, the issue of which care to fund and which not to, rapidly becomes a decision about who shall live and who shall die. Think of the debate over funding Herceptin back here in New Zealand.

The shadow of these judgements is cast over almost every treatment decision.

It's this lack of control which leads roughly one in three New Zealanders to 'pay twice' for their medical care by buying private medical insurance as well as making their contributions to the state system.

Hat tip to Henry Stern at Insureblog.

So, Gareth...

...sure, let's be fair, it's the flavour of untruth we have all told.

At a delicate point in negotiations, perhaps, and governed by a confidentiality agreement, almost certainly, a pesky journalist comes along and asks you if the rumours are true that you are about to sell your business. So Gareth Morgan denied it. David Chaplin's article quoted him verbatim:

"The [sale] rumours are not right," he said. "In fact, we're looking at a little expansion deal with someone else."

That was reported on the 13th of December, although the comment could have been made earlier, when it hit the press it wasn't corrected, and on the 18th of January the deal is announced. 23 working days later. Maybe he didn't lie. Maybe he got the call the very next day and made the fastest sale of a financial services business ever.

We can all understand that, and forgiveness for such a small sin will be swift. Certainly by the many people who are devoted to his commentary and relentless criticism of the financial services industry. The champion of value has found an ideal home in the Kiwibank brand: value-focused, challenger, resistance-themed positioning of is smart and simple offers.

In fact, it could hardly have been sold to anyone else when you think of it like that, so, since Kiwibank is 'our' bank, I feel entitled to say that I hope we didn't pay too much.

SOPA / PIPA Protests

As a producer of intellectual property I am all for it's protection. I am not happy about SOPA / PIPA as these tools are very heavy handed, hard to operate, and the costs of the consequences are likely to be much higher than the copyright infringement that they prevent.

If you would like to know more about SOPA / PIPA, and by that I mean a good general grasp of exactly what is wrong with the proposed laws, instead of a generalised "this must be a bad thing if Wikipedia is against it", then there are many good sites you can check out. I like this post by alienth because it refers to specific sections of the law and especially looks through some of the consequences - see "fallout".

Selling Through Employers

My last piece on goodreturns is all about selling through employers.

Ten Best Business Insurance Commercials

The folks at business insurance quotes have selected these gems of advertisements for your viewing pleasure. Enjoy.

Attitudes to Risk, Quality, and Compliance

During a good discussion about how to approach the cultural aspects of compliance we had a look at the models which show how staff attitudes affect risk and compliance. The process runs something like this:

1. Leadership and staff attitudes, which impact:
2. Management processes, which in turn affect:
3. Approach to operating quality, risk, and compliance systems, which affects:
4. Product and/or service quality

The key point is this:often companies are focused on designing and implementing new quality, risk, and compliance systems. But without management processes which incorporate a concern for quality, and broader attitudes which value quality, risk, and compliance thinking, then those changes will be doomed to fail.

Jared Wade, at The Risk Management Monitor blog has a good piece on Risk Culture which deals with a similar subject very well - my favourite quote is:

"This is a good way to think about your “risk culture.” Do your employees talk truthfully, and often, about risk?"

Compliance Confusion

It seems you need some quite advanced legal training to be able to tell whether an adviser has actually given you any advice and done it within the law.

My colleague here, Alan Rafe, has recently sorted out some car insurance for his son. In calling three separate general insurers about the car he has definitely received personalised advice. The occurred when they said (and all three did it) something like: "Because of the value of your son's car, you are probably better off with third party fire and theft and dealing with any damage or loss to your vehicle yourself".We were thus satisfied that an opinion had been expressed which was based on information personal to the client situation.

Convinced that either inadequate disclosure was made (if the person on the telephone was an adviser) or that the mark had been overstepped (if they weren't an adviser) we sat down with our compliance guru Rob Dowler and, over coffee, proceeded to discuss the issue.

• Was there pre-existing disclosure? No, there wasn't.
• Was the company a QFE? They didn't say.
• What was the status of the individual? QFEA? RFA? They didn't say.
• How did they interact? Telephone

That last point is important because there are broad exemptions from many process provisions for advice given on a category 2 product over the telephone. But even so, there are some requirements: Oral disclosure of adviser status (QFEA or RFA) must be given, and membership of the disputes scheme the company belongs to must also be covered. 

We believe that inadequate disclosure was made.

It seems virtually impossible for a consumer to easily tell whether or not the company they are talking to is complying with the rules.

We should finally note that, in the context of the balance of the conversation, although the process followed may have been flawed in our view the advice was fine.

 

 

Quotemonster 700

www.quotemonster.co.nz passed 700 users today. Go and check it out - our product research is coming to that site soon.