A well-known industry expert believes the client Best Interests Duty, introduced under the FoFA reforms, will have an impact on risk advisers ‘… in a big way.’
Speaking at this month’s Synchron Conference in Anaheim, CommInsure’s Jeffrey Scott said risk-focused advisers must be vigilant in observing the Best Interests requirements introduced under the FoFA reforms in 2013, but that in doing so, this could also deliver significant opportunities.
Mr Scott explained to delegates that part of FoFA’s Best Interests statute now formally requires advisers to investigate any existing life insurance products the client holds, regardless of whether that product resides on the adviser’s Approved Products List. “If a client walks into your office and they have an existing direct policy, retail policy, or have life insurance via an industry super fund, even though these products may not be on your APL, you now have an obligation to your client under the Best Interests Duty to investigate these products and compare them against products you are going to recommend,” said Mr Scott, who heads up CommInsure’s InsuranceTech division.
It is worthwhile for an adviser and their client to compare the pair
In emphasising his point, however, Mr Scott highlighted what a ‘tremendous opportunity’ this statutory requirement can represent. He told delegates there exist significant differences between the various life insurance policy types available in today’s market, which include direct and retail life insurance products as well as life insurance policies inside industry funds. “Risk advisers have the ability to demonstrate they have acted in the best interests of the client by comparing: premiums, underwriting terms, conditions of release, exclusions, ancillary benefits, preclusions periods, ability to remove benefits and features, and cessation of benefits.”
His message was that only by way of a thorough analysis can the client ensure that their life insurance policy represents value for money. Using the well-known industry superannuation phrase to make his point, Mr Scott told delegates that “The most expensive policy is not always the best policy, nor is the cheapest policy always the best value for the client. It is worthwhile for an adviser and their client to compare the pair,” he said.
Jeffrey Scott is a very knowledgeable person as to life-risk. I respect that, and find that his points are always clear, well-researched and many times he delivers good application of those points.
That said, few clients are as savvy as Jeff. While it’s essential to offer better coverage than a policy being replaced, going to great lengths to show prospects the differences will either confuse them or bore them, Either way that doesn’t put them in a decision-making frame of mind. They buy you and your expertise, not minute details of the product and the processes. Balance is needed.
Paul, I guess thats the skill as Risk Advisers we have to continue to develop. That ability to distill all of the points that Jeffrey mentioned into something meaningful for the client. The best interests duty is nothing more than another box ticking exercise from a compliance point of view, but during both the initial sale and review, you’ll be glad you went through it in order to justify your recommendations.
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