Our latest poll asks you to distinguish between the ideal world and reality when it comes to implementing life insurance product solutions for your clients.
This question has arisen in the wake of a recent story from our Riskinfocus 24 series which reported the issues around balancing IP and TPD product combinations for clients in an ever-evolving consumer world (see: Disability Dilemma…)
As part of the conversation around the right combination of IP and TPD cover and the interplay between them, MLC Life Insurance’s Marshall Ross noted the importance of trade-offs when it comes to which aspects of a client’s life should require coverage and which parts they might self-insure.
The compromise element is driven to a large extent by the cost of cover – especially during a period in the economic cycle where the cost of living exists at a heightened level of concern within much of the Australian community.
…it’s not unusual for experienced advisers to share …that every client conversation they conduct …is a compromise
Outside of this recent conversation about trade-offs and compromises, it’s not unusual for experienced advisers to share with Riskinfo that every client conversation they conduct (in relation to life insurance solutions) is a compromise – because that’s how the world works.
The argument goes that there exists a perfect solution for the client, in which 100% of their life risk exposure is covered by insurance. In reality, however, the conversation inevitably becomes one of trade-off and compromise – a sliding scale which balances affordability and risk exposure.
Does this sound right to you? Are the eventual risk product solutions you or your business implement always or almost always a compromise driven by affordability considerations? Or does the nature of your practice’s advice proposition allow you the opportunity to deliver much closer to the ‘ideal’ 100% coverage required for the client’s circumstances?
As always, we’ll be interested in your views and will report back next week…
A decade or so ago, I heard a talk from the veteran Queensland adviser Robert Ross. His key point was that risk advice was always a NEGOTIATION PROCESS WITH THE CLIENT. That was the complete opposite to the then attitude of investment advisers, many of whom assumed god-like attitudes.
Roberts proposition of course flew in the face of the then doctrine from ASIC, in that it was strictly a needs-based analysis process, after the adviser had identified the client’s objectives and needs, straight out of the Corps Act. What ASIC like to forget is that risk advice is an emotional process
ASIC was doctrinaire about the issue in that if your analysis said the client needed this level of complexity in risk cover, then the adviser was at fault if you didn’t put that cover in place. To a point I understood why they had that attitude, because at that time, for example, AMP advisers were trained to advise their clients “one sale at a time” doctrine, going back to the client every six or 12 months to extend the coverage.
However, at the same time ASIC, who were always ideologically opposed to life risk commission at any level (must be a conflict somewhere!), were somehow always keen to associate the level of lump sum cover with the level of commission paid to the adviser. They wanted it both ways!
I enjoyed Marshall Ross’s presentations (are they related?) Essentially he has refined the presentations that most experienced advisers undertake because we know that you could come up with a magnificent program, at considerable client expense, but lose the lot if the client developed “buyer’s remorse” before the responsibility period ended.
A philosophy of “do it once, and do it right” should be de rigeur for risk advisers. You must learn to to present alternative packages and help the client pick their solution. Marshall Ross has provided us with, as they now say, “the tools to do the communication job more efficiently and effectively”.
Old risky has hit it on the head and explained so well, the balancing act risk Advisers have always faced when presenting Insurance solutions.
The reality has always been that the vast majority of clients needed to pull back on full recommendations as other considerations like paying the home loan, food, vehicle and the plethora of other pesky expenses seemed to pop up in the conversations.
The REAL world can be such a bothersome thing and trying to explain that to all the compliance / Regulatory / Audit teams was a constant gripe of mine and had little bearing on how they interpreted the maze of Regulatory doom and how that correlated with real life.
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