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Six-step process

Now that you've seen a bit of what I'm thinking, you're getting the idea I'm looking to challenge the status quo somewhat.

Monday, July 30th 2018, 8:00AM

No, I'm not suggesting the fundamentals are changing; how we go about delivering them are. The harsh reality of life insurance is it is a product that is ’sold’ more than it is bought. 

It's a reluctant, grudge purchase on the most part for most clients, with many they see that premium standing in the way of their next car or house purchase.

Unless someone has seen the impact of not having it, then they hunt it down. But for the most part, it's sold not bought.

This week I want to raise Care, Diligence, and Skill with you. This is changing. Yes, with FSLAB, but more my point, right now today, not next year.

It's no longer ok to wave a wet bus ticket around and write policies off the back of it, without following the six-step advice process and abiding by the AFA code of conduct.

According to the law, there is nothing prescribed for RFA advisers, other than being registered, belong to a dispute resolution provider and operate with due care, diligence, and skill. Yes, I've been reading the FAA again ;)

Which means there’s no legislative requirement to keep records, do analysis, write reports, communicate with and service clients. Except for the provision the law talks about; in relation to what a reasonable adviser would do.

Looking back 10 years, where a vast majority of advisers sold policies in one appointment and did little in the way of document what they were doing, the test against the law wasn't hard to climb over.

Yes, lots we're doing it right, most weren't.

Fast forward to today and you'll find that many advisers are now qualified at level 5, they do needs analysis, they do research, they write reports, they get them signed off by clients, they keep good records, and they do service their clients at some level.

The advice market today compared to 10 years ago is entirely different. This, by virtue of the law of averages, means that the test of what a reasonable adviser would do has moved closer to the AFA standard than it was when the FAA legislation first arrived.

Yes, the noise from the groups and the providers has been in lieu of no rules, the AFA rules will apply by default. Well technically no, the law states the measure is what a reasonable financial adviser would do for RFA’s.

If you look at the 4500 plus AFA’s and RFA’s this drowns out the AFA standard by numbers; if you restrict the measure to life insurance advisers, it drowns it out even further.

So back in 2008 doing business over lunch drawing on a wet napkin, was perfectly acceptable. Under the law today you can still operate that way, nothing is stopping you.

Until you have a complaint. Today that legal measure will look at what a reasonable adviser today would be doing in the same situation. And this is where you’ll come to grief, the legislation hasn't changed, but the goal posts have moved.

Yes, you could argue on this point the groups and providers have not helped to create this situation, the flip side, if we hadn't moved to where we are, we would be facing a much more significant challenge with the legislation that is coming.

Tomato / tomatoe.

I have had the opportunity to see and keep in contact with many advisers and how they're operating. Many have stepped up and are running AFA standard advice processes, and have done for a long time.

Others are running what looks like an AFA standard advice process, but it's not quite there yet.

One I've had a close look at is no different from the wet napkin process dressed up to look like AFA standard advice. The problem is what it looks like, and how it reads, will put those advisers at risk of regulatory intervention when it doesn't go to plan.

While it demonstrates the six-step process in its documentation, it does it out of order to the prescribed procedure. Meaning there are challenges to be had with the advice process, with client decisions being made before the advice is actually given.

The documentation attempts to backfill the advice requirements but does little to hide it.

A good complaints manager, our regulator, will see straight through that in about 5 seconds, keeping in mind the FMA is hiring people from our industry to help with all of this.

So my challenge to you in this article is; how close to the six-step process are you?

While as RFA’s we’re not being held to the client first requirement yet, adherence to this process is where a reasonable financial adviser is today.

The six-step process, in this order:
1. Establish the client relationship
2. Gather data
3. Analyse and evaluate
4. Recommendation and presentation
5. Implementation
6. Monitor and review

If you look at the education standard on this, it's broken out into nine steps. I'll let you go figure that one out, it's in your level 5 material that you’re all working on.

The first step to solving the problem is to recognise the problem. The six-step measure is good enough for this right now.

Use it and see what you can improve now to make it less painful later.

Tags: AFA FSLAB Jon-Paul Hale

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