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Article research and adviser perceptions

Life insurance research should be used to support recommendations, not to drive advice.

Monday, August 13th 2018, 6:00AM 4 Comments

by Jon-Paul Hale

Over the years I have seen it suggested that you’ve covered the research and analysis aspect of the 6 step process for life insurance if you have a copy of the research used in the report in the client file.

Which is fine if you’ve read the document and actually used the research to give the advice.

However, the bastardised check the box compliance aspect with this is one of; do the QPR research, it goes on the file, and I do what I want anyway because I’ve got the research on file I’m golden.

Which isn’t necessarily true and this comes back to an article, shared on LinkedIn by Tony Vidler, from the Sydney Morning Herald about the environment in Australia. The article was discussing the pack mentality that comes from large groups of people narrowly focused on one thing or a limited number of things.

Now, this isn’t restricted just to Australia or Australian banks, but anywhere where there is a collective to reinforce you without the perspective of people with a differing opinion, as often happens within corporate environments. We had our own example of it here not so long ago with Youi and their sales practices.

And this is where the research piece, which is critical to the advice process, is somewhat getting lost.

Research isn’t the decision maker; for the consumer, a QPR report type approach is often going to give the consumer the best insight on a decision they can make by themselves.

However, when it comes to advisers and advice, a much higher standard is expected. We should be applying more than tick the box on research. The decision should be including our education, training, and experience, to mould the advice to the client needs. Brains in gear and it needs to be applied.

My point here is research is about supporting advice not driving it.

At the end of the day, your job as an adviser is to ascertain what the client need is, what their objectives are, and to employ an appropriate solution to meet those needs.

Research is helpful to ensure that you’re not blinded by your own bias, i.e. trip to some far-flung location as is often suggested or the more common, I’m used to that provider I know how they work, so I’ll use them.

It’s that familiarity that results in you overlooking the alternative solutions, which are in fact better for the client.

I used to be a BDM, a good one by reports and sales targets. The harsh reality of that, the easier I made it to deal with my company, the more advisers placed business with my company.

It’s the same the world over, and it’s pretty simple. Solve problems, and people will keep coming back to you.

So really there are two sides to this when it’s not done well.

One is that I did the research, it’s on file, I tick the box, we carry on.

And the other approach that said the research says go here, so that’s where we go, without applying any critical thinking to the situation.

For example, your fact find may have discovered that the client has some interesting ways of earning their income, that isn’t necessarily that easy to demonstrate in a loss of earnings position, or you have some medical conditions that have differing and sometimes interesting answers from underwriting.

If you’re heading down the track of using your usual supplier, you may be overlooking the opportunity to provide products to clients that are more suitable.

Which should raise questions as to why you are not looking wider. With the other options you may be missing an opportunity to provide coverage at substantially better terms, i.e. lack of exclusions and increased premiums, that means the client has better security of cover or the ability to pay for it for a much longer.

So what I’m saying here; is to be a professional adviser. No matter where you work, you need to have a depth of product knowledge and understanding to achieve this.

Which means that you have the ability to challenge the research, or at least justify why you’ve taken a different path to the research indicated path that sits on your file.

I’ve seen many files in my time with a tick box approach of putting the research on file. It hasn’t actually helped the adviser. The adviser has placed the cover with the provider that isn’t indicated as the preferred provider in the research, and they have no notes as to why they selected different provider. So the tick the box exercise from a critical advice perspective has done the adviser, or the clients, no favours.

I think we have an over-reliance on research with advice, now that we have tools that look pretty and give the client a perception that we are more professional because of the research reports.

And yes I know there’s plenty out there that will say, but the research reflects product, and on the most part I agree.

However, we need to make sure we don’t abdicate our role in the process in critically analysing the client situation when we decide to apply a product solution.

As a point I use Strategy and QPR in my business, I’m focused on getting the critical view and reducing any bias my own perceptions bring.

Recently in comparing Strategy and QPR for mortgage payment insurance, I found the situation that shouldn’t appear but did.

On the QPR side of things they had the OnePath Life mortgage product listed at 99% and the Asteron Life product at 79% when comparing this against the Strategy comparison, Strategy had Asteron Life at 94% and OnePath Life at 74%.

While I get that the two research houses have differing approaches, it shouldn’t be that dramatic.

In a pure, this is this, and that was that environment, we should not see this and further demonstrates that relying solely on research in making your decision is fraught. Potentially it will put your client in a position where they don’t have the cover you thought you gave them.

We have many things being discussed in the market, plenty is coming from the compliance people but frankly based on perceptions as we don’t have any rules to run with quite yet.

However, as an adviser, you can do some of the basics to ensure that your business can comply with whatever the new legislation throws at you.

And in the process hopefully you become a better adviser, a more professional adviser, and you have better outcomes for your clients.

So don’t focus on compliance, it’s only going to set the minimum bar, instead, focus on being a better adviser. A professional one that puts clients first and drives professionally driven outcomes for clients in the most challenging times of their lives.

Tags: Quotemonster Strategy Financial

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Comments from our readers

On 17 August 2018 at 12:18 pm RussellH said:
Hi JP,

Good article. I feel that research is a platform to help inform and educate an advice position that the financial adviser takes. If you like, it adds data and rigour. But advisers will make a recommendation using more factors than just the analysis of the policy terms and price elements.

Having said that, analysis of price and terms is a significant chunk of the work. It still surprises me, but every quarter we have an average of 8 products with price changes, and about 10 that have policy wording changes. That is really tough to keep track of one your own - we have six staff in Quality Product Research Limited to cover it, and we know there is room for improvement.

Best wishes, RussellH
On 19 August 2018 at 5:07 am Tony Vidler said:
Great thinking here JP.

I would endorse the thinking that product research is a factor in supporting a particular recommendation, but should certainly not be the sole determinant for suitability.

Product research by definition is limited to assessing the quality of a product by assessing its features and potential usefulness in comparison to other similar options. At no point does product research take into account the end users particular set of circumstances, thereby limiting its' capability to support a specific recommendation.

Having said that, I have maintained a publicly expressed view for some years now that QPR has the most useful methodology for supporting risk recommendations as it factors in a weighting for incidence of claim on particular benefits.

This is an especially useful aspect when one considers that virtually all insurance recommendations result in a compromise solution. That is, the overwhelming majority of insurance recommendations for consumers involve a trade-off between the optimal professional opinion of how to effectively transfer all foreseeable (& insurable) risks, and, the individual tolerance and financial capability of each consumer (which varies enormously).

Somewhere in between what a professional says the consumer should have and what the consumer says they are willing to pay for is what gets proposed to an insurance company most of the time. It is nearly always a compromise.

Being able to give weight to which elements are most likely to be required by a claimant is particularly helpful I believe when working through the compromise process, as opposed to having a methodology which simply gives weight to the volume of features any particular product may have.

For advisers deciding on which research they should use to support their recommendations (and everyone should be using some!) I would suggest looking at the methodology used in that research and then deciding which is the most robust, or best philosophical fit, for your own process.

After all, it is the adviser's name and livelihood that goes on the line with every recommendation. The adviser carries the risk in the provision of advice to consumers, and the adviser should therefore be looking at the research house methodology as a means of managing their own risk. It is not a method for determining suitability by itself.

(Note: I have no commercial interest in QPR).
On 20 August 2018 at 1:07 pm alogan said:
Agree wholeheartedly. Research is a tool to assist advisers with advice recommendations, not make the recommendations for them. Researchers know the products, the strengths and weaknesses of benefit provisions etc but they don't know your client. Every client is different and will have different needs and good research should be flexible enough to cater to these requirements. All too often I see advisers printing out a page of Research and using it for multiple client engagements, focusing on "overall" scores and not the specific requirements of each client. This is clearly flawed. Research should be embedded in the advice process not a stand alone tool, it should be client centric and results should be reflective of the required benefits for that client engagement. This goes beyond simply "male vs female" scoring methodology, research needs to be dynamic, both in features required and premium calculations; some products have optional benefits built in whilst others have the same benefits as added extras resulting in an increase in premium if selected. If you formulate a plan with some of these extras added in, and others excluded, are you sure the research and premium comparisons you're including accurately reflect your recommendations?

When it comes to replacement advice, we're seeing a greater focus on features gained or lost in the transaction, over product "scores" as this is the critical information required in the replacement advice process. Having this functionality available to advisers at the click of a button in the advice process has proven to be a very popular part of XPLAN.

Agree with Tony that methodology is extremely important, as is scrutiny of that methodology by external parties, otherwise there is always the risk of subconscious bias. IRESS has an ISO International Quality rating for its Risk Research to give our clients added comfort when using our tools.
On 23 August 2018 at 10:53 am RiskAdviser said:
Thanks guys! appreciate the comments and additional information you've added.

That client first and the qualitative approach and reasoning for the solution piece.

It's the theme that is consistently coming through from regulators, providers and industry bodies in all of the submissions and commentary to date.

Some are saying it's getting too complicated, and at some levels it is.

Cheers J-P ;)

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