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Leave good client outcomes to advisers: Whyte

Regulators' proposals for reform of the insurance sector seem to be trying to dilute non-aligned advisers' relationship with their clients, one industry commentator says.

Tuesday, May 21st 2019, 6:00AM 5 Comments

David Whyte, industry commentator and director, said the recently-released options paper proposing insurance reforms had some "strange proposals", including some that would interfere with the advice relationship by requiring insurers to take more responsibility for clients' outcomes.

"I don’t believe this is what officials intend when they seek to increase a life insurer’s responsibility for ‘good client outcome’ but that’s what the consequence would be if adopted," he said.

"And for me, this is the piece that is missing from much of the regulators and Ministry officials thinking – the existence of the axiomatic relationship between clients and advisers.

"Independent advisers don’t live or die on the merits of one company’s products or another – but they survive and thrive by building trust with clients throughout the process - with the addition of claims advocacy.

"In the process of building this trust, an adviser must have interpersonal skills which include integrity, empathy, and awareness. Put simply, independent intermediaries who cannot create a trusted adviser relationship with their clients do not survive in the long term. But for those who do, producing ‘good client outcomes’ is the primary function of their input to the relationship."

He said there wa sa lack of evidence that good client outcomes were not occurring in the independent adviser space.

"The several reports referred to frequently by commentators – the reports on remuneration and on soft dollars are outstanding examples - were produced using flawed methodologies, and produced conclusions which were in some cases risible.

"Nobody condones churning and many advisers rejected the overseas incentive trips but to conclude that there is a churn problem of any significance, or that a significant number of advisers create poor client outcomes due to inappropriate incentives, are conclusions that cannot be safely made from these two reports."

The new code of conduct for advice would put significant responsibility on advisers to create good client outcomes.

Tags: conduct Insurance Advisers

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Comments from our readers

On 21 May 2019 at 10:34 am Bikedude said:
Totally agree with DC Whyte. Insurers are providers of products and the suppliers to advisers. If the relationship is between Insurers and clients, then what competition to develop market leading policies would there be? Is Zip going to check with me whether the plumber did a good job of installing my hot water cylinder. Or do I rely on my Plumber to get the job done, knowing he is registered and qualified.
This whole view by 'the powers that be" is inane and laughable...if it wasn't so serious. How could they totally miss this most crucial factor in advice. Oh that's right, they came from banks who only have one product, "own" the customer and don't give advice.
On 21 May 2019 at 11:46 am Tash said:
Advisers, independent of providers, who can recommend a range of different provider's solutions, is a critical best practice feature for good client outcomes.
How will any product provider be able to assess the quality of my advice (suitability for the client)? They don't have the people, expertise or information to be able to do that.

Is the FMA seriously saying that if I make a recomendation that involves the use of two or three different insurance providers, (because that happens to be best outcome for the client) that someone from each provider must come to my office, review the fact find, and then sign-off my advice? That will serve practically no purpose other than force insurers to employ hundreds of advisers with the necessary level 5 and skill to perform my job at least as well as me. Costs and hence premiums will shoot through the roof! Really!!!!
On 21 May 2019 at 3:57 pm Backstage said:
Totally agree with your thoughts David. Also enjoyed the ZIP example Bikedude. I have been puzzled by how and Insurer can measure suitability with the current information they get from an adviser. In addition there are occasions where Insurer suitability is a factor over product. For example should your potential client have bi-polar as an example and want life cover, what insurer will be most empathetic to the illness and provide reasonable terms? How will they measure that... you cant get that on research models.
On 23 May 2019 at 1:42 pm JPHale said:
Echo and agree with all of the comments, as I said to a few bods last week, insurers being responsible for adviser advice is going to drive tied agencies better than clipping commissions.

Every provider, if they are doing it right, will have a different requirement for the adviser to provide proof of compliance and good advice outcomes.

This added overhead will force the majority of advisers to kick many agencies to touch and only work with one or two providers.

Not the independent advice outcome the government and regulators want.

We continue to ignore the behaviour aspect of the people involved when people in comfortable offices dream up this crap.

The predominant personalised advice life insurance adviser is a sole trader, on their own, with the cat and a PA.

The big operations talk advice, but the majority are sales operations, not the personalised advice operations those in the industry stand up for and are pushing back with.
On 30 May 2019 at 4:30 pm Paul J Burns said:
I take my hat off to some very insightful previous comments made. I think the way towards more scrutiny (of conduct, levels of transparency and remuneration etc), from regulators (officious or otherwise) and the public is at the point of no return. Hence the lesson I'm taking (as an intermediary) is that of the buffalo vs the cow (when faced with a storm). Seems I'm better off being a buffalo

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