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Good customer outcomes, where did this term come from?

Sorry team, I think I introduced it. Driving good customer outcomes has been a piece of language I have been using for a good 3-4 years when no one else was.

Tuesday, February 18th 2020, 9:47AM 13 Comments

by Jon-Paul Hale

I have used it with the FMA, MBIE, MP Faafoi, the Code Working Group and many of my comments in many mediums.

I'm somewhat surprised to see it picked up in the vernacular of our regulated environment also too; I'm very concerned to see this being hijacked by banks and VIOs to justify some Frankenstein version of good advice.

When I have been talking to various audiences, I have been using the term to drive thinking on what good customer outcomes could look like, with an expectation that the processes we have worked through would define what that looks like. Sadly it would seem I was overly optimistic in that aspect.

We are now here with a term that has no formal definition, and that needs addressing immediately.

To see VIOs come out saying that they are driving good customer outcomes with a bastardised sales process to look like advice that only has one answer is, frankly, not a good customer outcome.

I have written many articles saying what a good customer outcome is not, and I have proposed in several comments what it might look like, but it is not up to me to define this.

It is time we, as an industry, defined what a good customer outcome is, and we have a good solid debate on what that should be.

I'll start:

A good customer outcome is: An advice process that investigates the client situation, discovers the needs and desires of the client, along with the risks and challenges they face.

It is then researched and assessed to give a suitable solution balancing the points in the first statement, to provide a solution to the client that they can both understand and make a decision on.

The client can make an informed decision without influence from the adviser on an outcome that drives a benefit for the adviser that is not aligned to the clients' needs. (There is an ethics issue here that needs more discussion.)

That advice process also needs to take into account the recommendation not to move or take action if it is in the best interests of the client to stay where they are. And any action taken needs to be executed in a manner and way not to create additional risk for the client in taking the advice, ie replacing insurance cover that opens the client up to undisclosed risks because the adviser's process of underwriting and disclosure was poor.

Followed up with a servicing plan to ensure that the advice taken today is followed through to provide the desired outcomes as the client situation changes.

That is a significant mouthful and one that bank and VIO sales channels will struggle to meet in their current form.

Let's be very clear, banks and VIOs are not the panaceas of good client outcomes; they are a sales channel that meets a need that may or may not result in a good client outcome.

They can be compliant and meet the regulated requirements of advice from a single provider. However, the: "We have a solution, and it is only one solution" is not necessarily reflective of good advice or good client outcomes.

One of the discussions around VIOs in the past has been they are better than nothing, and this I agree with.

It has also been said that VIO clients are clients waiting for independent advice and holding with a VIO is a better answer than nothing too.

And in certain circumstances moving from a richly featured adviser product to a VIO product is also the right answer, ie simple life cover with no bells and whistles as premiums climb and need for other products drops.

What we need to appreciate is banks and VIOs as insurance providers to clients are the KiwiSaver equivalent of default providers. Somewhere to hold people until they get real advice.

We should not be seeing banks and VIOs making statements about being the example of "good customer outcomes for consumers". It is an arrogant and patently false position that attempts to manoeuvre these organisations into a position to continue doing what they have always done under the veneer of advice.

It is sales, and sales are driven for the good outcome of the provider in the first instance.

The other aspect that is overlooked is the role independent advisers play in product development – the people on the outside of the glasshouse throwing stones.

Advisers drive the product changes and development we have seen to date, because of the competitive nature of the market we work in. Take away adviser independence, and you get homogenised product and more inferior products.

So while the independent commission-based adviser is often the whipping boy of the industry, they are the ones that have driven the real change in recent times. You're welcome.

Independent advisers are where clients get advice that drives good client outcomes. This is an area of the market we should own and defend. Because the big end of town only has one motive – make money for shareholders.

Tags: Jon-Paul Hale

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Comments from our readers

On 20 February 2020 at 12:47 pm JPHale said:
@Murray Weatherston, and yes, when you asked the question two years ago, where did this term come from? I kept my head down hoping that we would get a reasonable definition on what that was with the process we were going through, sadly that has not happened.

Somewhere in the mix the statement, and question, has become a statement with no definition. And creates the question of What is a good client outcome?
On 20 February 2020 at 1:18 pm w k said:
what is a good client outcome = let's do this.
On 20 February 2020 at 1:36 pm All hat no cattle said:
What is a good customer outcome?

Advisers: Everyone is content and my business continues.

Providers: Someone bought something and our business continues.

Regulators: Your documents/files are in order.

Customers: My investment went up/my claim was paid.

Everyone: We got what we needed out of this.
On 20 February 2020 at 3:47 pm Murray Weatherston said:
Who can remember the almost universal approbrium heaped upon the Code Working Group when in Version 1 they came out with their "good advice outcome'.

The response should have been similar to the floating of the idea of "good consumer outcome". It's contextually empty.
But no, its now in the lexicon. Every Humpty Dumpty can make it mean what they want it to mean.
One consequence of the Govt/MBIE/FMA initiatives on financial advice regulation is that it has spawned a huge number of new consultancy areas. I have never seen any cost benefit analyses, but my experience tells me the gross benefit cost revenue would be well less than 1, and might even be lower than 0.5.

All this cost eventually finds its way down to the poor old consumer.

Who exactly was the focus of this review again? Certainly not professional services firms and former regulator employees now peddling their wares in the compliance space.
On 20 February 2020 at 3:50 pm Murray Weatherston said:
Oops in line 9 "revenue" should of course be "ratio".
Hit submit button before checking text.
On 20 February 2020 at 4:02 pm w k said:
this good customer outcome amongst others thingy reminds me of this sketch. please watch and see if it sounds familiar. below is link.
On 21 February 2020 at 6:57 am Murray Weatherston said:
@w k
Sketch absolutely brilliant. And right on point.
On 21 February 2020 at 8:47 am Doggy said:
What is a good client outcome = would you like fries with that?
On 21 February 2020 at 9:36 am w k said:
@murray: thanks to the creator of this sketch.

good customer outcome could be drawing a red line with invisible ink.

maybe time for another coffee?
On 21 February 2020 at 10:36 am Tony Vidler said:
I too have significant concern with the bandying about of this term as some sort of specific objective. We do not even have a working definition of when this "good customer outcome" is to be applied. Is it on completion of giving advice? Is it at some vague point in the distant future to be decided by the customer or their heirs?

I do disagree somewhat with JP's assessment. He has described a great advice process beautifully, and one which will more often than not lead to a good outcome by anyone's definition. The problem with it is that JP's definition described inputs, not an output. While the inputs (our proces, records, actual recommendations) contribute to achieving a good outcome, the actual assessment of whether it was good or bad appears to be entirely subjective and defined by any party other than the adviser.

That is poor policy.

I agree with the intent of the policy, but while it is lacking substance or definitive guidance it risks being little more than some form of Kangaroo Court process. And I don't imagine many institutions or government employees or consumers will get hung in the process.
On 21 February 2020 at 3:18 pm JPHale said:
:D Thanks! Keep it coming!
On 22 February 2020 at 11:54 am Adviser1 said:
Good customer outcome = good outcome for the regulator as they can keep regulating us, charging fees and waiving the big stick. The scary part is as it's not definable we are all exposed to a ton of potential liability despite our best efforts to do the right thing. Over regulation here we come.
On 26 February 2020 at 7:32 am JPHale said:
Thanks Tony, you picked up on my point beautifully.

It's not my place to define it and I spoke completely about inputs, the qualitative bit is absolutely about the output. The output needs defining.

The problem we have is that is crazily subjective.

For advisers presently the only approach is to have an excellent process that explores and advises on all the angles. And that drives the 150 page SOA that no one reads and client's can't understand. There are good ways to do this and shockingly complex ways too.

The question is what does a good client outcome look like?

We have to define this against the actions of the adviser, because they are the one being held to account.

So this translates to:

A presentation to the client that allows them to make an informed decision on their desired outcome, that translates to well executed product solutions that result in the desired outcome when called on. Including the informed decision to take no action or remove products that are recommended as necessary.

Good process and documentation is critical, and part of the FMA license terms. That documentation is more likely to help the adviser than hinder. As client's making decisions not in their best interest after being well-informed is not the advisers fault.

I.e. Client's dropping trauma to take IP and subsequently having a trauma claim that has questionable IP response based on work capacity.

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