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Jon-Paul Hale

The single biggest challenge with existing policies

Tuesday 30th of May 2023

As most advisers advising on existing policies know, what passbacks happen where is a dark art shrouded in mystery.

We've seen the recent AIA media case around passbacks on a policy, and getting a straight answer out of Fidelity Life on the subject has always been a challenge. Even the distribution staff have struggled to get the answers over the years, and they work there!

I've had vague to non-existent answers from most of the rest; the only exception to this is Partners Life, where their book of business has had it from the start and isn't polluted with mergers and acquisitions. I suspect from past experience with the rest even their approach to the BNZ Life purchase has been clear.

This area is potentially the biggest issue for advisers at claim time, where an older policy, expected to be relied on, doesn't respond as well as it should. Was that policy you advised on several years ago actually subject to the passback rules you expected, or not?

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Paul Flood: The danger is that the 'goalposts' (regarding what is acceptable or unacceptable adviser conduct) may be susceptible to change. Our 'Principles based' legal/regulatory environment lends itself to “prevalence-induced concept change” over time, perhaps not so much in the written laws and Code, as in the interpretation of the prescribed principles.
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Just a tip, if you use more than six, six letter words in a sentence you lose most Kiwi's. So avoid client/adviser confusion when writing your post or article if you would like it read and understood. Ironically, my last sentence was not likely read.
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FMA outlines its latest expectations for advisers
All things said are great aspirational goals for a great financial advice industry, it mirrors what both the legislation and the code requires. However, like most things discussed it talks about what's expected not how it's done. The hardest aspect of financial advice today isn't what it is, it is how it is done. The how only comes from those that have done it, the how is only provided with examples. Guidance documents that spell out what's required along side how it it done. We’re still dealing with the same issues we started with in 2021, figuring out the how. And figuring out the how in every advice business is consuming resources that could easily be shortcut by the FMA demonstrating what they are expecting. It's not about “do it this way” its about this is the sorts of things we’re looking for. In the absence of standards and expectations, guesswork prevails. That represents significant risk to FAPs and the result is onerous overcooked advice processes for multiple advice operations and undercooked she’ll be right for single operators focused on getting the work done. Both approaches have potential for harm and as its been said earlier, leaves advisers open to explain they haven't been speeding with the authorities have pulled them over. The advice industry needs guidance on the how we know the what already.
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To correct errors in my previous post: "policies, templates, and controls" should read "policies, processes, systems and controls", and "is more conductive" should read "is more conducive".
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