How are risk advisers to find the extra time to provide a higher standard of risk advice and adhere to the more stringent level of compliance?
Standard 5 of the Code of Ethics requires that:
All advice and financial product recommendations that you give to a client must be in the best interests of the client and appropriate to the client’s individual circumstances. You must be satisfied that the client understands your advice, and the benefits, costs and risks of the financial products that you recommend, and you must have reasonable grounds to be satisfied.
The FPA’s Explanatory Statement for Standard 5 goes further and says:
This means that your advice must be clear and simple.
ASIC found that of 202 life insurance advice files reviewed as part of its controversial Report 413 Review of retail life insurance advice, 37% failed to meet the relevant standard for compliance with the law and of the 63% that passed, there was significant room for improvement with regard to the quality of advice provided.
Poor advice highlighted in the report included:
- ‘the complexity of the client’s personal circumstances was not taken into account’ and,
- ‘industry participants employed “rules of thumb” to provide guidance about appropriate levels of insurance, for example – a multiple of the insured person’s annual income’.
To stay in business, risk advisers are going to have to find a way to strike a commercial balance between these competing forces and rethink traditional paper-based processes that are both time-consuming and inflexible, requiring, as they do, information to be captured and re-entered multiple times from initial fact find through to the statement of advice.
But how are risk advisers to find the extra time to provide a higher standard of advice and adhere to the more stringent level of compliance?
Providing compliant life insurance advice that is focussed on client needs and meets today’s standards means having very efficient, effective, compliant and valuable software and processes.
Then you will be able to provide valuable advice efficiently, including generating short and simple, comprehensive and compliant, risk SOAs.
To do it, you need electronic tools that allow you to quickly and efficiently:
- Gather key client information electronically prior to the meeting – after all there is no value in having a client watch you fill out a paper-based fact find for 40 minutes
- Conduct a comprehensive, compliant and efficient Risk Needs Analysis in the client meeting (face-to-face or Zoom) using integrated Insurance Calculator Software
- Undertake product research to find the best value-for-money policies
- Generate a compliant Risk SOA quickly because all the required information is in the database
The key to success is employing a process whereby each of the above steps is conducted thoroughly and efficiently with data flowing seamlessly to the next part of the process, while simultaneously and automatically producing an all-important audit trail.
Do it well and you will not only be able to provide comprehensive and compliant risk advice in 60 minutes, including generating a short, simple, compliant and plain English SOA, you will also create an interesting, interactive and visual experience which will be educational and valuable for your clients and become part of the value chain of your advice.
Risk Advice: Step-by-step
To provide insurance advice, be it part of a scaled or comprehensive advice process, you need to complete a number of steps. Many of these steps can now be handled, either fully or partially, electronically. Each step should need to be done only once and the information should automatically flow into the downstream tools, reports, file notes and documents.
| Step | Process | Tool |
|---|---|---|
| 1 | Determine the client’s financial circumstances through an electronic fact find process | Have clients complete an electronic About You Questionnaire prior to the meeting |
| 2 | Determine the client’s objectives and needs | Have clients complete an electronic Goals Questionnaire that contains short prompts to assist them |
| 3 | Determine the subject matter of the advice sought | Discuss the client’s circumstances and goals, either in person or virtually using video meeting technology, for example Zoom, Skype, Webex, etc. |
| 4 | Determine the scope and scale of advice | Use an electronic Scoping & Scaling Tool to determine the segments of advice to be addressed and what specific aspects of life insurance will and won’t be covered. |
| 5 | Prepare a letter of engagement and an authority to proceed | This should be automatically generated by the system you are using, populated with relevant information from the above steps |
| 6 | Conduct a live insurance needs analysis meeting identifying what the client wants to achieve and the types and amounts of insurance required | Use a comprehensive and compliant Electronic Insurance Calculator |
| 7 | Determine the best ownership structure for the insurance | Use the Electronic Insurance Calculator to determine the best ownership structure and record the decisions made in the calculator |
| 8 | Conduct research regarding the best product options for the client and the implications of cancelling any existing insurance and enter key information into the software | Use Risk Researcher, OmniLife or research direct with Insurer |
| 9 | Auto-generate a compliant strategy paper, or…. | Use a Strategy Paper Generator |
| 10 | Auto-generate a short, compliant SOA in plain English, so that your advice is clear and simple | Use a Statement of Advice Generator that brings all the required information together |
| 11 | Present recommendations to the client | Either in person or virtually using screenshare meeting technology |
| 12 | Complete and submit application forms and follow up an any issues until completion | Usually electronically. Either in person or virtually using video meeting technology |
