A lot of focus, rightly, has been on conversations with risk advisers on how best to engage the LIF reforms to maximise the security and longevity of a risk advisers proposition, if their model is to be adversely affected by the pending changes. I say “if”, because the reality is, that advisers who already have adopted a hybrid model, initially see very little impact if any at all, as a consequence. However there are a significant number of businesses and individual advisers who have written under the model that life insurers have provided and it is those advisers, especially newer entrants and aspiring advisers who will, (yes that’s a definite), be adversely impacted by the reduction in their income unless they adapt quickly to the changes. The questions that still need answering are: where are the positive impacts to the end client and what can be done to address the suitability and quality of strategic advice as highlighted by ASIC report 413?
In a surprise to many (if my reading of social media is correct), life insurers are not the winners from the LIF reforms. Life insurers are reliant on advisers and without a sustainable and in fact growing adviser force, life office insurance sales via advisers may fall. It’s a simple equation, less advisers equals less new business. Surely the saving grace for life insurers is the reduced commission payable?
Simple maths debunks this thinking. For arguments sake, let’s say that currently 80% of new business is written on upfront commission and that, that upfront commission averages 110% with a renewal of 10%. After 7 years the life insurer has paid out 180% of the policy premium. (It’s actually more when you factor in premium increases but let’s call it square on that point). Now take the LIF regime and let’s say that all business is written on 80/20 in year one. After 7 years the life insurer has paid out 220% of the policy premium. It’s worse for the life insurer on level commission, for at 30% the life insurer after 7 years would have paid out 240% of the policy premium. So, where are those premium savings for consumers going to come from? Reduced lapses? Possibly.
When it comes to lapses, most insurers have been working behind the scenes dealing with lapse rates at an individual adviser level. Lapse rates for some insurers are the best they have been for a while. Others are finding it difficult. Should LIF reduce lapse rates there would be some assistance towards premium reductions, mitigated by the overall increased cost of acquisition (unless that cost is improved by efficiency gains). It would be better if people didn’t claim! The reality however is that claims, especially in the disability space are increasing and should that trend continue, premiums most likely will increase.
If you are working in a life insurer at the moment, there certainly isn’t champagne dripping from the taps. However what responsible life insurers are trying to do at the moment is:
• Improve policy onboarding efficiency
• Develop new product to meet the needs of advisers and policy holders
• Provide mechanisms to assist advisers in their businesses : in regard to engaging and retaining clients and maximizing conversion rates
• Assist new advisers progress to best practice
None of the above except for the last point, deals with enhancing quality strategic advice, and for that education programmes and technical sessions are being built, assessed and placed in diaries with associated learning materials and in field tools. It’s this combination that is needed to draw advisers to dealing with the disruption: getting smarter, getting more efficient and getting deeper engagement (with advisers from the life insurers perspective and with the client from both views). It is also one that supports a growing adviser force, the key ingredient for a positive impact on consumers let alone life insurance company sustainability.
So are the LIF reforms positive? That depends on how you measure success.
If it’s from the customers view and that view is predicated on the need for dramatic premium reductions, then that is possibly not a reality. If it’s from an income perspective for the life offices or advisers, then that journey is a longer one and has the aim of long term sustainability. If it’s from a higher standard of advice through education, that is a progression and requires work on education standards and programmes.
However, if you do measure success as a progression then maybe professionalism and what I mean by that is the definition and norm associated with fee for service, then, maybe this, LIF, is a small starting point for that progression. Personally I am not sure if I agree with that definition. I can see models (and have seen) where insurance with adjunct services such as estate planning and cash flow management are highly valuable and fee generating services that clientele will be happy to pay for.
For someone however who wants an average premium to protect their family, will the remuneration without an additional fee be adequate compensation for an adviser to adhere to the tenants of quality strategic advice? My modelling suggests no (based on current advice processes), and without that adviser being able to service that client, where will that client turn to and will they get suitable advice?
That is the key worry for retail life insurers and advisers and should be the key concern for our legislators. How advisers and life offices work together on this point to find advice and product solutions that not only sustains but grows advice businesses is the real challenge and focus for the coming changes. Efficiency of engagement, application, policy maintenance and communication will win this challenge for life insurers and advisers alike. It requires collaboration and engagement between the insurer and the adviser. That’s a very positive outcome.
Wednesday 28 October 2015
Wednesday 2 September 2015
I wish I was (still) a financial adviser.
Right now as I write, I'm sitting on a plane, about to take off, bound for Brisbane, Australia, to complete the final two site visits (of the six I had to do) as part of the judging process for the 2015 Adviser of The Year (That I'm fortunate my company Zurich sponsors). I'd wanted to record the journey of the judging process (and the semi finalists) in a blog in a similar way to the Million Dollar Round Table diary I kept in June of this year.
Alas, time not only escaped me, but I also could not find the appropriate words to do the advisers who had opened up their businesses (and their hearts) to me, justice. Such is the serious that I approach this role with and the care that I believe one must take throughout the process.
As I reflect now, however, I can't help but think how much I miss being an adviser.
This may seem a strangely "out of touch" comment, especially considering the media, regulatory and self imposed scrutiny that our profession is facing and the significant changes for advisers and insurance providers that are set to be implemented in 2016. I am however neither out of touch (I have spent countless hours with advisers discussing the changes, and even more time modelling the financial and advice consequences to consumers of the changes) nor overly romanticising the advice profession. Rather I am appreciative of the value that financial advisers add not only to transforming the lives of their clients in the most positive of ways, but also how dramatically they protect the community (that includes you, our bureaucrats, our politicians) from a heavy burden from having to cater for a populace ill prepared for life events.
It is something like the Adviser of the Year judging process that makes you realise how deeply financial advisers care for their clients.
Now that feeling of taking a client to a place where they feel secure, where they have a solid foundation to build towards their personal dreams and they have "the freedom to say yes" (thanks to Chris Browne and Rising Tide for that one) is something I dearly miss. However I can do it no longer. Just like I do with the Adviser of the Year entrants, I did with my clients, and I become heavily emotionally invested in their story and journey. It is something that financial advisers do daily, and when you do so with so much passion there is no room to do things by halves. For me it was emotionally devastating to lose a client through death, something which I had prepared them and their families for financially but something they and I were never, could never be emotionally prepared for. I miss my clients. I miss Grace, I miss Jaclyn and I miss Bob, clients who passed away in my final year of advice. I miss Annette and Gary, clients (who I still see) thriving with their family and their life plans : I miss that weekly check in we had. I hear the stories of the Adviser of the Year participants and how deeply they are invested in their clients dreams and how much they have contributed to making those dreams a reality.
It takes skill to do this. Discipline. Courage. Process. Passion. It is what all the Adviser of the Year participants have.
I think of my sister, who is a doctor, a paediatric emergency specialist. I think of all the banged up kiddies she sees. The hundreds of thank you letters and cards she gets from parents, and I wonder what is in your make up that doesn't make you go crazy? What emotions she must feel? She tells me she detaches it when on duty, she has to. Then in her quiet moments she reflects.
For financial advisers, they don't detach. They are 100% of the time emotionally connected with their clients. I don't know any financial adviser who detaches emotionally when with a client (or afterwards for that matter). I see it in their meeting notes and given life in their staff. I see it in their client stories.
I wish I could do it again, but I cry way too easily. I'm so lucky that Zurich is so heavily invested in the advisers of the Adviser of they year and I get to stay connected through this process and then get to share via Zurichs education series all that I see.
So as a precursor to the new tools and presentations that will be delivered by Zurich post this 2015 journey, I say hats of to all the financial advisers who love their clients, who say to me they "can never imagine doing anything else, or ever stopping". Who in the face of ever changing landscapes, continue to deliver positive client outcomes that change an individuals life for the better, a families world for the better and make the communities they work in stronger, connected and spirited.
Take a bow.
Alas, time not only escaped me, but I also could not find the appropriate words to do the advisers who had opened up their businesses (and their hearts) to me, justice. Such is the serious that I approach this role with and the care that I believe one must take throughout the process.
As I reflect now, however, I can't help but think how much I miss being an adviser.
This may seem a strangely "out of touch" comment, especially considering the media, regulatory and self imposed scrutiny that our profession is facing and the significant changes for advisers and insurance providers that are set to be implemented in 2016. I am however neither out of touch (I have spent countless hours with advisers discussing the changes, and even more time modelling the financial and advice consequences to consumers of the changes) nor overly romanticising the advice profession. Rather I am appreciative of the value that financial advisers add not only to transforming the lives of their clients in the most positive of ways, but also how dramatically they protect the community (that includes you, our bureaucrats, our politicians) from a heavy burden from having to cater for a populace ill prepared for life events.
It is something like the Adviser of the Year judging process that makes you realise how deeply financial advisers care for their clients.
Now that feeling of taking a client to a place where they feel secure, where they have a solid foundation to build towards their personal dreams and they have "the freedom to say yes" (thanks to Chris Browne and Rising Tide for that one) is something I dearly miss. However I can do it no longer. Just like I do with the Adviser of the Year entrants, I did with my clients, and I become heavily emotionally invested in their story and journey. It is something that financial advisers do daily, and when you do so with so much passion there is no room to do things by halves. For me it was emotionally devastating to lose a client through death, something which I had prepared them and their families for financially but something they and I were never, could never be emotionally prepared for. I miss my clients. I miss Grace, I miss Jaclyn and I miss Bob, clients who passed away in my final year of advice. I miss Annette and Gary, clients (who I still see) thriving with their family and their life plans : I miss that weekly check in we had. I hear the stories of the Adviser of the Year participants and how deeply they are invested in their clients dreams and how much they have contributed to making those dreams a reality.
It takes skill to do this. Discipline. Courage. Process. Passion. It is what all the Adviser of the Year participants have.
I think of my sister, who is a doctor, a paediatric emergency specialist. I think of all the banged up kiddies she sees. The hundreds of thank you letters and cards she gets from parents, and I wonder what is in your make up that doesn't make you go crazy? What emotions she must feel? She tells me she detaches it when on duty, she has to. Then in her quiet moments she reflects.
For financial advisers, they don't detach. They are 100% of the time emotionally connected with their clients. I don't know any financial adviser who detaches emotionally when with a client (or afterwards for that matter). I see it in their meeting notes and given life in their staff. I see it in their client stories.
I wish I could do it again, but I cry way too easily. I'm so lucky that Zurich is so heavily invested in the advisers of the Adviser of they year and I get to stay connected through this process and then get to share via Zurichs education series all that I see.
So as a precursor to the new tools and presentations that will be delivered by Zurich post this 2015 journey, I say hats of to all the financial advisers who love their clients, who say to me they "can never imagine doing anything else, or ever stopping". Who in the face of ever changing landscapes, continue to deliver positive client outcomes that change an individuals life for the better, a families world for the better and make the communities they work in stronger, connected and spirited.
Take a bow.
Sunday 26 July 2015
Creating a Climate of Mastery
When we think about creating a winning culture, during both periods of success and a culture that carries through in periods of adversity, too often the basis of that “culture” is on the end outcome, the goals. That seems to make sense. There is a target to achieve, a competition to win, a league ladder to top.
What is missed with that approach is the achievement motivation of the individuals and the team. This refers to the efforts to master the task, with excellence, to overcome obstacles and take pride in exercising talent rather than a singular focus on the end outcome. Consequently the hallmarks of high achievers are that they select challenging tasks and persist in the face of failure.
What we know from sports science is when we as leaders can provide task-oriented feedback our “players” perceive the motivational climate to be more mastery orientated and less based on ego-orientation (a key facet of a goal based motivational climate), (Gershgoren et al, 2011).
This approach is often lost within sales team cultures. Too often the win at all costs attitude permeates through observation, modelled behavior and rewards aligned to the end goal that ignores attitudinal shifts towards a high ego-orientated state, that ultimately leads to attributions of success primarily to an individuals proficiency and attributions of failure to those other than the individual. In other words a blame culture, win at all costs, and ultimately a culture that does not thrive in the face of adversity.
This creates a problem for those entering such a culture. These “high achievers” have a fragile hold on success. For the new entrants whose competency at tasks may initially be low, can without initial success demonstrate a maladaptive behavior pattern in that faced with now being able to compete they, reduce their efforts, cease trying or make excuses. However as the blame game is one that perpetuates in these climates, they shift to tasks that are guaranteed to provide success and challenge new ways, new methods, fight change and fight progression and avoid peer evaluative feedback. In fact they don’t cope with feedback very well at all.
What motivation theories tell us is that to build a culture of achievement orientation, a climate of mastery, leaders in organisations need to become better at focusing on task mastery and feedback that builds confidence in an individuals management of the task at hand rather than a singular focus on the end goal.
Weinberg and Gould (2015) provide these guidelines:
• Set appropriate tasks aligned to progression towards mastery of a subject
• Emphasise the task goals and downplay the outcome goals
• When providing feedback ensure that attributions are appropriate. In other words focus on what the individual can control from a task perspective and ensure they take responsibility of task achievement and non-achievement.
• Enhance the perception of competence and control for the individual.
Critically this approach aligns with studies of organisational behavior such as the groundbreaking working of Amabile and Kramer (2011),that provided the keys to positive work culture. It was identified that clear tasks, with appropriate encouragement, resources, feedback, transparent leadership and celebrating the small wins (task achievement) were vital ingredients to developing a vibrant supportive and winning culture.
We as leaders directly and indirectly create motivational climates. If we do not give this influence we have any thought or planning (on a daily basis) we can unconsciously and irrevocably create a climate that focusses on blame, that is siloed, stagnant and incapable of reacting to challenges that require different thinking and approaches.
A new game plan is needed, one of confidence in the ability of our players to carry out the required “plays” and is achieved because they understand their roles, their tasks and through that clarity they have mastered the set plays and are ready for the challenge.
Sunday 19 April 2015
How to Build Consumer Loyalty and Advocacy In Financial Advice.
We pay more for brand names. We pay more for and are advocated of brands that have emotionally connected with us. The richer the emotional content of a brand’s mental representation, the more likely the consumer will be a loyal user. This thinking is just as relevant for financial advice as it is for toilet tissue and car tyres. Puppy dogs chasing a roll of toilet paper and the piece of mind of safety on a wet road have less to do with the end product and more to do with feelings and emotions.
Understanding, therefore, how people think is a critical factor in building consumer loyalty and advocacy. So just how do we make decisions and what occurs in peoples minds to help them evaluate situations? What do we need to know about how peoples minds work?
“Cognitive control and value-based decision-making tasks appear to depend on different brain regions within the prefrontal cortex,” says Jan Glascher, lead author of the study and a visiting associate at the California Institute of Technology in Pasadena, referring to the seat of higher-level reasoning in the brain.
In normal brain functioning people : a valuation network in the brain auto computes what's good and what's bad, before the person concerned has a chance to consciously understand the decision making process has occured. It is quick. It is intuitive and it is automatic.
This highlights the complexities in dealing with customers where you need them to make a considered rationale choice. The choice has less to do with the rationalities of your proposal and more to do with how they feel about you and your brand. In short they have a gut feel about what is good and what is bad for them: and if you have not connected with them then that good choice (rationally) seems the uncomfortable one.
Most people believe that the choices they make result from a rational analysis of available alternatives. In reality, however, emotions greatly influence and, in many cases, even determine our decisions. In a book, Descartes Error, Antonio Damasio, professor of neuroscience at the University of Southern California, puts forth that emotions are necessary ingredients to almost all decisions. What occurs is that emotions from previous experiences attribute value and impact how we consider the options in front of us. These emotions create preferences which lead to our decision. Damasio’s view is based on his studies of people whose connections between the “thinking” and “emotional” areas of the brain had been damaged. They were capable of rationally processing information about alternative choices; but were unable to make decisions because they lacked any sense of how they felt about the options.
Values
So if you are not using some method of assessing past experiences and values and hierachies in a clients decision making you actually leave so much of your process to chance. When it comes to money: we have values associated with our experiences and these values have been passed to us from our parents. If you are not questioning clients about these experiences your process is like waiting for a magic eye picture to appear.
Psychologist Valerie Wilson tells us that troubled relationships with money stem from childhood. Research shows that money habits are formed between the ages of 6-8.
Consequently these lessons (which we have learnt from our parents) shape the way we feel and act about money and money issues. Our attitudes to money bring with it a range of emotions and behaviour: they can be positive but they can also range from greed and arrogance, to jealousy and fear.
What all of this means is that that you need to embed in your process:
• a means of uncovering a clients values
• questioning on past experiences
• determining a clients hierarchy of choice assessment
• looking at a clients goals and the why of their goals so you can elevate a simple statement of a goal or objective to a highly functional progression and pathway that you indeed can influence
• a show casing of you as an individual and your brand
Dr Peter Noel Murray reminds us that the influential role of emotion in consumer behavior is well documented and studies show that positive emotions toward a brand have far greater influence on consumer loyalty than trust and other judgments which are based on a brand’s attributes. Only by building process in your business that is cognisant of: how people are drawn to brands, make decisions and order their values; can you truly expect to drive customer loyalty and advocacy.
Understanding, therefore, how people think is a critical factor in building consumer loyalty and advocacy. So just how do we make decisions and what occurs in peoples minds to help them evaluate situations? What do we need to know about how peoples minds work?
“Cognitive control and value-based decision-making tasks appear to depend on different brain regions within the prefrontal cortex,” says Jan Glascher, lead author of the study and a visiting associate at the California Institute of Technology in Pasadena, referring to the seat of higher-level reasoning in the brain.
In normal brain functioning people : a valuation network in the brain auto computes what's good and what's bad, before the person concerned has a chance to consciously understand the decision making process has occured. It is quick. It is intuitive and it is automatic.
This highlights the complexities in dealing with customers where you need them to make a considered rationale choice. The choice has less to do with the rationalities of your proposal and more to do with how they feel about you and your brand. In short they have a gut feel about what is good and what is bad for them: and if you have not connected with them then that good choice (rationally) seems the uncomfortable one.
Most people believe that the choices they make result from a rational analysis of available alternatives. In reality, however, emotions greatly influence and, in many cases, even determine our decisions. In a book, Descartes Error, Antonio Damasio, professor of neuroscience at the University of Southern California, puts forth that emotions are necessary ingredients to almost all decisions. What occurs is that emotions from previous experiences attribute value and impact how we consider the options in front of us. These emotions create preferences which lead to our decision. Damasio’s view is based on his studies of people whose connections between the “thinking” and “emotional” areas of the brain had been damaged. They were capable of rationally processing information about alternative choices; but were unable to make decisions because they lacked any sense of how they felt about the options.
Values
So if you are not using some method of assessing past experiences and values and hierachies in a clients decision making you actually leave so much of your process to chance. When it comes to money: we have values associated with our experiences and these values have been passed to us from our parents. If you are not questioning clients about these experiences your process is like waiting for a magic eye picture to appear.
Psychologist Valerie Wilson tells us that troubled relationships with money stem from childhood. Research shows that money habits are formed between the ages of 6-8.
Consequently these lessons (which we have learnt from our parents) shape the way we feel and act about money and money issues. Our attitudes to money bring with it a range of emotions and behaviour: they can be positive but they can also range from greed and arrogance, to jealousy and fear.
What all of this means is that that you need to embed in your process:
• a means of uncovering a clients values
• questioning on past experiences
• determining a clients hierarchy of choice assessment
• looking at a clients goals and the why of their goals so you can elevate a simple statement of a goal or objective to a highly functional progression and pathway that you indeed can influence
• a show casing of you as an individual and your brand
Dr Peter Noel Murray reminds us that the influential role of emotion in consumer behavior is well documented and studies show that positive emotions toward a brand have far greater influence on consumer loyalty than trust and other judgments which are based on a brand’s attributes. Only by building process in your business that is cognisant of: how people are drawn to brands, make decisions and order their values; can you truly expect to drive customer loyalty and advocacy.
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