I purchased a mindfulness colouring book recently. My mind moves often at a 100 miles an hour (yes I know I'm not special in that regard), and focus on the moment, clearing my thoughts, applying my filter(s) can be at times, difficult. So concentrating on the task at hand, surely with Faber Castells at the ready, would solve the lack of "stillness" in my daily routine? Sadly no. I've not had that much self inflicted frustration thrust at me for quite some time. Of course I didn't choose an "easy" selection of graphics, and well I wanted to "blend" colours and not have it look like a 3 year old had completed the templates. Perhaps I was missing the point?
There are different approaches to mindfulness. A great way to explain what it actually is, is probably to start with what it is not. When we don't pay attention to what is going on around us, when we operate on automatic pilot, when we go through the motions, this is indeed the opposite of mindfulness. And we have all done it.
I can't tell you how many times I have driven into my street, and can't actually remember the drive home. Perhaps considering Melbourne or now Sydney traffic, that's a good thing. But imagine if that's the way you felt about a meeting, and interaction, or your day? In other words where we really haven't paid attention to what we have been doing or saying. Rather we have just reacted with ingrained habitual responses. Without mindfulness we can not create changes in how we live our lives, which is required because of the constant interchange and exchange of experiences that comes at us each and everyday. Without mindfulness we can. It change patterns that possibly are not serving us well.
I have triggers. Throughout my life they have led to a pattern of reacting to things. The reactions have manifested differently depending on the different experiences encountered, but nevertheless they are the result of patterns. Sometimes the reactions are needed and beneficial. Sometimes they have been rather destructive. The reactions are not the problem. The habit and locus of control relinquishment is.
Has mindfulness helped? Well I don't think I'd be writing this without it.
So what is mindfulness? It's paying attention, it's being aware. It is a style of thinking. It's being actively invested in the experiences that come your way, and dealing with them in the present rather than applying old filters and patterns.
Buddhist meditation teaches one to detach your own personal filter from the experience so that the automatic reaction does not occur.
It's not easy! It is about firstly focusing your attention to the experience at hand and then being open, accepting, curious.
Researchers have demonstrated that self awareness levels and positive emotions are associated with the ability to be more mindful.
But to break old habits, when you are practising mindfulness, Shapiro and Carlson in their article "The art and science of mindfulness, integrating mindfulness into psychology and the helping professions" (American Psychological Association, 2009) listed some elements that being mindful requires. They posit that to have success in mindfulness one must be non judging - be impartial to the experience, non reactive - forget and let go of habitual responses, trust - trust you are in control of the experience and also they identify having patience as key (just to name a few).
For me it was very much about transferring the quiet stillness I feel when running track, into everyday experiences, and not reacting in patterns of the past. It was also about appreciating that what was happening now, in the moment was not something that was happening to a scared helpless 11 year old boy. And as such triggers become, well, less of a problem. Letting go of some patterns is not without it's trauma.
What's the point of it all? Well there is a connection to concepts of flow, to peak performance for individuals and for teams. There's connections to happiness and well being. There are connections most profoundly to living a better life and being closer to the person whom it is you want to be.
That old adage exists : of playing the movie of your life, and whether you are proud or not. Luckily for anyone reading this, you can throw the script out if you don't like the direction the story is heading and rewrite it. It's never too late.
Monday, 27 June 2016
Time for positivity?
The bandwagon has arrived and I'm jumping on. Or so it may seem. It appears if anyone and everyone who has read an idiots guide to positive psychology is turning themselves into key note speakers, quoting the same studies about cortisol and oxytocin and about the amygdala and neuro plasticity. And you know what......good luck to them. If they can earn a dollar and possibly get some inquiring minds to investigate positivity in their own lives, well then kudos to them.
But make no mistake, what they are espousing is nothing new. Theories of happiness and well being, and what delivers these often subjective measures of life satisfaction have changed little since ancient times and the days of philosophers such as Socrates, Plato and Aristotle.
Socrates believed that the quest for happiness was only delivered by knowing oneself, or in other words by self awareness of self and virtue. This was expanded on by Plato who suggested that that awareness needed to be beyond the sensory self and in fact required a deeper investigation. And Aristotle looked at values, self discipline, and the balance of virtues in a quest towards the good life.
As theories expanded through the enlightenment, the 50s, and then with the humanistic psychology movement, one of its guardians Maslow, entitled a chapter of his 1954 book (Motivation and Personality) : Toward a Positive Psychology.
So what of this modern thinking? This new positive psychology movement that talks about the left prefrontal cortex of Buddhist monks lighting up when they reach a state in meditation? What of the biochemistry of emotions?
Well it's new science. Assisted by technology, that supports the theories around happiness and well being. Yes, oxytocin is associated with social bonding, yes increased dopamine is associated with the experience of happiness and yes the brain can change during our life as we explore different skills and we can create new neural pathways and these pathways can be plentiful when we meditate or practice skills such as playing or learning music.
But here's the rub. None of these positive effects occur without individuals actually doing the work that is involved with self exploration towards self assessment and awareness. It takes work on behalf of the individual to investigate their positive self, to create plans for growth, foster relationships, to regulate behaviours, to find purpose in life and to strive to master ones environment.
Chanting "serenity now" will not deliver eternal happiness, set oxytocin flowing through your viens, light up your left pre frontal cortex or create new neural pathways.
A lot of hard work and self examination just might. So take the next presentation you see with a grain of salt, with curiosity, with critical thinking and with a notepad to write down the suggested actions you might take personally to develop positivity in your world.
If there are no suggested game plans, strategies or processes, well then seek answers from someone who has lived the journey. Not just from someone who has read a book.
But make no mistake, what they are espousing is nothing new. Theories of happiness and well being, and what delivers these often subjective measures of life satisfaction have changed little since ancient times and the days of philosophers such as Socrates, Plato and Aristotle.
Socrates believed that the quest for happiness was only delivered by knowing oneself, or in other words by self awareness of self and virtue. This was expanded on by Plato who suggested that that awareness needed to be beyond the sensory self and in fact required a deeper investigation. And Aristotle looked at values, self discipline, and the balance of virtues in a quest towards the good life.
As theories expanded through the enlightenment, the 50s, and then with the humanistic psychology movement, one of its guardians Maslow, entitled a chapter of his 1954 book (Motivation and Personality) : Toward a Positive Psychology.
So what of this modern thinking? This new positive psychology movement that talks about the left prefrontal cortex of Buddhist monks lighting up when they reach a state in meditation? What of the biochemistry of emotions?
Well it's new science. Assisted by technology, that supports the theories around happiness and well being. Yes, oxytocin is associated with social bonding, yes increased dopamine is associated with the experience of happiness and yes the brain can change during our life as we explore different skills and we can create new neural pathways and these pathways can be plentiful when we meditate or practice skills such as playing or learning music.
But here's the rub. None of these positive effects occur without individuals actually doing the work that is involved with self exploration towards self assessment and awareness. It takes work on behalf of the individual to investigate their positive self, to create plans for growth, foster relationships, to regulate behaviours, to find purpose in life and to strive to master ones environment.
Chanting "serenity now" will not deliver eternal happiness, set oxytocin flowing through your viens, light up your left pre frontal cortex or create new neural pathways.
A lot of hard work and self examination just might. So take the next presentation you see with a grain of salt, with curiosity, with critical thinking and with a notepad to write down the suggested actions you might take personally to develop positivity in your world.
If there are no suggested game plans, strategies or processes, well then seek answers from someone who has lived the journey. Not just from someone who has read a book.
Tuesday, 31 May 2016
The Psychology and Benefits of Financial Well Being and Advice
Financial planning, and the professionalism of the industry is under challenge. The challenge is not from existing clients who are actively engaged in the advice process. These clients overwhelmingly regard their advisers in the highest terms. In fact studies indicate that as a means of rating their advisers the average financial adviser attains net promoter scores in the 50’s. Further, advisers who we would regard as at the top of their game, who have developed and deliver a client centric experience, tailored to the researched needs of the individuals receiving the advice score in the 90’s.
Rather, the challenge comes from a combination of sources as the industry undergoes the FOFA series of reforms aimed at increased professionalism and improved quality of advice and to an extent this has been driven by consumer dissatisfaction and regulatory concerns over standards within the industry . What has eventuated, with this focus on the industry, has been an illumination not only on examples of best practice but also shone a light on practitioners who were not making the grade. That is what a reform process can deliver and what’s important to remember and to convey to consumers is that the vast majority of advisers enhance the lives and financial well-being of Australians.
The well-being of individuals, has become a measure of the societal progress of populations alongside measures such as GDP and life satisfaction measures focus on an evaluation of the individual’s life, for example, by asking “Overall, how satisfied are you with your life?” Individuals arrive at a summation after considering a number of important aspects such as health, family life, social relationships and finances . It follows then, as Irving (2012) points out, that Financial planning goes beyond the giving of insurance and investment advice. The process of financial planning delivers a strategy that takes into consideration all aspects of lifestyle, goals and requirements to help individuals reach their financial goals effectively and efficiently. The process of financial planning when delivered in a sequential, manner according to Irving :
• guides individuals in a goal oriented and systematic way;
• formalises behaviours for accomplishing outcomes and;
• provides a means of assessing progress.
Looking deeper at what drives human behaviour, the work of Lawrence and Nohria , identifies at least four hardwired innate drives that shape our behaviours and choices. Those elements, the drive to acquire, learn, bond and defend, fit neatly into the advice process as advisers educate clients as part of a discovery process to illuminate what is important to the client, and provide strategy solutions that allow clients to set a foundational platform to build towards their well-being goals and desired outcomes.
It flows then that as summarised by Irving (2012), the provision of best-practice financial planning is likely to have positive influences on individuals’ well-being and life satisfaction. The actual process of planning and the manner in which it takes into account goals, wants, values and motivators is core to not only the success of the planning outcomes but the overall well-being of the client.
Crucial then, to maximise the outcomes of the process, is to unpack each step of the financial planning process and discover what best practice looks like, what the client experience is and what it needs to be during the process and how businesses can deliver repeatable, sustainable and measureable processes to enhance client outcomes.
Professionalism embodies the notions of relationship quality, communication and ethical practice , so why has the financial planning industry been unable to enshrine the concept of professionalism in the hearts and minds of consumers? The process of financial planning provides a key to answering this question. The traditional process for financial planning has at its core a simplicity and an implementation that utilizes a prescriptive software illustrated approach that does nothing to unlock the mystery that is the black box of the advice process.
What’s missing here is the positioning and context of how the process will in fact make a meaningful change to an individuals circumstances to obtain the outcomes that are important and relevant to them. The focus is on a service and not on a collaboration. Some advisers however have taken this process and created models that emphasise a focus on values and motivations .
What has occurred with these leading advice firms is that they have unpacked the advice process and connected it, demonstrably, to the outcomes the client wants. This has meant a connection illustration where the client is bonded with people ‘like’ them. Using the concepts of social proof and liking (whereby people will do things they see other people doing, particularly those people they can associate with ie: like) these businesses explain the financial planning process in ways that connect it to a path others who have gone before them have travelled. Thus the process becomes less feared and more likely in the clients mind to be able to deliver the outcome that is desired.
There is value and benefit for all parties when a process towards best practice financial planning is positioned in this way. The process has positive impacts on well-being and satisfaction with life because it addresses lifestyle aspirations, values and goals . The methods of best practice positioning of the financial planning process can be summarized into client experience checkpoints that businesses need to enact if they are to be successful in delivering the entire process and having buy-in from the client to do so:
• the firm has a concept of the types of clients they can specialize in and like working with
• the firm develops capabilities to deliver needed specialized services and resources to their desired client set
• the firm positions the typical outcomes these types of clients have in the messaging and value statements they make about the services they offer
• the firm takes new clients through a process where client stories are illuminated so that the prospective client can associate and relate to the outcomes produced
• the firm takes the time and provides the resources for clients to participate and collaborate in the advice process
Increasingly then firms delivering best practice advice are utilizing techniques and tools such as mind maps, lifestyle questionnaires, wealth indices, personality profiles and wealth choices diagnostics, to engage clients, set benchmarks for communication, engagement and outcomes and in so doing are winning the hearts and minds of clients and delivering not only financial but psychological well being outcomes.
According to the Financial Planning Association the steps undertaken by a professional adviser when advising a client are :
1. Defining the scope of engagement;
2. Identifying goals;
3. Assessing the clients financial situation;
4. Preparing the financial plan;
5. Implementing the recommendations, and;
6. Reviewing the plan.
From a client psychology standpoint at each stage of the process can be attached to an underlying factor in positive well-being. Irvings 2012 work in this regard is substantial and we have expanded further here to explain exactly how clients are feeling at each point of the process.
1. Defining the scope of engagement; This promotes positive well being as the client starts engaging with basic life tasks: clients feel competent in managing everyday life and can take advantage of new opportunities. They can organize their life, work and home situations to match their needs and values. Known as ‘environmental mastery’ .
2. Identifying goals; Clients acknowledge they have goals for their life and develop a sense of direction in working toward them. They have beliefs that support a sense of purpose in their own life and life generally .
3. Assessing the clients financial situation; A realistic appraisal of a current state of affairs and a desired state of affairs reduces (potentially) the stress and strain of financial concerns, particularly if the client can see themselves working towards minimizing the gap. As a result they can feel good about where they are at financially and accepting of both strengths and weaknesses.
4. Preparing the financial plan; The plan is the enabler of the client, with one of the major benefits of long term planning is that it enables clients to start to compensate for a lack of resources and to maximize the possibility of even achieving better outcomes than people who had those resources but didn’t make a strategic plan.
5. Implementing the recommendations; As Irving (2012) notes the implementation process sets in train the progress towards the pre-identified goals. Further, enacting positive financial behaviours is an important component in overall well-being
6. Reviewing the plan; encompasses all of the above steps, and re-inforces the positive progress and psychological benefits of the process.
Knowing these processes is not enough. What leading advice businesses do at each step of the process is to stop, review, clarify the client experience and reinforce the progress. They use claims assistance guarantee promises, client assurance messages and formal assurance communications. Further they have embedded into their client process touch points that each member of the firm understands are crucial in delivering a positive client experience in line with the journey through the financial planning process steps.
References
Kym Irving 2012, The Financial Life Well Lived, Psychological Benefits of Financial Planning, Australasian Accounting Business and Finance Journal
Paul Lawrence and Nitin Nohria 2002, Driven : How Human Nature Shapes Our Choices
Rather, the challenge comes from a combination of sources as the industry undergoes the FOFA series of reforms aimed at increased professionalism and improved quality of advice and to an extent this has been driven by consumer dissatisfaction and regulatory concerns over standards within the industry . What has eventuated, with this focus on the industry, has been an illumination not only on examples of best practice but also shone a light on practitioners who were not making the grade. That is what a reform process can deliver and what’s important to remember and to convey to consumers is that the vast majority of advisers enhance the lives and financial well-being of Australians.
The well-being of individuals, has become a measure of the societal progress of populations alongside measures such as GDP and life satisfaction measures focus on an evaluation of the individual’s life, for example, by asking “Overall, how satisfied are you with your life?” Individuals arrive at a summation after considering a number of important aspects such as health, family life, social relationships and finances . It follows then, as Irving (2012) points out, that Financial planning goes beyond the giving of insurance and investment advice. The process of financial planning delivers a strategy that takes into consideration all aspects of lifestyle, goals and requirements to help individuals reach their financial goals effectively and efficiently. The process of financial planning when delivered in a sequential, manner according to Irving :
• guides individuals in a goal oriented and systematic way;
• formalises behaviours for accomplishing outcomes and;
• provides a means of assessing progress.
Looking deeper at what drives human behaviour, the work of Lawrence and Nohria , identifies at least four hardwired innate drives that shape our behaviours and choices. Those elements, the drive to acquire, learn, bond and defend, fit neatly into the advice process as advisers educate clients as part of a discovery process to illuminate what is important to the client, and provide strategy solutions that allow clients to set a foundational platform to build towards their well-being goals and desired outcomes.
It flows then that as summarised by Irving (2012), the provision of best-practice financial planning is likely to have positive influences on individuals’ well-being and life satisfaction. The actual process of planning and the manner in which it takes into account goals, wants, values and motivators is core to not only the success of the planning outcomes but the overall well-being of the client.
Crucial then, to maximise the outcomes of the process, is to unpack each step of the financial planning process and discover what best practice looks like, what the client experience is and what it needs to be during the process and how businesses can deliver repeatable, sustainable and measureable processes to enhance client outcomes.
Professionalism embodies the notions of relationship quality, communication and ethical practice , so why has the financial planning industry been unable to enshrine the concept of professionalism in the hearts and minds of consumers? The process of financial planning provides a key to answering this question. The traditional process for financial planning has at its core a simplicity and an implementation that utilizes a prescriptive software illustrated approach that does nothing to unlock the mystery that is the black box of the advice process.
What’s missing here is the positioning and context of how the process will in fact make a meaningful change to an individuals circumstances to obtain the outcomes that are important and relevant to them. The focus is on a service and not on a collaboration. Some advisers however have taken this process and created models that emphasise a focus on values and motivations .
What has occurred with these leading advice firms is that they have unpacked the advice process and connected it, demonstrably, to the outcomes the client wants. This has meant a connection illustration where the client is bonded with people ‘like’ them. Using the concepts of social proof and liking (whereby people will do things they see other people doing, particularly those people they can associate with ie: like) these businesses explain the financial planning process in ways that connect it to a path others who have gone before them have travelled. Thus the process becomes less feared and more likely in the clients mind to be able to deliver the outcome that is desired.
There is value and benefit for all parties when a process towards best practice financial planning is positioned in this way. The process has positive impacts on well-being and satisfaction with life because it addresses lifestyle aspirations, values and goals . The methods of best practice positioning of the financial planning process can be summarized into client experience checkpoints that businesses need to enact if they are to be successful in delivering the entire process and having buy-in from the client to do so:
• the firm has a concept of the types of clients they can specialize in and like working with
• the firm develops capabilities to deliver needed specialized services and resources to their desired client set
• the firm positions the typical outcomes these types of clients have in the messaging and value statements they make about the services they offer
• the firm takes new clients through a process where client stories are illuminated so that the prospective client can associate and relate to the outcomes produced
• the firm takes the time and provides the resources for clients to participate and collaborate in the advice process
Increasingly then firms delivering best practice advice are utilizing techniques and tools such as mind maps, lifestyle questionnaires, wealth indices, personality profiles and wealth choices diagnostics, to engage clients, set benchmarks for communication, engagement and outcomes and in so doing are winning the hearts and minds of clients and delivering not only financial but psychological well being outcomes.
According to the Financial Planning Association the steps undertaken by a professional adviser when advising a client are :
1. Defining the scope of engagement;
2. Identifying goals;
3. Assessing the clients financial situation;
4. Preparing the financial plan;
5. Implementing the recommendations, and;
6. Reviewing the plan.
From a client psychology standpoint at each stage of the process can be attached to an underlying factor in positive well-being. Irvings 2012 work in this regard is substantial and we have expanded further here to explain exactly how clients are feeling at each point of the process.
1. Defining the scope of engagement; This promotes positive well being as the client starts engaging with basic life tasks: clients feel competent in managing everyday life and can take advantage of new opportunities. They can organize their life, work and home situations to match their needs and values. Known as ‘environmental mastery’ .
2. Identifying goals; Clients acknowledge they have goals for their life and develop a sense of direction in working toward them. They have beliefs that support a sense of purpose in their own life and life generally .
3. Assessing the clients financial situation; A realistic appraisal of a current state of affairs and a desired state of affairs reduces (potentially) the stress and strain of financial concerns, particularly if the client can see themselves working towards minimizing the gap. As a result they can feel good about where they are at financially and accepting of both strengths and weaknesses.
4. Preparing the financial plan; The plan is the enabler of the client, with one of the major benefits of long term planning is that it enables clients to start to compensate for a lack of resources and to maximize the possibility of even achieving better outcomes than people who had those resources but didn’t make a strategic plan.
5. Implementing the recommendations; As Irving (2012) notes the implementation process sets in train the progress towards the pre-identified goals. Further, enacting positive financial behaviours is an important component in overall well-being
6. Reviewing the plan; encompasses all of the above steps, and re-inforces the positive progress and psychological benefits of the process.
Knowing these processes is not enough. What leading advice businesses do at each step of the process is to stop, review, clarify the client experience and reinforce the progress. They use claims assistance guarantee promises, client assurance messages and formal assurance communications. Further they have embedded into their client process touch points that each member of the firm understands are crucial in delivering a positive client experience in line with the journey through the financial planning process steps.
References
Kym Irving 2012, The Financial Life Well Lived, Psychological Benefits of Financial Planning, Australasian Accounting Business and Finance Journal
Paul Lawrence and Nitin Nohria 2002, Driven : How Human Nature Shapes Our Choices
Wednesday, 28 October 2015
Creating positive outcomes for the life insurance industry in Australia
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.
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, 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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