Last week Money Management was pleased to announce the winners of the inaugural Adviser Choice Risk Awards and in discussions with the winners it became clear that risk insurance was the growth market of the moment.
When the growth was analysed, two issues became clear. The first was those advisers who were long-term writers of risk business were still writing risk business and ensuring a revenue stream for the product providers. The second issue was the spike in sales by other advisers, who knowing that equity investments are on the nose, have switched their focus to risk.
In either case the risk houses are pleased since either scenario means they are making money but this belies a real danger this industry faces with risk products.
For some time planners and dealers have been harping on about holistic service and whole of life financial needs, but it seems that this is far from the case if risk sales spike when equity investments are down.
If holistic planning is truly the rule of thumb across great swathes of the planning industry, as is often claimed, risk sales would be holding at a relatively constant level, not from churning but from the new business being written for the growing number of people seeking advice.
Risk products are often seen as the poor cousin of investment products and this was especially evident in the recent ACA/ASIC survey and media storm that followed it. Almost no mention was made of the need for risk cover and how that fits into financial planning.
Rather, the only time risk is news in the industry is when the debate flares up about commission disclosure.
If risk is to be regarded as a secondary concern, or as a fallback position in poor markets, then advice is not complete and the industry opens itself up to the criticisms of recent weeks.
It also means that advisers are opening themselves up to possible legal action in not being aware of the products and how they fit into the clients’ needs.
Reputable planners would never recommend a product without being aware of all the implications, and risk needs to be considered in the same way. If you think clients can be angry after three years of poor performance, imagine their response when they find the risk policy they have is inadequate for their needs or worse, was glossed over and neglected all together.
It is true that risk insurance is a different breed of product and takes different skills to sell but it is highly unlikely that you will ever find a client, who having benefited from a risk claim, will complain that their adviser sold them too much risk cover.