The web, regulation and our increasingly self-directed consumer market have forced our advice industry to evolve or die.
The quintessential "risky" or risk adviser is being replaced by a new, savvier species — the new risk professional.
The risk professional:
- Believes client centricity is paramount to the success of their busines;
- Has valued relationships with their clients, not just conversations;
- Knows the value of their advice and charges the appropriate fee for their expertise; and
- Is a specialist, but has a trusted and professional network to facilitate broader financial needs.
Survival of the fittest
Client needs have shifted and one track conversations about insurance products are near extinction. This has allowed the rise of the risk professional, and a wider acceptance that the ‘four pillar' approach to risk advice is key to survival.
1. Risk, not insurance
It's one thing to sell an insurance policy to a client. It's a very different thing for that client to understand the potential risks in their financial position, see the need for a risk management strategy to mitigate them, and then actually buy a policy.
While old fashioned sales techniques might help you get a client signature, they're unlikely to help you build trust and relationship longevity. In fact you might find that 12 months down the track, your client starts to question the value of their policy, gets frustrated about the monthly premium (especially if hit with an increase), and potentially forgets why they purchased it in the first place.
Not only does this increase the likelihood of a lapse, it also increases the chance you'll never see that client again.
The risk professional knows that the difference between insurance sold and insurance bought lies in the ability to engage clients with personalised questions and a personalised approach.
Understanding cash-flow is essential to a discussion about risk, and it should go deeper than just incoming versus outgoing. A detailed analysis can help you determine the funding mechanism for a client's risk management strategy. If you push a client's budget too far, or set a premium that's higher than they believe they can afford, you can't blame them if they lapse months later in favour of a previously vetoed annual family holiday.
If your client can't afford the recommended policy, rather than dropping the premium (and benefit) and leaving the client with a gaping hole in their plan, carefully consider the client's personal cash-flow situation instead.
Today's risk professional should not only be equipped to offer advice around cash-flow strategies, spending habits and saving habits, they should also be able to balance risk against cost to meet their client's goals.
And, of course, superannuation is included as part of that conversation.
Speaking of super, always consider it as more than just an alternate funding solution for an insurance policy.
A risk professional will walk their client through the options, and explain the full implications of using what is effectively their retirement savings, to achieve risk mitigation. From there, they will determine the best, most viable outcome for their client.
At this point, professional relationships can also come into play. A risk professional will facilitate discussions with other trusted professionals in their network who have their own specialist expertise, such as a tax adviser or financial planner, when the client requires a wider scale of advice.
4. Estate planning
If you've discussed risk, cash-flow and super, you might consider your client to be pretty well covered when it comes to meeting their risk management objectives. Having gone through a robust risk advice process, that client is likely to be in a better position than they were yesterday.
But the new risk professional knows that a wealth and protection discussion isn't complete without including estate planning.
Wealth security and the transfer of wealth is a technical field, and the right specialist needs to be brought in. However, by playing facilitator (building upon an already existing role of trusted adviser) the risk professional seeks the best help for their client, continues to stand in the middle of their client's financial world, and closes the loop on a financial strategy.
Evolution or extinction?
Longer term business viability is not the only benefit of the new risk professional's approach.
You will build real relationships with your clients while giving them a clear view of the risks associated with their financial position, a clear understanding of the role of insurance, and a personal risk management strategy.
And best of all, your clients will understand the real value of an adviser: advice.
Generating good outcomes for your clients can turn them into great advocates for you and your business.
Evolving your approach to advice might be the difference between survival and extinction, so if there was ever a time to change, it's now.
So, with changes in consumer expectations and the marketplace taking place, the question is, have you evolved?
Craig Parker is the general manager at Affinia Financial Advisers.