It’s fair to say times are changing for the financial services industry across the board. I have been working as a strategic advisor and coach in this industry for over 4 years now. During this time I have seen financial advisors and insurance agents and businesses come and go. I have seen mergers and closures. Compliance is one of the major reasons for determining the success of individuals and firms.
The introduction of the Financial Advisors Act and Financial Services Providers Act 2008 lifted the required standards in the industry as well as giving customers a place to voice their concerns. The release of the Options paper – the review of the Financial Advisors Act 2008 and the Financial Service Providers Act 2008 last week by the Ministry of Business, Innovation and Employment is focused on purely the customer and their requirements and access to professional advice that is transparent. The output of this review process will without a doubt bring further change to the financial advisory services field.
However, at this point insurance agents have been left untouched. Successful agents are writing huge numbers in insurance policies. It is an industry where if you are good at selling, you will have significant success. It’s like these agents are afloat in the gorgeous blue water swimming on their lilos and enjoying what life is offering them. What they are not appearing to see is the storm looming on the horizon that will hurtle in and sweep them off the lilo in an instant.
The huge increase of property investment across NZ has enabled a perception that people need to manage risk and so having an insurance policy is a must. Over 92% of businesses in New Zealand are small so a need for insurance protection is a must. ACC Levies and managing those through a policy is a must to keep levies down. An ageing population and having children later has meant more reliance of policies to protect generational wealth. So,there is a need. We are clear on this. As customers, we are so much more savvy. We know what we want but the question becomes how can we be sure that the advice or the policy we are being recommended is actually what we need rather than being the latest product or higher commission package for the insurance agent?
Transparency has been missing from this industry for a long time. Where is the value of what the agent is providing? When I looked on line for insurance businesses to find out what the current customer problems were in this industry I was surprised at the results.There are a lot of online videos that asked the question and made me want to know more. However they went straight into selling the respective business services. That did not give me any confidence that they understood what I was looking for.
So what will change?
In all likelihood the insurance industry is about to become compliance driven in a major way. Agents will need to be transparent about their fees and disclose how they are being paid. The distinction between sales and advice will need to be crystal clear. If you take a stereotype of an experienced insurance agent who has spent most of his life selling insurance policies to Kiwi Mums and Dads and made a very successful living out of it, that agent will need to change. The sales process that these agents use is generally about being a lone ranger, getting the sales across the line and hunting for himself. He has expertise in getting the deal across the line but after that point there is no further contact or interest in maintaining a client relationship. If the customer shows any sign of terminating before the clawback time, he will go to bat again to keep them onboard until the period is over. His focus is only on the next customer. Transparency and compliance will mean that he will need to be disclose all his commission to his Mum and Dad prospects. Mum and Dad prospect will want to know that his payment is a direct link to how he is getting paid. This will, without a doubt, shift the way he has to do business. Commissions will inevitably be driven down.
Suddenly, customer service and providing value must be introduced to get the customer across the line in the first place. What I do know is that customers actually want advice. They want to know that you care enough about them and that you understand what they want. They want to know that they can trust you and you can build a relationship with them. They want to know that you are competent and easily accessible past the policy “sale”. This preparation work needs to take place NOW.
So to all the insurance agents out there the question I leave with you with is: Are you still on the lilo sunning yourself when the hurricane is on the horizon? If you are, I suggest it is time to get some clarity on what you are going to do to keep your practice operating to survive the storm heading your way.
Contact me if you would like to read our research paper on how to be ready for the changes in the Financial Services market when it comes out in the new year.