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Are Advisers Compliance Fears Costing Them Clients?


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If there is one area that continues to bug me about advice process it is the “Scope of Service” documents that are used by so many advisers.  Too often they are just rubbish.

If I was a consumer I wouldn’t engage the adviser either on the basis of the menu of “services” offered a lot of the time.

At this point many advisers will be thinking “yes – compliance has a lot to answer for!”

Compliance isn’t the problem here: The advisers fear of being non-compliant is the problem.

It makes absolute sense to have a Scope Of Service document from the compliance, best practice and clear client communications perspectives, so I am all for having the client consent to engage documented as part of our advice process. But why do so many advisers insist on listing products or services in industry jargon on their “menu” for clients to choose from?

What sense does it make to the typical consumer to be offered a document somewhere near the beginning of a possible engagement where they get to choose whether they would like the adviser to talk to them about (say):

  • Income Protection Insurance
  • Total & Permanent Disability Cover
  • Critical Illness Insurance
  • Managed Funds

Often enough these lists of possible products or “services” run to near on 2 dozen bland and boring financial services products.

Advisers then complain that “regulation” is responsible for consumers opting out of the full advice process.

Actually, Regulators have nothing to do with advisers being boring and speaking in a language that consumers are not interested in, even if they did understand it.  It is simply poor communication by the adviser concerned.  When did compliance insist on the industry talking in language which disengages consumers or makes it difficult for them to comprehend what we do?

I pay a fairly hefty premium for an excellent income protection product myself – and am happy to do so.  It isn’t because I love income protection products and enjoy paying for them.  It isn’t because I am a loyal brand advocate for the boring insurer (who frankly is bloody poor at communicating with me as a client – thank god I have a great personal financial adviser!).

I pay a small fortune for this, and other risk protection products, because I care about making sure that money continues to come into the household so the people I care about can continue to eat, live and pursue their lives and plans if I cannot provide for them. I pay the premium – and take a known loss I can stomach – so that the people I care about don’t have to worry about having money for food and shelter if I can’t provide it.

I buy insurance so money will still be there even if I am not able to be here or provide any.  I save money so that I will have enough to live on when I cannot earn more through labour.  The “why’s” are pretty simple aren’t they?

So when it comes to engaging with potential clients why would we ignore the key motivations for using financial products as a means of addressing the real fears and concerns?  The motivations that matter really are things like:

  • Survival, and meeting basic daily needs like keeping the family home or eating.
  • Care and protection of loved ones.
  • Freedom from fear, anxiety or threat.
  • Enjoyment of some better things in life (food and wine!).
  • Being responsible, or well remembered.
  • To be superior, winning, keeping up with peers.
  • Social approval.

Our engagement documents and the language we use to describe the products or services we can provide need to be presented in these terms. Advisers cannot let their own compliance fears make them lose sight of the important “WHY’s” that drive consumer engagement.

A great – and compliant – engagement document for defining the scope should be in language which is aligned with the motivations and outcomes that can be created rather than product or industry jargon.  For example:

  • Ensuring ongoing income after illness or accident
  • Keeping the family home in event of disaster
  • Owning our home faster
  • Kid’s fast start with debt-free education planning

These sorts of descriptions still absolutely define the scope of the engagement.  They obtain consent from the consumer about the areas of concern or planning where advice can be useful for them (in their opinion), but do so in a meaningful way as they address real life concerns and motivations.  It is up to us to then figure out how our products and services can be used to provide good solutions to these issues.

Compliance is about good process rather than the language being used.  Stick with great process and get agreement for engagement recorded with clients. But do it in a meaningful way for them – and an effective way for you.

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