Financial Advisors - What's Their Worth?
Every second advertisement these days seems to be promoting a do it yourself approach to financial services and in particular insurance. Whether it is via online providers or through call centres all sorts of insurance - home, contents, car, life, disability, medical and travel - are just an 0800 or click of the button away.
If you don't succumb to these ads then a visit to your local bank branch, where bill boards and marketing paraphernalia scream out the wonderful additional services your bank now provides, will surely get you. Long gone are the days where bank staff would just receive deposits and dispense withdrawal requests. Many bank staff have individual sales targets across an array of additional services including mortgages, investments (KiwiSaver) and insurances.
So, as the ease of access to insurance products increases, what worth is the traditional advisor? After all, many online platforms have filters and questionnaires to help determine the covers and amount required. Bank staff will happily make recommendations.
The short comings in these offerings quite often lie in the detail. Invariably on line services will endeavour to commoditise insurance and target the "do it yourselfer". Price now becomes a determining factor - often what is presented is a discounted first year premium and what is not evident are the higher premiums over the longer term.
Other offers look to provide a discount on your current premium if you swap like for like. However, there is a cap on the total amount of cover that can be transferred and you may end up with two polices with different insurers just to achieve what you already had.
Bank staff have a single offer to make which is provided by the bank. My experience is that these staff, while having been being trained in their own products, have very little market knowledge and therefore are unable to make comparisons with other providers. Given the range of products, variations in benefits and features this could leave you with cover inferior to what is now available in the market.
However, my biggest fear from this current trend is the "she'll be right attitude" when it comes to filling in application forms. I have had clients tell me bank staff advise that certain historical health conditions are not relevant to the cover they are seeking so there is no need to record this. I have seen situations where clients have dismissed a past experience as there was no ongoing issue but it is still relevant to an insurer assessing an application.
In both of these cases policies were, or could be, voided by the insurer at time of claim due to non-disclosure. Even if a claim is for non-related issues the insurer quite rightly can take the position that if they had been presented with all of the relevant health evidence the cover provided would either have been declined, modified or premium loaded.
In the first example, the outcome was the client had no cover when they thought they had. Having been advised to disregard past ACC treatment details by bank staff - the two staff in attendance at the client meeting had subsequently left the bank - there were no meeting notes supporting the client's position. The insurer pointed out it was the client's responsibility to accurately complete the application form despite what advice may be given.
In the latter case the client had visited his GP due to chest pains. These had subsequently settled down and no further investigation was undertaken. However sitting on the client's medical file is an open ended investigation of "Chest Pain" with no conclusion. Because this was some time ago (3 years) the client didn't see it as a consideration today. When applying for cover one insurer picked up on it because when aggregating total cover across all policies it crossed a threshold triggering a request for Doctor Consult Notes. This has led to a Deferment of cover being issued until a medical clearance has been provided in regards to chest pains. Another insurer because the policy size is under their medical limits did not request Doctor Consult Notes and has issued a new policy. We are now in the process of trying to have this cover validated based on a full disclosure.
Fair Go investigated a case which again was based on a non-disclosure of vital information that would have affected the issuing of the policy.
So, while many will tell you insurance is easy and establishing policies is as simple as a couple of clicks of the mouse, don't ever under estimate the value of your advisor who will assist in:
- determining your risks and quantifying them
- matching products to those risks
- matching insurers to those products
- establishing policies on the correct terms and conditions
- being able to provide a review process that builds on previous reviews
- being your advocate at claim time.