On the results of the RBNZ and FMA culture and conduct report for insurers
Updated: Feb 18, 2020
Seeking financial advice is an important undertaking. I always feel proud and privileged when someone comes to me, looking to determine what, exactly, their long-term goals are, financial or otherwise. It’s why I get up in the morning. There is a lot of trust involved in using a financial adviser yet this industry has historically not provided or endeavoured to provide a high level of transparency to their clients. Transparency is vital, however. You should know, as a client, why your financial adviser makes certain decisions and most importantly, trust them to do so.
The insurance industry has also in past, been based upon a set and forget business model: you invest time with an adviser, maybe 3 or 4 meetings to set up some medical cover while the insurance provider pays the adviser a higher commission for the personalised time that adviser spends with you. The result is that you receive a policy which may meet your needs, but with no incentive for advisers to touch base, you don’t hear from them again.
This is changing in the industry.
Let’s be clear; we receive commissions for setting up insurance for clients. It’s the current business model for advisers and we do need to keep the lights on. However, there are alternative ways of doing business, which has made a real improvement on this aspect of the industry.
For instance, we take a spread commission from insurance providers. With this model we receive a lower upfront commission in exchange for a larger renewal commission which puts the focus back on providing clients consistent policy reviews. It’s an investment. It also reflects our stance on the importance of the adviser-client relationship; if we can keep our clients happy long-term, a business lasts and everyone benefits.
The Financial Markets Authority is requiring Financial Advisers to be client focused.
Kauri Financial Planning works on a subscription model. Providing our service based on a small subscription fee normalises financial advice and the relationship between us and our clients. This in turn creates a collaborative and rewarding experience but most importantly, the subscription model gives you the confidence to engage us in conversations big or small. With us there is no worrying about being invoiced for time, or dealing with an adviser who isn’t aware of your individual situation.
Kauri Financial Planning’s role in advice in NZ
The industry is going through an upheaval. Transactional experiences and the commission structures that accompany them are being removed and the businesses’ that have worked under these client models will be greatly affected. We believe sincerely that our success depends on the success of our clients. Our client-first attitude puts us in a great position going forward and I am very proud of this.
If the recent media coverage regarding the FMA and RBNZ conduct reports has given you cause for concern, please let me know and I can answer your questions.