Adapt or die: Solutions for long-term intermediaries
Regulation will have a huge impact on the life industry in coming years. In March 2006, the National Treasury published a discussion document titled Contractual Savings in the Life Insurance Industry.
Treasury invited comments from affected players in the industry before reporting back in November 2006. Information presented at this meeting is still under embargo- but should be made public soon.
The South Africa Financial Services Intermediaries Association (SAFSIA) hosted a seminar for life insurance intermediaries to discuss the impact of this consultation process. The seminar attempts to answer the question: "Is there life after regulation?"
The majority of industry participants answer this question with a definite "yes". The life insurance intermediary should emerge from regulation with business potential intact and with government as an ally!
The seminar also looked at some of the options available to long-term intermediaries in the future
Weighing up the independent option
Independent consultant, Nigel Scott, emphasised the importance of choosing between going the independent broker (IB) or the independent financial adviser (IFA) route. This distinction is created by the distribution models proposed by National Treasury for collective savings intermediaries.
An IFA will, by definition, charge an upfront fee for his advice, while an IB will receive commissions on product sales.
Once this determination is made, Scott suggests the independent intermediary spend some time on business strategy. The most important step will be to establish a value proposition (VP). This is a simple statement that will distinguish or elevate the businesses from those of similar intermediaries. The VP should highlight an area that the intermediary can directly control. Focus on aspects of exceptional service rather than promises of financial return.
Independent financial advisers should steer away from the idea that their fees will have to be time based. "Selling time is not ideal," said Scott. Instead, he encouraged IFAs to create fee models according to the amount of funds the individual client is investing.
Changing regulation will require that IFAs re-invent themselves. Scott suggests that independent brokers strive for new levels of professionalism, and seek to establish unprecedented trust relationships with their clients.
Trust the brand with institutional broking
Speaking for Standard Bank Financial Consultancy, Chris Busschau outlined the benefits of joining an institutional broking division.
Consumers held institutions very much 'front-of-mind' due to the range of financial products they use on a daily basis. Consumers develop strong associations with these institutions due to owning credit cards, bank accounts and home loan products.
Joining an institution meant spending less time on canvassing new business and more time with the client. The average institutional broker can count on between 10 and 18 leads a week- with a better chance of completing the sale due to the existing relationship between client and institution.
A decrease in the amount of commission earned is adequately compensated by various company benefits.
Take up the fight as a 'tied' agent
A 'tied' agent is an intermediary broker who sells the products of one provider only.
John Wallace, Advice and Product Strategy Manager for Old Mutual, believes that the benefits of operating as a 'tied' agent will be passed down to the consumer.
Consumers will benefits from a recognised brand, wide access to services and a full range of products.
Editor's thoughts:
Life insurance intermediaries should emerge from regulation with a more focussed and professional outlook. Intermediaries should take this opportunity to re-assess their strategies with regards to cash flow, business mix, intermediary status and behaviour. Send your comments to gareth@fanews.co.za
