Brokers must step in to manage consumers’ product expectations

Outcome 5 focuses on product providers rather than the advice process. It correlates with Outcome 2 which states that products and services are designed to meet the consumers’ needs. Overall the outcome that a consumer experiences should be what they have been led to expect.

The difficulty with this outcome is twofold. First – financial advisers are responsible for communicating expectations around product performance. And second – consumers usually "test” this performance at a time of tremendous stress.

A life or funeral policy performs upon the death of a loved one – short-term insurance kicks in after a car accident – and disability covers must perform when the consumer needs time off work due to ill health...

Products fail to live up to expectations because the vague "illustrations” given at point of sale – and embedded in the clients’ mind as "promises” – are often not met. In the Financial Services Board’s (FSB) pilot study on TCF, published December 2011, they observe that:

• Customers cannot distinguish between product performance (which in investment terms is the eventual outcome) and product behaviour (the degree of volatility experienced);

• There is limited monitoring of changes that might affect either the behaviour or performance of a product, with the result there is limited mitigation of risk to customers;

• In many cases, customers are not informed of the consequences of their proposed actions; and

• Customers are not fully informed of the available options.

How to deliver a fair outcome is at the heart of TCF. The outcome must be in line with the clients’ legitimate expectations. Advisers must therefore capture their clients’ expectations and manage them so that product delivery is within the bounds of what the client expects.

For an investment product this means communicating that while you expect growth over the investment term there will be times when it falls (perhaps even significantly) in value. You must make sure that you clients are comfortable with the "journey”...

Where insurance is concerned you must communicate that claims will be dealt with in a certain way – that settlement takes time – and that certain deductions and exclusions may apply. These details are all "in the contract” but you cannot assume that your clients have read it. Rather than relying on reams of policy pages you should communicate the key facts about what the product will and will not do up front – on one page – in clear readable font!

A recent trend in expectation management is to remind clients at regular intervals what you think the product will be providing (or delivering) and when – and invite them to contact you if their expectations do not match ours. More and more firms are engaging in this type of interactive communication – if you are not then it is time to up your game.

The FSB TCF pilot confirmed a lack of support at points in the process where customers could select product options… A checkbox does not ask the customer whether they understand the implication of the selection, nor whether they are happy with their choice.

A list of Frequently Asked Questions that can be sent out whenever there is a request to action changes or a prompt to encourage the customer to seek advice would be useful in this regard. Again, this is about supporting your clients in times of stress.

You need to do as much for our clients once they are on board as before you "signed” them. The sales process can be complex and intense. Things often get left out or lost in translation. The challenge is to have a robust follow up process and to ensure that customers’ legitimate expectations are met.