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Brace yourself for massive realignment

21 August 2017 Jonathan Faurie

One of the objectives that Regulatory Reform hopes to achieve is that product providers and advisers add significant value to clients throughout the client journey with the adviser and insurer. The Financial Services Board (FSB) has been outspoken and has said that this will be regulated through the Treating Clients Fairly (TCF) objectives, as well as the guidelines outlined by the Retail Distribution Review (RDR).

However, value is subjective; it means different things to different people. With this conundrum in mind, FAnews spoke to Jackie Drotsky, Licenced Compliance Officer at Momentum Consult, to find out his point of view on the subject.

What does adding value to clients mean?

Drotsky says that when companies are approaching the topic of adding value, they need to do it with a specific goal in mind.

“Before an adviser can decide what to charge the client post RDR, the adviser will first have to decide which one (or more) of the categories of advice they wish to focus on. It is at this point where the adviser needs to assess the value proposition that they are planning on providing to clients, and only then put a price tag on the value proposition,” says Drotsky.

She adds that honouring the value proposition will ensure that the entire business delivers on promises made which will in turn result in clients experiencing value, leaving them satisfied and willing to pay for the service.

“Value may be a relative term, and may mean different things to different clients; however, the one thing which remains constant, no matter the industry, is that delivery on the services promised, and ongoing service delivery, will leave any customer satisfied and willing to pay for advice,” says Drotsky.

Valid concerns?

Some of the country’s biggest insurers have said that regulation and RDR will force the industry to rethink the advice process. We asked Drotsky if these concerns were valid.

"The concerns are valid, advisers not only have to face the numerous changes to current financial services legislation to accommodate Twin Peaks, but they also have to address market conduct issues which resulted in poor customer outcomes in the past. There is also the ever growing compliance and operational costs whilst still trying to survive on declining regulated income. Not to mention the economy that is on the brink of recession and the growing unemployment figures," says Drotsky.

She adds that the only way to get out on top will be for advisers to change their approach on how they deliver a service to their clients whilst still meeting the business’s goals to ensure sustainable success for all stakeholders. This will be possible by carefully considering and designing a value proposition.

“After the TCF Principles were introduced, it became clear that the customer always comes first and is always right. This has always been the case, but since TCF, it has been on every adviser’s door step. There is no more getting around poor service or undelivered promises,” says Drotsky.

A war being fought of multiple fronts

In addition to the above concerns, which Drotsky just indicated are very serious issues, advisers need to find a way to remain relevant and relatable in the clients eye.

“The question we need to ask is: do advisers truly understand their clients? Independent Financial Advisers (IFAs) may find the changes regulatory reform ushers in less challenging than tied agents. Staying relevant will be possible for IFAs as long as product providers keep on competing to be the number one in the market. Tied agents on the other hand will only be as relevant as the company they support. However, just as financial advisers will have to rethink and redesign their value proposition in order to survive, product providers will have to rethink marketing strategies and designing value adding products and solutions to survive,” says Drotsky.

She adds that the fight for survival is ongoing and has been for a while to such an extent that he almost wants to say that this is a war that is being fought on multiple fronts. “As long as the competitive environment, advisers’ approach to service delivery, the generally accepted treatment of clients and legislation keeps on changing, the war will continue. Advisers will have to change the way that they communicate with their clients based on the changing environment. They will have to find ways to enhance the customer experience through the intelligent use of data and artificial intelligence allowing them to anticipate customer needs,” says Drotsky.

Editor’s Thoughts:
It seems as if the adviser will be the key role player in the elaborate game of chess that the FSB has recently started with the introduction of regulatory reform. Understanding value and anticipating client’s needs are no mean feat and requires keen observation skills. However, one still has to question whether the plate of adviser is becoming too full of responsibilities. At what point does it overflow? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts jonathan@fanews.co.za.

Comments

Added by Nancy Bowring, 22 Aug 2017
I agree with Simon, Peter & Guthrie.
How better to know your client than to meet with them. How do we meet with them when we are tied up with administration. The first service provider who has a team dedicated to easing our administrative burden - ie we send a one or two pager and quote request and the pre-completed forms are sent to us with a few places that require personal notes and input in the client advice records.
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Added by Synical Simon, 21 Aug 2017
The industry is once again running the risk of talking to ,and considering long term and investment outcomes and then to dip their brush into that paint and paint the short term adviser with that very same brush in that very same colour.

That he war is being fought on multiple fronts goes without saying but in the short term space the innovative policy wordings and bizarre interpretations are mortal enemies to, TCF and unless some sanity on age old , well established ,tried and tested principles of insurance and those to be regarded as the benchmark for policy wordings and being more important than policy wording thought out by novices to the industry, being restored the changes will achieve little more than burdening the intermediaries with impossible odds.
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Added by Peter, 21 Aug 2017
The FSB is the State's representative striving for better consumer outcomes - Accepted and agreed. This is good. However, the consumer experience in the financial services sector is already so much better than in other sectors of society, especially the STATE itself and the State Owned Enterprises. Surely Treasury should focus on the areas where the whole country (And world) know the problems reside, and leave a good efficient free market to flourish??? That will assist with economic growth.
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Added by F Guthrie, 21 Aug 2017
In a nation that refuses to save, it is unlikely people will actually pay for savings advice. The online techno-systems will win this battle and how, one has to wonder, will they be called to account when a call centre will be the point of sale and follow up?
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