What is trust? In the world of life insurance, plenty of noise is made about the importance (and the challenge) of establishing trust between advisers, their clients and insurers alike. But it seems we’ve missed a critical step in this precious relationship.
Much industry debate and speculation stresses the importance of establishing trust between insurers and premium-paying policyholders. And this, of course, is undoubtedly true. But what about the trust an adviser needs to have in the insurer (and therefore the product) they are selecting on their client’s behalf? Perhaps we’re all trying to run before we can walk.
After all, the trust a client attributes to their financial adviser, hangs precariously on the strength of the product the adviser has sold to that client in the first place. The very nature of the long-term insurance industry means financial advisers have to first trust that the solution they’ve sold, will in fact, deliver when that client needs it most. Trust is reciprocal. And in the adviser-client dynamic, it has to start with an adviser who believes so confidently in the quality of the advice and product they propose – they’re willing to lay their credibility and reputation on the line for it.
Great in theory, right? Let’s unpack what this actually means and how advisers can go about building solid and successful long-standing relationships with their clients.
“Customers today are much more aware of and engaged with their own financial planning needs and the products available, and therefore have higher demands around products and services. This changes the way financial advisers should interact with their clients, and what the industry needs to offer,” says Mike Saunders, keynote speaker and author of the book, Renowned.
“To do so, focus on ways to improve your credibility in the industry, showcase your reliability and create a closer connection with your clients. Then make sure you keep your self-promotion to a minimum. No one likes the arrogant guest at the party telling everyone how great they are.”
In his book, Renowned, Saunders says that in this connection economy, your relationship building skills are your competitive edge, and it’s your ability to leverage these connections that will lead you towards success1.
Trust is defined2 as “the reliance on the character, ability, strength, or truth of someone or something”. Never has this been truer when viewed in relation to the adviser-client relationship. As a financial adviser, your clients need to believe that you genuinely care about their individual and family needs – and that you’ve committed to putting them first, over and above commission or the assumed monetary gain. They need to feel their advisers relate to them and that they have the expertise to offer them an individual, tailored solution.
Listen. It matters
Your first point-of-call should be to define and appreciate your client’s particular circumstances and needs. If you don’t understand their needs or their ‘problem’, how can you offer an appropriate solution? Too often customers receive a hard sell without being heard. Once you’ve asked the right questions, listen to what your clients have to say, so you can respond accordingly.
The solution lies in your hands
Above anything else, the most critical need for your client is to protect their ability to earn an income against all risk events. The most effective way to do this is by offering income benefits that protect 100% of their income, not just against their most dire risks such as permanent disability and death, but against the most likely risk of a temporary injury or illness that will prevent them from earning an income. According to FMI 2019 Risk Stats, the risk of a temporary injury or illness during your clients’ working career can be as high as 92%3.
When you consider this along with the fact that 62% of South Africans would run out of money within 3 months without an income4, the financial consequences of not being adequately protected can be devastating. Three months of lost income can have a massive impact on retirement plans. Take a 35-year old earning R30 000 a month as an example. An injury or illness that books them off for 3 months would ‘cost’ them R2,6 million in lost income by the age of 65. This means that they’d either have to live on 10% less income when they retire, or they’d have to work for 21 months past their planned retirement age of 65 to make up this income5.
Income benefits are highly successful because they match the way individuals plan for and manage monthly expenses. This may be one of the reasons why clients who already have income benefits hang on to those policies. According to FMI’s 2017 Lapse Report, lump sum only benefits are 66% more likely to lapse in their first year, compared to income only benefits, highlighting the fact that individuals understand the indispensable value of an income benefit.
You, as an adviser, have such a critical role to play in helping your clients make the right decisions that will potentially have a major impact on their future. Offering product solutions that address their unique needs will enable your clients to believe in the advice you’re giving and recognise the value of having had an adviser who guided their financial plan. This ultimately leads to long-lasting, indispensable relationships built on trust.
1Renowned by Mike Saunders
3FMI Risk Stats 2019 – 25-year-old risk of a temporary disability that will last more than 2 weeks during their working career.
4FMI 2018 #RealityCheck Consumer Survey
5FMI Retirement Calculator. The numbers assume retirement savings of 8% of income, inflation of 6% pa, real investment return of 6% pa, net of fees and tax.