I know an experienced financial planner, with a masters in financial planning, including CFP training, who employs the services of another financial planner for his own financial advice.
“What a fool!” you might think. Well, that fool would be me. You see, I am a risk adviser whose sole professional focus has been risk advice.
The terms MDA, CSHC and TTR are familiar to me but don’t ask me to explain them (let alone advise on them). IP, TPD and BE on the other hand is what I live and breathe. Not just the general product categories, but the policy intricacies, structural options and ultimate claim-ability.
As a ‘riskie’, I am obsessed with the underwriting process. Does a tubular adenoma always result in a bowel cancer exclusion? Can someone working 19 hours a week get income protection? Can my 61-year-old client get trauma cover?
Claims management is another obsession. Does a degenerative illness like MS allow for a total disability claim without the client having been totally disabled throughout the waiting period? Should my client receive a terminal illness benefit today or allow his estate to receive the proceeds of a death benefit?
Just like riskies who dabble in a bit of super, how good will the advice outcomes generally be for planners’ clients whose advisers dabble in risk?
Of course, the planner that my wife and I engage is licensed to give risk advice, even if that is not her area of expertise. If I wasn’t in the privileged position of being able to self-advise in this area, I would engage a risk insurance specialist. It’s not only that I have Type 1 diabetes (which presents a range of underwriting issues itself); it’s about the comfort of having someone with ‘risk influence’ in my corner if and when called upon – particularly at the time of claim.
So why do I pay for financial advice? I recognise that the required skills and expertise are beyond my current abilities. I trust that my adviser really knows what she is doing and is with my family and me for the long-haul.
It is time to challenge the assumption that being a financial planner qualifies you to be expert enough to give risk advice. If Corporations Law required all advisers to give general insurance advice, would another unit of DFP really ensure that we were up to the task?
How many planners currently scope out risk or do it with moderate enthusiasm? And when tackling risk, how many find they become frustrated and bogged down in a never-ending quagmire, determining the most appropriate product, the most appropriate insurer and ownership structure – not to mention processing applications, underwriting issues, revised terms, repositioning recommendations and loadings or the disappointment of being declined?
The relationships risk specialists have with underwriters are so vitally important in securing the most beneficial outcomes for clients.
This presents a strong case for financial planners and risk specialists to work together. This is an opinion shared by financial planning doyen, John Hewison: “I can see significant client benefits in professionals working together. Rather than trying to be everything to everyone, we use external risk specialists to better meet our clients’ needs.”
To put this in medical terms, a GP will consult with patients in need of specialist services on a daily basis. Does she refer them on or do it herself?
Our duty of care obliges us to recognise the limits of our expertise and ensure our clients are ably assisted by professionals in their respective fields.
Financial planners and risk advisers manage distinctly different risks using distinctly different skill sets.
Aaron Zelman is a risk adviser and principal of MediBroker
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Good article Aaron. Having worn both hats, both exclusively as well as juggling both at the same time, in the past, I too have chosen to specialise. For me, focus precedes success
To say that an adviser can be providing the best possible advice in both investment advice and risk is to ignore the principles of logic and analysis v. emotional aptitude, left brain and right brain dominance and playing to our strengths. Whilst those focusing on investment and those focusing on risk wish to assist clients in achieving their objectives there are different skills, approaches and processes that apply to both disciplines. The best results are achieved through recognising our strengths and specialisation which supports differentiation.
To believe that we can do both risk and investment at the ultimate level is to believe that we are strong everywhere and without vulnerability. Such can be our ego and our avoidance of being true to self.
I’m fairly confident you will struggle to find someone who is truly an expert on both sides of the fence. No doubt there are plenty of people who think they are. How many doctors specialise and are leaders in 2 fields? It shouldn’t be any different with risk and investment planning. Those who consider themselves a jack-of-all are a big problem in the industry. The sooner everyone embraces specialisation, the better off the industry will be.
Well said Aaron!
Specialization is one of the key issues facing our industry and how we are perceived. (from another passionate life specialist)
When I joined the industry in 1987 everyone was a life insurance agent.
This evolved into financial planning and everyone had to adopt to the education which qualified them to provide advice on investments, even if they were most just for superannuation and/or retirement planning.
As information, advice , products, and technology changed, so too did advisers move into certain areas to specialize in either risk or financial planning.
Because of the remuneration packages and knowledge required to keep up with the tow different sectors, many advisers decided to give up on one and commit to the other. However, most retained alliances with this who were specialists in the other field and would work together on referral.
People who entered the industry after the conversions generally tended to gravitate towards one or the other, and were more likely to come in under the auspices of an overseeing planner or adviser rather than being able to jump right in to the deep end on their own.
Hi Wayne. There are probably some Riskies who are great in other areas too. But the average Planner is not likely to be highly adept at Risk. Your opinion is vaild in any event.
While this story makes some valid points, it’s not like we’re talking accountant v lawyer. There are a great many financial “planners” who are also risk experts. If you have chosen to specialise on one side of the advice fence, it may be because you feel no comfort on the other. But, to suggest that the two disciplines are “chalk & cheese” is a gross over-simplification.