Bill me by the hour
You might hate their advertising but Auto & General and its more recent clones such as Outsurance and King Price have confounded the sceptics.
Conventional wisdom for years was that you needed brokers taking clients out for long lunches to sell insurance. Surely nobody would listen to barking voices on television? Yet the personal lines broker is now, if not quite extinct, confined to certain niches.
It might surprise some regular readers that I have a short-term insurance broker and value that relationship. If I have an accident, they handle everything. In the event of a breakdown, they are contracted to a towing service which offers a more efficient service than the AA. If I buy something valuable, they can add it to my insured items quickly. If there is a small premium in cost, I am happy to pay it for personal service. And you will always get what you pay for. In my experience, direct insurers make claiming a nightmare. It must be even worse now that bots are starting to replace call centre agents.
Life insurance has been more resistant to direct sales. But that has changed since the start of the pandemic. Just look at the significant growth of Sanlam’s MiWay Life and Indie units. Life insurance is a generic single needs product – without the long inventory that would be part of a short-term insurance contract. The only area of complexity revolves around the levels of disability cover. But even brokers have underplayed the importance of disability cover, letting down their clients along the way.
Of course, it is in the investment field that intermediaries have been most complacent. They call themselves the second-most important profession (though perhaps not the second oldest) as wealth care is second only to health care. What they tend to ignore is that they serve a tiny part of the population. Worse, it seems to be the most untransformed business in the country. It was not so long ago that I went to an allwhite conference of the Financial Planning Institute with an all-white speaker line-up, where all the prize winners were white. Makes me feel quite forgiving about the pace of change in the fund management industry.
Talking you off the ledge
I am told that a financial adviser is not there to help pick investments, or even tailor an asset allocation to a client’s needs. His main role is to “talk you off the ledge”, like a counsellor talking an addict out of a relapse. That was a role played many years ago by the bank manager, in the days when he (and almost always he) had a holistic view of a client’s finances.
But independent financial advisers need to do a lot more to earn 1% of their clients’ assets in perpetuity. They need to stop pushing their clients into cookiecutter investment portfolios provided by discretionary fund managers — usually at an additional cost. They might also consider managing the other side of the client balance sheet: their debts. Too often they advise clients to buy the next commission-rich structured product when the best advice would be to keep reducing debt.
I would much prefer to pay for intelligent investment advice when I need it. So I am waiting for the days when I can get advice from advisers on issues such as setting up trusts and capital gains tax on an hourly rate, like lawyers and accountants. Why should they earn a percentage of assets if they are leaving the investment calls to others?
It can’t be too long before some enterprising multimanager cuts them out completely.
Independent financial advisers need to do a lot more to earn 1% of their clients’ assets in perpetuity