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Richard Verdin: Advisers should embrace simple product plans

Richard Verdin MM blog

Since the publication of the Sergeant Review of simple financial products I have followed the observations in the trade media with interest. Having been very much on the inside of the initiative (chairing the working group on protection and attending the steering group meetings) it is interesting to contrast the hard work and good intent of those involved with some of the commentary by those who weren’t.

One of the more imaginative descriptions of the initiative has been to label simple products as ‘McProducts’.  My guess is that the reference was intended to suggest such products may be quick and easy but probably not good for you. I think the reference is a little off target. In fact, I would suggest that Mac is probably more accurate than Mc. Simple insurance products are not designed to last a few minutes. They are built to be fast, reliable and to last. They are designed to be bought without advice (which is a good thing for advisers as we’ll come to later). They therefore have to be ergonomic(designed to minimise physical effort and discomfort, and hence maximise efficiency) and with an intuitive interface because they are intended for use without manuals or human instruction.

Whether you think Mac or Mc, advisers should not fear simple products – they should embrace the concept. Of course good advice is the gold standard but we can’t deny people access to cover just because they are denied access to advice. There are significant segments of the population which advisers do not or cannot reach, probably because there simply aren’t enough advisers to go around. We therefore have a responsibility as an industry to construct solutions for the currently un-serviced segments.

Some advisers, in the right circumstances, may recommend simple products to their clients. However they will still also have the existing comprehensive products with various options and add-ons which they sell now. The advent and specification of simple products will actually help advisers differentiate both themselves and the advice they give in a way that isn’t as obvious or as easy today.

Simple products by themselves won’t change much – but you have to start somewhere. The other parts of the improved engagement jigsaw also have to be delivered including – increased consumer awareness through improved visibility (activity and marks) and the use of social norms to appeal to human heuristics. All would be delivered by trusted messengers including – but not limited to – what I will call new-MAS.

If and when the pieces can be clipped together, everyone will benefit. The state and customers will gain because of improved individual resilience in the face of adversity. Providers will be better off because they will have new customers and advisers as a result of an improved general level of consumer awareness, many of whom with their raised awareness will be likely to follow the signposts to advice.

The simple products initiative as it relates to protection was not led by “theorising bureaucrats” as the referenced author suggests, rather by experienced distributors and providers – all successful, active market participants. Maybe I ask too much but I think as an industry we would make more progress if some curtailed their instinct towards sniping and NIMBYism and worked constructively to ensure the advice and non-advice regimes compliment rather than compete head on with each other.

Finally, I guess you can accept change, embrace it, challenge it as a part of it and try to make the outcome as good as possible under the circumstances. Or you can take the easier roles of ostrich or critic. It is for each of us to decide what our contribution is going to be – something or nothing.

Richard Verdin is UK protection director at Aviva

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Comments

There are 7 comments at the moment, we would love to hear your opinion too.

  1. Martin McNamara 28th August 2012 at 2:04 pm

    on a defensive “Mc or Mac ” note interested Mr Verdin, what’s your take on how the two Prefixes differ?!
    As you can see I have an interest.
    Upon the note of not all products need to be advised, forgive me but even “born again” Insurance companies need to be careful what they say, as they will no doubt be hung by those words.
    I fear a past reliance upon the good Burghers of the insurance/banking world has some what sour taste.. I am not sure the future will be any different
    M McNamara

  2. Does this man think IFAs and their clients are simple? That their needs are simple? That purchasing a product without advice is always simple?

    I’ve seen what happens when someone bought a single life policy instead of death of another, no trust. The mess was far from simple.

  3. As the perpetrator of the ‘Macprosucts’ slogan I will merely conjecture that the problem afflicting the consumer is an unwillingness to engage.

    Stakeholder provided that making them cheap and marketing them as ‘simple’ is not sufficient.

    If they are sold then the sellers will surely want to sell better products.

    This then leaves them to be bought or delivered by bucket shops.

    Perhaps the term selling ’em by the bucketload will take off.

  4. So if we should embrace “simple Products” and sell those, why do we have to have to go through the indignity of obtaining level 4 and above in order to be allowed to continue trading post 2012?

    Simple products have been proved to be ineffective in growing wealth, protecting consumers from the financial consequences of premature death, critical illness or long term incapacity, time and time again. Stakeholder is a perfect example of a simple product which is as much us as a chocolate fireguard.

    Wht incentive does an IFA have to sell “simple products” when there is no fiscal reward for their business in the form of commission post 2012.

    By extolling the virtues of simple products, surely this defeats the objective of becoming better qualified and more professional financial planners, when these products eventually come about.

    If we give advice it costs money, if we sell product without advice, the FSA pounces on us.

    Those who put this stuff about only have their own interests at heart, not the consumers.

  5. “There are significant segments of the population which advisers do not or cannot reach, probably because there simply aren’t enough advisers to go around. We therefore have a responsibility as an industry to construct solutions for the currently un-serviced segments”
    NO WE do not!
    Personally, my responsibility is to MY clients-the ones who pay me to work for them. My other responsibilities lie in taking care of my family. If there are not enough advisers to go round who is to blame for that?

  6. There is no blame to be apportioned to the lack of advisers the real problem lies with the lack of real advice. When a reccomendation is made on two year clawback or that a company simply offers more conditions than their peers this is not real advice this is the easy option.
    More work needs doing about the awarness of protection and the need for protection and I have said it before this should have government involvment. Simplified products are just a vehicle If there are more clients than advisers then whats the issue

  7. Well said Richard. For goodness sake, why does it seem that knocking new initiatives is the smart thing to do! No one said advice is not valuable – just that the vast majority of people (over 50% at the last count) have no form of protection whatsoever and we need to do something about that fact. This initiative is about addressing the huge ‘protection gap’ of several trillion (goodness knows how many zeros) – and that has to be a valuable vision.

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