What’s wrong with risk research?

There are some things wrong with risk researchers, according to respondents toMoney Management’sRating the Risk Raters Survey, but they are also getting some things right.

On the plus side, respondents agreed many of the research tools available to advisers provide them with a calculated analysis of the products available. This not only helps the adviser find the right product for the client, but it also helps in the client relationship — the adviser is able to physically demonstrate the selection process to the client and this helps the client understand how and why a particular product has been chosen.

One survey respondent said he was keen on the role research had to play in the life industry, he liked research tools and felt they encouraged professionalism. But on the downside, there were many criticisms levelled at the risk researchers.

One respondent commented that “the research software houses do not provide a clear distinction or meaningful evaluation of the products in the marketplace”, while another complained that many systems have either low or no ranking for factors other than product and price.

“The systems don’t provide for other factors such as service and company strength. Advisers are interested in a lot more than product and price. They want back-up and BDM support because if they can’t get business on the books, they don’t want to deal with that life company.”

This respondent argued that researchers could show some initiative by developing systems that look at the other factors that are important to advisers.

“Researchers could be innovative themselves — and then they would find that they’re putting pressure on life companies to actually help advisers with what matters most, which is the new business process,” he said.

Respondents felt that research tools do not, and possibly cannot, cater to individual client needs but, according to one respondent, the research process itself detracts from the key issues, which are building relationships, uncovering needs and determining the best approach to selling the right policy for the right amount of cover to the client.

“We’re in a market where we’re trying to get more people to sell risk but we’re not making it easy,” he said. “The differences between the top products in the market aren’t much these days and coming down to the nth degree in comparison, as we do, detracts from the key important areas.”

This respondent felt the researchers could do more to help advisers to sell risk but recognised that the life companies also have a role to play in this area.

Research tools are, however, merely that — tools. They cannot provide answers, they can only offer suggestions and one respondent was critical of those advisers who rely too much on them.

“Life research tools can be too much of a crutch,” he said, adding that many advisers do not understand the shortcomings of the tools and need to look behind the ranking a researcher gives a product to ascertain whether or not that product is in fact the best product for a particular client.

It is about understanding the weightings of the ratings behind the research, he said.

“In the case of one researcher, when you go to look at the weightings of the ratings, total disablement and partial disablement definitions, for example, total six out of the potential 41 — that’s about 15 per cent. If someone doesn’t have partial, that means they automatically ‘lose’ 3 out of 41 or 7 per cent.”

For a client who needs partial disablement, this is important — they do not want a product that doesn’t offer partial disablement cover. But for a client who doesn’t need partial disablement cover, a lower ranking product might actually be the better product for them.

“I don’t think researchers do enough about telling advisers about shortcomings like that,” the respondent said. “When I’ve had dialogue with advisers, it’s not obvious that they’re very well educated on research.”

Another respondent criticised dealerships, saying they were “likely to use the minimum criteria from research houses as the basic requirement on whether a specific product can be recommended by an adviser”.

Researchers were criticised by one respondent for not supporting innovation.

“We brought out three or four new options and we had one researcher say, ‘Sorry, I can’t introduce your options on our system until another two life companies have it’.”

Another respondent said the influence of research houses under the financial services reform regime will only increase, so researchers “need to have more accurate data behind their rating criteria”.

Financial services reform came in for some criticism from another respondent who said it has resulted in both research companies and life companies putting far too much emphasis on helping advisers to comply and not enough into helping them to sell.