Insurance is a specialised area and there are expert ways to offer the safety net.
If insurance isn’t your specialisation, beginning a conversation about your client’s needs can be daunting.
Many advisers agree that they feel nervous too, fearful of any questions that may be asked for which they don’t have the answer. What’s more, they want to avoid making the impression that they are trying to ‘upsell’ their client into another product area.
Firstly, you shouldn’t feel nervous because insurance is an important piece of the wealth management puzzle for most Australians.
Just as you would never expect a client to hold assets such as a house or a car without insuring them, it is just as important to ensure their ability to earn an income, pay down debts and provide for dependants.
Without insurance, the financial plans that you’ve put in place are unlikely to be adequately future-proofed for risks that may occur.
Hence it makes sense to introduce the subject as an important part of your financial advice.
So where should you begin a conversation, particularly when you may not be the adviser who will consider your client’s insurance needs, and need to refer them on to an insurance specialist? Questions rather than making statements, are useful tools when striking up a conversation – not only will you learn information, the client will be more engaged.
Consider what your own reaction would be if someone were to say to you, “Life and disability insurance is important to ensure you and your family are protected, in the event that something happens to you”.
Did you think about your own needs? Most people don’t; their natural response is instead to assess the validity of the question and whether they agree before applying it to themselves.
Contrast the previous statement with a question: “How long would your family be able to maintain their current lifestyle without your income?”
Did you think about it? In most cases our natural reaction is to try and answer questions, whereas with statements we assess their validity first, and consider whether they are accurate.
The other point about questions is that you haven’t taken a position, ie. you’re not trying to convince someone that what you are saying is right. Instead, you’re working through their needs and this makes it less confrontational.
So what are the questions to ask and where do they lead to? Dependent on the client and their circumstances, you’ll have different questions that can be posed. Below are some examples.
In this case we’re looking at protecting a household, and the family’s financial plans. Suggested questions could be: “What would you do if your income were to stop?” or “Do you have a plan for how you would cope financially with a major illness or injury?”
A less-forward approach is, “Have you reviewed your personal risk needs recently to ensure your cover is adequate and up to date?” or “Do you know the details of the insurance cover inside your superannuation?”
When it comes to business risk, you can often be more direct.
You may wish to ask, “Have you identified the key people in your business and the loss the business would suffer in the event one person suffered a sickness or injury?” or “What is your business succession plan should one of the owners need to exit the business?”
Furthermore, “Do you have an agreement that gives the surviving owners the right to buy and forces the exiting owner to sell? And is your agreement funded?”
Once you’ve uncovered your clients’ needs, don’t expect that you will have all of the answers.
Insurance is a specialised area and referring a client to an expert can be as simple as stating as much: “Risk management advice is specialised and I want to ensure you receive the best advice. Eleanor is our risk specialist. When would be a good time for you to come in and meet with her?”
As risk specialist advisers know, the right insurance cover can change an individual’s life.
Insurance is a social good, a safety net to catch us when we face terrible news. Broaching the subject with your client means you’re offering that safety net to them – and that can only be a good thing.
Katherine Ashby is senior product technical manager at BT Financial Group