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Financial Services
Monday, March 1, 2010
Pivotal role

The role of the financial intermediary is pivotal to our industry. He is the conduit between the insurance company and the customer and his role in facilitating the flow of information in both directions cannot be over-stated.

This flow of information will, by necessity, involve understanding customer needs and matching those to insurance company offerings. “But,” says Herman Botha, Broker Distribution Executive at Metropolitan, “the broader issue of financial education also needs due consideration. In many ways, it is like the proverb of teaching a man how to fish rather than merely giving him fish that makes the difference to his long term survival.”
When a financial intermediary meets a client and conducts an initial Confidential Client Needs Analysis (CCNA), the customer’s current and future financial needs and circumstances are assessed so that a relevant, tailored portfolio can be structured. This process is crucial, but does not necessarily fulfil the broader, macro need to educate customers. “We need our intermediaries to step into this role and help everyday South Africans to take responsibility for their own financial health and well-being,” he explains.
Lack of financial education is the root of many of the scourges of our industry. Lapses are one prime example. “A factor that has a huge influence on the decision to lapse a policy, particularly at the lower LSM, is the level of financial literacy of the customer,” says Botha. “It is not just a case of the client’s knowledge of the value of insurance and the financial products; it is also about the customer’s ability to manage his/her own finances, the issue of affordability, and the customer’s sophistication in terms of utilising banks and banking services.”
The healthcare industry has seen a tremendous shift towards holistic health management, for example, with people taking personal responsibility for their health and well-being. This concept now needs to be applied in the area of personal finance.
For many South Africans, financial terms can be confusing and the personal finance arena can seem daunting. Intermediaries can help enormously by explaining basic financial terms and concepts and taking the time to answer customer questions. For many, the difference between order and chaos may be as simple as drawing up a monthly budget, consolidating debt and making an effort to commit to regular savings, however small. With some advice and long-term planning and investment, these small changes could make a big difference.
“Although every customer is an individual and therefore has a different level of sophistication, there is almost always room for improvement,” adds Botha. “There are steps which each South African can take to streamline and improve their own long-term financial prospects.” The starting point is a mindset change and the cumulative effect of individuals taking charge of their financial health will eventually have a far-reaching and positive impact on our country’s economic stability. I cannot stress enough the importance of the intermediary as the facilitator in this process.
 

Copyright © Insurance Times and Investments® Vol:23.3 1st March, 2010
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