TMM - The NZ Mortgage Mag Issue 3 2020

Page 32

COLUMNS • INSURANCE

“Could my recommendation result in less than ideal outcomes for my client?”

Insurance adviser conduct obligations: part III Steve Wright explores what it means to act with integrity and give priority to client’s interests, and how to ensure this is part of your everyday advice practice. BY STEVE WRIGHT

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s life and health insurance advisers, we are required to act with integrity (Code Standard 2) and give priority to client’s interests (Section 431K of the FMC Act). These requirements will be satisfied naturally when doing what is right for our client in many instances but, in some cases, careful consideration may be required. Good conduct is not “file and forget” and the various conduct obligations must be top of mind all the time. Reducing the opportunity for getting conduct obligations wrong and introducing repeatable processes to ensure consistency of good conduct, makes good sense on many levels.

Acting with integrity Dictionary definitions of “integrity” focus on honesty, moral principles and doing what’s right, for instance: ‘… doing the right thing in a reliable way’, and ‘… being honest and strong about what you believe to be right ’. C S Lewis said: “Integrity means doing the right thing even when no one else is watching.” It also means doing the right thing when there is pressure to do something else (a conflict of interest). Acting with integrity towards clients requires many things from us, for example, we must: •

have the knowledge and skills to perform our duties properly

• identify and understand our own biases and set them aside, unless they are entirely, and objectively, reasonable and appropriate in the circumstances • practice “direct honesty” and be fair and objective

“Integrity means doing the right thing even when no one else is watching.” _ C S Lewis 032

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regularly self-reflect on what we do and how we do it. A peer review of knowledge, opinions, practices and recommendations allows for continuous improvement

• act with compassion, patience and respect, and not spread misinformation or rumour

• take responsibility for our own education and ensure we get the skills and knowledge needed to do the job for a client and if you can’t or won’t, referring the client to someone who can help them. For advisers who can advise on many different providers’ products, acting with integrity means acting impartially: recommending the most appropriate provider and solution for the client objectively and without prejudice and not the one that suits the adviser for whatever reason. Acting with integrity may be inconvenient and require change. It may require more training, changes to the way we do things, maybe even changes to things we may have done for years. It may even be commercially detrimental in the short term and so for all these reasons, any change needed will need persistence, action and discipline. Sometimes, integrity will require that we decline to act for a client.

Giving priority to client’s interests To give priority to client’s interests means advisers must put their client’s interests above their own and avoid or manage conflicts of interest. Code Standards 1 and 2 (treat clients fairly and act with integrity) probably make this a general conduct duty and not limited only to the giving of financial advice as defined. The FMC Act specifically requires advisers, when giving advice, to take all reasonable steps to ensure that the advice is not materially influenced by the adviser’s interest or anyone else connected with giving advice, such as the adviser’s FAP. For example, giving priority to client’s interests means: • not recommending a product the client doesn’t need • not recommending a provider solely because they pay higher commission or provide any other adviser benefit or benefit to the adviser’s FAP


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