Marc Fabris will write a regular commentary in Riskinfo Magazine shining light on issues impacting financial advisers. His first topic is the appropriate role of risk product research in the advice process. While research can help advisers, solely relying on research scores without understanding the methodology can disadvantage clients. Advisers should consider a client's specific needs and circumstances, as well as features of individual products, when making recommendations rather than basing decisions only on research scores. Using research appropriately alongside other factors helps ensure advice is suitable and complies with regulatory obligations.

1. www.riskinfo.com .au • S ec t i o n
Under the Spotlight
In the first of what will be a regular series of brief commentaries
in riskinfo Magazine, well-known Zurich identity, Marc Fabris, will
shine a light on the many issues that impact advisers in the course of
their business. The first topic under Marc’s spotlight is the role that
risk product research plays, or should play, in the advice process...
There’s a famous old saying about
marketers wrongly using research like
an adviser –
–
Service levels
Claims reputation
a drunk uses a lamppost - for support
rather than illumination. Similarly,
placing too – Research ratings and in particular
much weighting
(which seems most often missed)
risk researchers have copped a bit of
flack over the years for driving product – Specific product features, options,
development and, to a degree, adviser on scores from availability or pricing which are
particularly relevant for the client
behaviour.
But is this fair?
a risk research in question.
Is it possible that we have lost our way system without
a little, allowing ONE of the important
tools (research) within the advice understanding the
process to be THE key determinant for
a recommendation?
methodology for
It’s interesting to note that the arriving at that
researchers themselves don’t seem
to condone the use of their systems score, is doing
as a sole vehicle for determining
recommendations. Both IRESS and
their client a
Canstar Cannex appear to agree, that
an adviser placing too much weighting
disservice
on scores from a risk research
So a rating may rank a particular
system without understanding the
policy more highly, but may be based
methodology for arriving at that score,
on features that aren’t included in a
is doing their client a disservice.
recommendation, or may be included
So is it the systems that are an issue, or but are not relevant for that client.
the way the research is used? Making recommendations based on the
research score alone does not ensure
RG 175 Section 109 states “ the
suitability or appropriateness.
law imposes a specific obligation
on providing entities to give I get to see many SoA’s, and the basis
due consideration to the client’s for each recommendation varies
circumstances and the subject matter of significantly. To my mind the strongest – Adviser Quotes –
the advice, and to ensure that the advice basis for a recommendation will outline
is appropriate”. the broad reasons for the product and “The stock market is where
provider being recommended, which money makes money. Life
Section 110 goes on to say “personal
may include: insurance creates money where
advice does not need to be ideal, perfect
none existed before.”
or best, but it must satisfy each of the
three elements set out in RG 175.106”.
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NOVEMBER 2010 - R ISKINFO MAGAZ INE 43