The complicated world of insurance, and how to pick a broker to best serve your needs.

Interview with
Mike Lay
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The complicated world of insurance, and how to pick a broker to best serve your needs.

 

In today’s episode of, From Chaos to Control by The Project Guys, Craig interviews Mike Lay, owner of Foresight Financial Planning.  This particular episode is interesting because it gives the listeners a peek of financial planning.  Mike brings over thirty years of experience in Financial Planning firstly in the U.K, and the last 11 years in New Zealand.

 

What makes Foresight Financial Planning different from the big insurance companies is that they offer personalized advice to clients on their personal insurance needs.  They insure people, not assets. 

 

Insurance is important because mitigates the risk to your business and family.  If something goes wrong, it’s something you wish you had.  Insurance covers certain scenarios if something doesn’t go on as planned.  “It’s not about telling people what they do.  It’s about providing them with information and assistance so they know where they’re potentially at risk or where their business is at risk”

 

A question Mike frequently gets is, “What should I do?  What’s the average?”  Mike doesn’t believe that there is anything in business that you can say is the average.  If the business has debt, it’s important to insure that if anything happened to you, your fellow directors, or people who rely on the business, that there will be money available to get them through that.  It’s having a backup in case of illness or death.  If you have a backup plan, you will be able to maybe bring somebody in to run the business in your absence or at the very least, you can get rid of debt and have a business continuity plan in place.

 

Not all brokers and advisors are the same.  One of the key differences is the agreements that the brokers have in place with the actual insurance companies. Some brokerage firms have access to the whole market in New Zealand while others financial agreements in place to work with just one or two different insurance companies.  This can obviously determine and dictate which policy ends up getting sold to the client.

 

Likewise there are two different types of governing rules and qualifications that brokers and people giving advice have the option of working under.  They can be either an Authorised Financial Advisor (AFA) or a Registered Financial Advisor (RFA).  The difference is that and AFA is governed to actually be allowed to offer financial advice, whereas a RFA is only allowed to sell a certain product.

 

What you need to look for in a broker is finding the right person for you who suits the way you work.  It has to be somebody you trust.  According to Mike, trusting your gut is his first rule.  You also have to ensure the quality of advice that you’re getting.  You need to be talking to someone who can provide you with advise that’s relevant to you.  You don’t want to work with people who are limited to one or two companies only.  That person has to have access to the whole insurance market.  You have to make sure the advisor or broker you’re dealing with has the right professional qualifications.

 

Being a small business owner has its upside.  Mike is able to truly work with his clients and give them very personalized service because he knows his clients well.  He regularly interacts with them through his newsletters and the social media, among others.  He maintains focus on giving added value to his clients.  As its downside, he believes that the playing field in the financial advisory industry is not leveled. 

 

The downside to being a small-business owner and an authorized financial advisor is that banks don’t have to adhere to the same rules and government regulations that he does. 

 

What the big companies don’t want you to know is that they are selling you insurance products that may not be a perfect match with your needs.  When you make a claim, it might get thrown out for some specific reason because something wasn’t mentioned.  When you buy something over a counter at the bank, you actually can’t be sure what you’re buying.  In Mike’s experience, he even saw the small print of one of the big four banks that said a claim won’t be paid if it’s in relation to any terrorist event or war-related activity.  If you happen to be on holiday and get killed because of a terrorist event, the insurance won’t pay out. 

 

To manage this risk if you choose to deal with the bigger companies, you need to read the fine print.  Or better yet, you can have a qualified professional do it for you. 

 

A benefit of working with a firm like Foresight Financial Planning is that you get more personalized service.  If you ever had to claim anything from the insurance companies, Mike will hold your hand through the process.  He also works with lawyers and accountants to make sure his recommendations don’t interfere with their advice.  His interest is in developing long-term relationships with his clients. 

 

QUICK FIRE ROUND:

 

Best Marketing Tip: 

 

Do something.  There are businesses that don’t have any web presence.  As a new generation of youngsters who do mostly everything on the internet, come through, in the future, it’s very important to engage with them as early as now.

 

Best Operations Tip:

 

Use a system called “Twenty Points to Success.”  It’s about setting goals each day in order to grow your business.  Mike has been using it for about ten years now.  He makes sure his role in growing the business continues and that he doesn’t get sidetracked just doing stuff that’s not going to add to profitability or increase his business.  That helped him get some clarity to ensure he was doing the right thing to make his business better. 

 

Best Insurance Tip:

 

Regularly review your situation.  Get out of that mindset that if they review their insurances, they have to spend more.  Circumstances change, children grow up, and business situations change.  An ideal time frame would be to do so every one to two years.  That way, you are able to make adjustments based on what’s different in your life.

 

For personalized financial advice, you may contact Mike Lay through Facebook, Linkedin, or his website at www.foresightfinancial.co.nz  

 

THE GOOD, THE BAD, AND THE UGLY OF INSURANCE:  INTERVIEW WITH MIKE LAY

 

In today’s episodes of From Control to Chaos, Craig of the Project Guys interviews Mike Lay, owner of Foresight Financial Planning.

 

Tell me a little bit about your background, who you are, and how you ended up doing what you do today.

 

Okay, so I’ve been in financial planning for over thirty years now.  Lucky enough, the last eleven years have been based here in New Zealand, following immigration from the U.K.  So, I’ve got a strong background of working with various insurance companies through the years.  I’ve held a couple of different management roles including being a high network manager for a large pension transfer company in the U.K. and now, obviously, I’ve got my own business here in New Plymouth, also for financial planning.

 

What services do you offer at Foresight Financial Planning?

 

We basically provide personalised advice to clients on their personal insurance needs.  That encompasses the straightforward stuff like life insurance, critical illness, disability insurance, income protection, health insurance…So we basically insure people but not assets.  So for example, we don’t do business insurance.  We don’t insure homes or cars.  We concentrate on dealing with the people.  Basically, anything to do with the person or the people, we insure.

 

Why is insurance so important?

 

I think the whole criteria of having insurance is a bit like a power board on the computer.  It’s there behind the scenes.  If something goes wrong, it’s something that you wish you had.  So, I think that insurance is very important, whether it’s for a family situation or a business situation because realistically, it does cover a certain scenario if something doesn’t go to play.  And that’s basically what we’re here for.  Our business isn’t about telling people what they must do or what they should do but it’s about giving them information and help so that they can make more informed decisions themselves as to perhaps, you know, where they’re potentially at risk or where their business is at risk and then we look at the options, if they can alleviate that. 

  

I’m in business and have a partner, or I’m in business with my wife.  What should I be insuring myself against and why?

 

Yeah, I mean, it’s always hard and certainly in our industry, one of the questions I get asked a lot is, “What should I do?  What’s the average?”  I actually don’t believe there is anything in business that you can say is the average but to give you an example, if you’re in business, perhaps the business carries debt, so it’s important to insure that if anything happened to you or your fellow directors or the people that you rely on in the business, that in the event of something like death or critical illness, that there’s a lumps…that there’s basically money available to come into the business to get them through that.

 

I think it’s important from a business point-of-view to have a look at, perhaps, what’s your backup plan if something goes wrong?  If you die, does it mean because you haven’t gotten insurance in place, that you found that there is a chance that you’re going to potentially lose the house.  What’s the implication if maybe you don’t die, but an accident or even an illness means that you’re no longer able to work in the business?  You know, if you don’t have a backup plan, potentially, you might find yourself having to sell the business in a fire sale, whereas you know, if you’ve got the right coverage in place, you can maybe bring someone in to run the business in your absence or at least to get rid of debt or make sure that the business continues.

 

Brokers are trusted advisers, just as important as accountants and your lawyer.  What sorts of things should they be asking?  What should they look for in a broker?

 

I think the first thing to look at or to understand is that not all brokers and advisers are the same.  For example, I’m an Authorised Financial Advisor.  So that means, that I can provide insurance and investment planning advice.  So, I would always say the first thing that’s really important looking at a broker, is finding the right person for you that suits the way that you work.  Someone that you trust.  And trust your gut.  That’s the first rule for me.  I think also, one of the big things to ensure is the quality of advice that you’re getting because there are a lot of brokers out there that perhaps have got financial agreements in place to work with only one or two different insurance companies.  So it’s important that you deal with someone that has access to the whole market in New Zealand.  That someone who can actually provide you with advise that’s relevant to you rather than the advisor.  That’s also the same when it comes to the likes of banks because as you can imagine, the banks are always recommending their own products.  But that may not necessarily be in your best interests.  So, yeah, I think in reality, it’s making sure that you’ve got someone with the right professional qualifications and someone that you know has access to the whole insurance market for investment.

  

What do you enjoy the most about being in business?  And likewise, what do you enjoy the most about your industry?

 

I think the thing that I enjoy the most is the interaction with the clients.  Nothing is ever the same.  There’s no one size fits all.  So I think the biggest thing I enjoy is the interaction with the clients and helping them to find the right solution for their insurance needs.  We’re only a small team as you know this.  And myself and my wife, and we’ve got Guinness the dog who’s an important part of our business.  But apart from that, we are a small family owned business.  So, we’re not looking at being the biggest.  We’ve got no interest in being the biggest but we want to focus on giving the clients good quality advice.  So for us, it’s all about people.

 

I think the beauty about what we offer is it’s very, very personalised, so we know our clients well.  We know their families.  We know their situation.  So we’re not a corporation.  If the client finds out there’s only two people in the business, that they speak to.  I accept that if you’re part of a bigger organization, they’ll have a different view on how it works but for our own situation, it works well and we have regular interaction with our clients, with our newsletters, and social media, or what have you.  So, it’s all about giving that added value back to our client.

 

So what frustrates you about your industry?

 

I guess the thing that frustrates me the most is probably the compliance aspects of it.  I think there’s an awful lot of necessary compliance.  I do believe in compliance.  I do believe it’s important that people are adequately protected.  Equally, I think that the regulations are in place don’t always necessarily achieve what they were supposed to do, which is make things safe for the clients.  I think there are still a lot of rogues out there.  I think one of the biggest frustrations we have is that there doesn’t appear to be a level playing field between the different types of advisor.  So as an authorised advisor, I have to abide by a code of ethics.  I’m directly responsible for the advice that I give, for the actions that I take compared to, for example, somewhere like the banks that tend to self-regulate and don’t have to really act in the client’s best interest.  So, that frustrates me.  I think there was a level playing field and we were all treated the same, then that’s something that I think would benefit everyone.

 

Where do you see your industry going in the next five to ten years?  Every other industry’s changing and there’s also a trend?

 

Undoubtedly so.  I mean, there’s been a lot of financial crossover the last few months about financial advisers, about the earnings, the commissions, that advisers received.  I think that’s a very one-sided argument.  We earn commissions on the advice that we give on our insurance products and we’re happy to do so.  Equally, if a client wanted us to work on a fee-basis for them tomorrow, we have a fee-structure in place for our clients.  I think the thing is that we are in one of the industries that unless you’re in one of the big cities like Wellington or Auckland and you’re on a fairly phenomenal salary, people don’t want to actually see me for their insurance needs and they don’t want to be presented a bill to pay a few hundred dollars yet a lot of the regulators and the financial bodies are saying the commission should be outlawed and everyone should work on a fee.  But I don’t think it suits everyone.  So, if the regulators ended up going down that route, then what’s the…where do people then go to get quality advice?

 

I think the direct route is going to grow, especially with the new generation coming through.  Equally, I think if you buy something more direct and you’re choosing what you buy, you are effectively making that decision yourself and then very much comes a “buyer beware” situation.  So, I think that will probably happen to some degree.  If it does, there will also be a negative side to it further down the line when maybe someone goes to make a claim direct on an insurance product and the claim gets thrown out for some specific reason or because something wasn’t mentioned.  So, maybe it’s because I’m old and I’ve been in this industry a long time.  But I always advocate face-to-face advice and that’s how you build up a relationship and with us, we truly value that level of advice and then with our clients, for example, if something goes wrong and they need me to make a claim, they’re not doing that on their own.  They contact us, we deal with the whole claims process all the way through.  So, yeah, in answer to your question, I think when you buy direct or you may go buy something over the counter at the bank, you actually can’t be sure what you’re buying. 

 

Wasn’t there a sign in your industry that said, “we put the proof in the pudding.”

 

Absolutely right.  I think it is.  I saw one of the big four banks on their life insurance in the small print, actually says that a claim won’t be paid in relation to any terrorist event or war-related activity.  So, you would imagine, if someone take out life insurance with a bank, happens to go abroad on holiday, like London, they get killed, then potentially, the insurance won’t pay out because it’s a terrorist activity.  So that’s the thing where it’s that buyer beware whereas if you actually get advice from a qualified individual who can do that research and make sure that sort of provision aren’t in your contract…

 

Absolutely and one of the big things we do which we also give clients a lot of advice around income protection and what have you.  As you know, ACC can be a minefield on their own.  So, we not only offer that advice free of charge but we also work with the clients or a business’ accountant or lawyer to ensure that anything that we do or any recommendations we make don’t interfere with anything that perhaps the accountant and lawyers advice.

  

You have to understand the big picture.

 

Absolutely and I think that’s really, really important and that’s the difference perhaps between an adviser who wants a good long-term client as opposed to someone who just wants to make an insurance sale and then you won’t hear from them again.

 

I think with anything like that, it’s important that you protect what’s important to you and if you get the right sort of advice, it doesn’t have to cost the earth.

 

QUICK FIRE ROUND:

 

Best Marketing Tip: 

 

Best marketing tip is to do something.  I see so many businesses out there that don’t do anything.  They still don’t have websites.  Still aren’t on social media, etc.  And as a new generation of youngsters come through and ultimately will end up starting their own businesses, in the future, I think it’s very, very important to engage with those people.

 

Best Operations Tip:

 

My best operations tip that I swear by is I use a system called “Twenty Points to Success,” which basically means that I have to make so many phone calls and client contacts each day in order to grow the business.  So I’ve been using that system now for probably round about ten years.  It makes sure that my role in growing the business continues and I don’t get sidetracked just doing stuff and ultimately something that’s not gonna add to the profitability and increase our business.  It’s something that I picked up along the way years ago and perhaps I picked it up at a time when I was busy but I wasn’t doing things that actually helped grow my business.  So that helped give me some clarity to ensure that I was doing the right thing just to make my business better.  And I’m still using it.  You’re busy being busy but you’re not actually doing anything.

 

Best Business Growth Tip:

 

Business growth tip is number one is see the people.  Number two is see the people and number three is see the people.

 

Best Insurance Tip:

 

Regularly review your situation.  Everyone thinks that if they review insurances, there’s going to be a knock on their door and they’re gonna spend more money but quite often, circumstances change, children grow up.  For example, business situations.

 

Yearly would be fantastic but let’s be honest.  With families, business, day-to-day life, it’s not going to happen.  Equally, I’ve come across people that don’t know what they’ve got in place having reviewed insurances for five to ten years perhaps even longer.  Ideally, every one to two years you should have a general review.  Look at what’s changed.  Look at what’s different and then you can make the necessary adjustments.

 

For personalized financial advise, you may contact Mike Lay through Facebook, Linkedin, or his website at www.foresightfinancial.co.nz

 

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