Playboy’s role in NZ Financial Services Industry

The NZ Herald carried a headline on Sunday revealing – shock horror – that salespeople in the insurance industry are incentivised to deal with certain product providers by the provision of overseas trips! Now, this may not come as a complete surprise to some of you, and the Laird’s colleague Russell Hutchison (a Sassenach by birth but, like the Laird, a passport-carrying NZer now) eloquently summed up the quality of the article on his website - http://www.chatswood.co.nz/. Russell displays a high level clarity of thought on the issue that should leave the hapless Herald hack gasping in embarrassment.

However, I have a suspicion that ‘clarity’ to this fellow is probably a description of red wine.

True, there’s a sad lack of real investigative journalism around these days, and this particular contribution to the Fourth Estate hasn't helped in the slightest.

The issue however could stand some more serious scrutiny and discussion, so let’s see if we can address some of the aspects - without attempting to sensationalise the matter (but see photograph!!)

Apart from the obvious attractions (for the blokes at least)

the life insurance advisers visiting the Playboy mansion should find out how Hugh Hefner has managed to lift the US mortality experience all on his octogenarian ownsome while residing in a mansion resplendent with such potentially life-threatening temptations.

I’m tempted here to digress and recount the late great George Burns’ tale of wishing to date a 25 –year old blonde. When asked if the age factor caused him any concern, he replied “If she dies, she dies”.

Overseas incentive trips for life insurance advisers, agents, brokers, consultants have been a part of the industry scene for many years, here and overseas.

The concept is a vestige from the era of the large tied agencies operated in Australia and New Zealand by the likes of Colonial Mutual, AMP, National Mutual and a host of others too numerous to mention. Sovereign followed suit in 1990 and, like most of the competitors that are left standing, continues with the practice.

I suspect everyone in the industry has a view on these trips –positive or negative – and the Laird is no different.

While at AIA in NZ, overseas trips didn’t figure in the strategy. Mainly out of choice, but partly out of necessity as there simply was no budget available as the organisation struggled to gain traction. But even when there was some momentum gained, the value extracted by an overseas incentive trip was hard to measure. Given the financial and capital constraints, the growth rate achieved was calling on plenty capital, without adding more support demands – and more expense allocation.

So the independent advisers that AIA had relationships with in those days didn’t expect a trip from us, and, if that’s what they were looking for, some other organisation would be preferred.

Personally, I didn’t lose any sleep about advisers who placed business purely for the travel incentive.

As an adviser in the UK, these trips were frowned on by the independent sector and grabbed eagerly by the tied agents. In truth, the rejection of these incentives created a distinguishing feature which was presented to each and every client who was tempted to deal with a tied agent.

But in truth, the impact on the consumers’ decision-making process of taking such incentives on board is pretty minimal.

Let’s see how long the indignant storm of protest lasts which has been ignited by the Herald’s article - perhaps we have a NZ life insurance buyers Spring in the offing!

Somehow, I doubt it.

And there are advisers who genuinely follow what they believe to be best advice for their clients and are happy to accept the overseas trip as a reward. I know plenty advisers in this category and can confirm that their clients are not given sub-standard advice in exchange for a visit to Outer Space, the Playboy Mansion, or any other exotic location.

And other industries use these incentives don’t they? Why, I’ve even seen travel journalists disclosing at the end of some random travelogue that they were flown/entertained/provided hospitality by airline X or hotel group Y – so what’s the difference? Most sensible advisers don’t have a problem about declaring to clients the compensation involved in developing a mutually useful relationship.

On the other hand, the cost is contained in the premiums charged to policyholders – just like every other expense incurred in transacting life business, and try taking the trips away from some of the long-term qualifiers and you’ll have a decent scrap on your hands! And take 100 advisers to the good ol’ US of A for 5 days, with flights and accommodation then you can kiss the best part of $0.5m goodbye - not chump change by anyone’s measure.

Also, my old mate from Australia, J.P. Thomas, has tales aplenty of outrageous behaviour on such trips from advisers, spouses, girl-friends, boy-friends, and others – ranging from fights to fornication, and other indescribable practices too rich for this piece.

So there are arguments for and against the incentives, and much depends on the individual adviser’s attitude to such offers.

Product providers probably wish they could dispense with the rewards without losing any business, but that  - in an extremely tight and competitive market – is a bridge to far for some CEO’s.

And if that bridge happens to be over the rivers and canals in Venice, Vietnam, or Valencia – so be it.

For now, they’re an embedded part of the industry’s marketing and distribution strategy, and no amount of huffing and puffing from poorly researched newspaper articles will change that.

Now, if the regulator takes a dim view of these incentives, that’s a different story...........

Slàinte mhath

The Laird (at home in Albany)