“For too long financial needs analyses (FNAs) have calculated an amount that clients need to allocate to insurance and invest without taking affordability into account. If we want to make financial advice more accessible and achievable, FNAs must include affordability considerations.”
1Life CEO, Laurence Hillman, is passionate about making financial advice accessible to more South Africans. This starts with an FNA that’s quick and easy to complete and takes affordability into consideration as well as a client’s life stage.
How do industry FNA’s measure up?
Technology has made FNAs a lot easier to complete because no manual calculations are required, but they still have a few drawbacks. They tend to either focus on only one aspect of personal finance – insurance or investments, and the recommendation of how much to spend on insurance or to invest ignores how much a client can afford.
This means that financial advisers have to spend time manually adjusting the FNAs output to find an affordable amount and to make sure clients have adequate insurance and investment savings for their life stage.
There’s another drawback in many FNAs – they ask a lot of questions. For advisers this means spending time with a client completing an FNA and following this up with a discussion on the outcome of the FNA. In addition, the client needed to sign, in person, the Record of Advice, acknowledging they understood the outcome of the FNA and accompanying financial advice. A time-consuming exercise we believe can be shortened.
We can do better: 1Life’s FNA
1Plan, a revolutionary FNA, supports the financial adviser through the advice-giving process. There are only five questions a client needs to complete. 1Plan then uses these answers and big data to come up with an affordable monthly number. No tweaking or adjusting required. Based on the client’s life stage, 1Plan will calculate how much of that affordable monthly number should be spent on risk products and how much on investing.
“Other FNAs tell you how much you need. Ours tells you what you can you do with what you have,” says Laurence.
1Plan is quick and easy and uncomplicated. It calculates a number that’s realistic, so clients can be confident their goals are achievable.
Are five questions enough?
Yes. Well-designed FNAs aren’t lengthy and they don’t ask too many personal questions. “We looked at what we learnt on our digital journey in our direct distribution channel and used the innovations achieved there as well as insights from economic research and big data to design an FNA for financial advisers that’s simple yet sophisticated, comprehensive and compliant,” says Laurence.
How does 1Plan work?
1Plan is available to financial advisers on 1Life Vantage, 1Life’s financial adviser digital solution. Advisers log in, capture client details such as name and ID number, and complete the FNA with the client in real time.
1Plan then calculates an appropriate, affordable monthly amount that’s allocated towards insurance and investments.
This allocation takes a clients’ life stage into account. For example, a client with two toddler children will have a higher allocation towards life and disability insurance than an older client with children in matric.
“Although the number is an affordable recommendation, it isn’t cast in stone,” says Kobus Wentzel, 1Life’s head of distribution. “Financial advisers know their clients personally and can adjust the number if they need to. “
1Plan also makes annual reviews a lot less complicated and repetitive as clients can quickly review the five questions to see if their circumstances and life stage have changed and their financial products still meet their needs.