Take a client through the product documents, costs and conflicts well enough that they could explain them to someone else.
A familiar way for disclosure to go wrong: the representative hands over a thick folder, points to the signature boxes and says it is all standard and the client can read it later. The client signs. On paper, everything has been disclosed. In practice, the client does not know what is in the folder.
Documents are part of the advice, so go through them with the client instead of handing them over. You do not need to read every page aloud. Take the client to the pages that matter and explain them.
Start with your firm's process. It sets out which documents must be given and when, and you follow it. For a life policy, the product summary and the benefit illustration are usually the core documents. The firm and the insurer may also require others, for example a guide to buying that type of product.
Lesson 2.3, Clear, relevant and timely information, covered sending documents early enough for the client to read them. That is the first half of the job. Walking through them in the meeting is the second half.
In the meeting, open the core documents together. Within them, pick out the parts that answer the client's real questions and show the client where each one is, so they can find it again later. Done properly, the client leaves knowing where the important parts are. A folder handed over without that walk-through usually goes into a drawer unread.
Whatever the product, a client should be able to tell you four things before buying: what they pay, what they get, what is not covered, and what it costs to stop early.
What they pay means the premium, how often it is paid, for how long, and whether it can change. If premiums can be revised, say so and explain in plain words what that means for them. For investment-linked policies, explain the charges that come out of the policy as well as the premium going in.
What they get means the benefit described in the situation it is meant for. Use the client's names and situation instead of the brochure's generic family. With a couple such as Hafiz and Nadia (an invented example), that sounds like: "If Hafiz dies before the policy ends, the insurer pays this amount."
What is not covered means the main exclusions and waiting periods, plus any condition you know about from the fact-find that might be affected. This is the part most often skipped and most often behind a later complaint, so give it proper time.
What it costs to stop early means explaining what happens if the client stops paying or cancels at different points, such as year one, year three and year five. For a policy with a cash value, use the illustration to show how the surrender value, the cash returned when the policy is stopped, compares with the total premiums paid in the early years. For pure protection, explain that there is usually nothing back if the client stops, and that this is how that type of cover works.
Wei Ling, a representative, uses the four things as headings on a single page and fills it in during the meeting with Hafiz and Nadia, in their own words as far as possible. It takes ten minutes and saves a lot of explanation later.
Clients sometimes ask how you are paid. When they do, be open and follow your firm's disclosure process, which sets out what to disclose about pay and how. Most clients ask because they want to know whether you have a reason to recommend one thing over another, and a straight answer builds more trust than a vague one.
You may also have conflicts the client would not think to ask about, such as a campaign on a particular product or being close to a target. Lesson 2.4, Complaints, conflicts and the habits that cause them, covered how these can bend a recommendation. Apply one rule: if something about how you are paid could reasonably affect what you recommend, the client should not have to guess at it.
A signature on a disclosure form shows the client signed. It does not show they understood, and the only real check is asking. Ask open questions, ones that need an answer in the client's own words. You might ask what would happen if they stopped the policy in three years, one thing it does not cover that they would want to watch out for, or whether a premium rise next year would cause them a problem.
Avoid questions that invite a yes, such as "Is that clear?" or "Any questions?". Almost everyone answers yes, or no, out of politeness, and the answer tells you nothing about what they understood. If an answer is wrong or vague, explain that part again in a different way and ask again.
Write the client's final answers in your notes. When Wei Ling asks the early exit question, Nadia answers, "We'd get nothing back, because it's just cover." That answer goes straight into the file. A client's own-words answer recorded in the file is better evidence of disclosure than any signature.
Disclosure done this way takes time, but less than you might expect, and most of it goes on the four things. With practice, you can cover the costs, exclusions and early exit terms of a typical product in a few minutes of plain speech, leaving time for the client's questions. That plain-speech explanation is worth preparing in advance.
In the activity below, script your explanation of one product's costs, exclusions and early exit terms, short enough to deliver in under three minutes without reading from the brochure.
Pick one product and write out how you would explain its costs, exclusions and early exit terms in plain words, in under three minutes.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).