The Plan Audit meeting is the second step in our four-part series that makes up the CloudAdvisors Annual Advisory Model. If you haven’t read the overview you can go there now as well as the link to part 1, the governance review.
While many advisors will appreciate a plan audit, or evaluation, as a powerful process to earn new business and make an immediate impact with new clients we’re proposing that this should be a core practice with every client every year. This is the opportunity for advisors to approach every client relationship as if they were a new client. Clients rely on advisors to not only provide safety and security in their decisions but also as the appointed expert that every client places their trust in for the whole year. A broker who only meets with a client once a year is selling the renewal, likely only retaining a client. A trusted advisor, however, is engaging their clients over the long term, assisting them in solving problems, even before they occur. At CloudAdvisors we empower advisors and independent advice because we believe that employee benefits are vital to families. That is why the advisor's role is to provide advice, helping employers to navigate the decision-making process that will impact their people.
So what is the Plan Audit Meeting?
Following a successful governance meeting with a client, the advisor should have a fresh perspective and a better understanding of objectives and priorities. You can think of the governance meeting as problem hunting questions and the plan audit meeting like solution matching advice. The plan audit meeting is the advisors’ time to shine as it lays everything on the table: new insights, considerations, and recommendations. The most effective advice will come from insight, using all of the available information about a group, their people, market and industry. The purpose of advice is both to raise awareness of issues with considerations as well as ultimately deliver firm and actionable recommendations. Making recommendations to a client is the strongest statement an independent advisor can make to differentiate themselves all year. The plan audit process is the new standard Raising the BAR with employers. Let’s look at the process in detail:
Generating insights from the data.
Advisors have access to lots of information including plan design details, claims experience, financials, industry trends, legislative updates, and legal precedence. Understanding the interplay of all these factors and the possible impact for a client is where the expertise, experience, and access to resources are leveraged by the advisor. Modern advisors will utilize technology and services to efficiently analyze and benchmark data greatly aiding in uncovering new insights. Expert advisors will also use their experience and colleagues experience to spot risks, gaps in the plan, problems arising, as well as better fit solutions from the marketplace. Let’s look at a quick bullet point insight example:
Industry trend for private drug plan risk is rising, specifically high-cost specialty medication (>$10,000 per year).
Legal cases of discrimination have limited some employers reactive options
Recurring maintenance drug costs have greatly reduced the portability of plans from one insurer to another.
Groups with no drug maximum are at a greater risk for claims volatility
Groups with self-insured extended health care are the most exposed
It would be overwhelming for the advisor and client to discuss every insight that might be related to a particular group plan so priorities should now be developed into presentable considerations. Historically it’s been observed for some advisors, that generic considerations have lived in the form of one-pagers and bullet points tucked into the back of renewal reports in hopes of seeing 1-3 seconds of daylight during a crammed renewal meeting. In recent years this has pushed some renewal reports from 30 pages to over 100 pages in some cases, all in an effort to have everything documented for the client. This is one of many reasons why we propose the plan audit as a stand-alone process and meeting but also those generic considerations, if actually valuable for the client, should be presented. Many considerations are unique to each client and become a topic for conversation with developed rationale, to raise awareness, not necessarily to inspire action. Considerations may be carried over for months or even years. The plan audit meeting is purposefully set months before renewal negotiations when both advisors and clients have time to discuss and contemplate changes. Let’s look at a brief example of a consideration:
Consideration: Adding limited Medical Cannabis coverage per year, for specified conditions.
Rationale: As a legalized controlled substance effective October 17, 2018, with the Cannabis Act, cannabis/marijuana use is losing stigma, especially in medical applications. Adding medical cannabis coverage is a progressive change to benefits and one that allows prescribing physicians and patients to utilize alternative therapies for specified conditions where deemed appropriate. With defined annual maximums and specific conditions, this is seen as a moderate risk to claims experience.
A recommendation is essentially graduating a consideration to priority status. The rationale that was considered is likely the same but now the fit with that group is clear and there’s an increased risk or diminished value based on the timing of implementation. These could be lingering liabilities that need to clean up or outstanding opportunities that could be serving objectives. A recommendation in many cases represents advisor bias where certain philosophical points are being emphasized such as level of coverage, underappreciated or misunderstood benefits, proper definitions, policy, procedure, and of course preferred solutions. Recommendations delivered at each plan audit meeting should be limited and prioritized. Following acceptance, each recommendation can then be matched to various solution options in the marketplace, priced and tested for impact on the organization and its members. Let’s look at an example of a recommendation to make a change:
Recommendation: The current dependent life insurance is $5000 per spouse and $2500 per dependent child. We are recommending to increase dependent life insurance child amount equal to the spouse amount at a minimum $10,000 benefit.
Rationale: Dependent Life Insurance is added for the intention of covering final expenses related to death which are largely equivalent between a spouse and a child. The benefit is not designed to cover loss of income or in consideration of debt, as such, these costs are not related to spouse or child status. The average cost of final expenses has increased to between $10,000 to $25,000 depending on funeral, burial and celebration of life arrangements.
Concluding the Plan Audit Meeting with a Report
The plan audit meeting should be documented, not just in meeting notes and a calendar invite but also in a presented plan audit report. For several reasons, documenting the plan audit will be a key step for advisors building the recorded value proposition with their client and the further distinction of their advisory services. There is also key advisor governance here as this process should unfold regardless of whether your client decides to accept or reject recommendations each year or even discuss all considerations. In the event decisions (or inaction) are called into question, executing and documenting this process each year will have demonstrated how the employer retains an advisor that conducts a thorough evaluation with advice and well-formed rationale. It should be noted that there is also an element of inspiring change with a client where advisors should passionately make a play for changes they really believe in but still, no decision is still a decision and a successful advisory process.
If you’d like to learn more details about how CloudAdvisors can organize your data, automate reports such as the plan audit and help you advise from insight please contact us for a demo. CloudAdvisors offers the platform to benchmark benefit and retirement plans, comparing and ranking data as well as developing insights to build considerations and recommendations for every client or prospect. Visit www.cloudadvisors.ca to contact us and see how you could become #poweredbyCloudAdvisors.
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