Protection commission to help advisers with RDR ‘transition’
Commission generated from protection business can help advisers manage their cashflow as they move the rest of their business to adviser charging post-Retail Distribution Review, Ron Wheatcroft, vice president of client markets at Swiss Re, has said.
In an interview with FTAdviser, Mr Wheatcroft said Swiss Re agrees with a broad industry consensus that there should be more opportunities to write protection business due to incoming regulation, including the RDR and the Mortgage Market Review.
Protection business does not fall under the incoming RDR so advisers can still receive commission for this business whereas, under the RDR rules, most other investments will fall under adviser charging.
He said: “That’s not to say there should be massive hikes in commission, but it should in theory help that transition and we could end up with a number of firms who don’t do protection now but will have a slightly more broader-based approach.
“There will be some intermediaries that just specialise in investments and have a model that works in the new world very, very well and that is fine as well.”
There have been widespread predictions of a rise in the amount of protection business conducted by advisers post-RDR, which many feel will be a positive step in addressing concerns over the oft-cited protection ‘gap’.
However, some have raised concerns that a movement of advisers into the space could have some negative consequences, with advisers lacking product knowledge acting like brokers that are focused purely on price rather than client value-add.
Speaking to FTAdviser earlier this year, Peter Chadborn, director of advisory firm Plan Money, said: “My concern is that, yes, there may be IFAs moving into this area that want to operate like a broker. Perhaps wittingly, perhaps unwittingly... maybe a way to write business.
“Life offices should be offering education in this area.”
Referring to the protection gap Mr Wheatcroft admitted that it is a “huge challenge” for consumers to buy these products, but he said advisers are “well-placed” to help this. He added “it would be nice” if the government announced its thoughts on the issue.
Last year, Aviva launched a national televison advertising campaign to highlight the importance of taking out life insurance which Mr Wheatcroft branded as “tremendously effective”. Fellow protection provider Unum has been running television advertisements for the past two years and has recently launched the latest phase of its ongoing campaign.
He said: “Intermediaries and other competitors were all very positive about these, stating that they were getting the message out.
“In an ideal world, the government should be doing something like that but to ask them to do our marketing for us, is something that I doubt they will do.”