Yet, over the past four years, there has been an explosion in the number of prepaid funeral plans, driven by direct marketing from providers and an increase in distribution through third parties.
Such growth is concerning, as it is a market that deals with money but remains largely unregulated.
This is why Mark Moran, director of intermediary sales at funeral planning firm Golden Charter, is on a mission to help clear up “misconceptions” about the sector. He wants to demonstrate that funeral planning can be a key part of an IFA’s financial planning tool.
Planning ahead
Mr Moran said: “If you are an IFA, you will plan every part of your client’s life: inheritance tax, life insurance etc, but the one place [advisers] stop at is that end point – death.
“Funeral planning is just a further stage in the planning process.”
Prepaid funeral plans, which allow people to pay in advance, can be bought directly from a funeral company, or sold via funeral directors, will writers or financial advisers.
The average cost of a funeral is now around £4,000, while the firms that introduce or sign the client up to the funeral planning firm can be paid as much as £800 in commission, in some cases.
According to Funeral Planning Authority (FPA) figures, since 2010 the number of plans sold more than doubled to 210,700 in 2016 from 104,364 in 2010.
And these are just the companies that have registered voluntarily with the FPA, meaning in theory that they hold themselves to a higher set of standards. For those that do not, it becomes a worrying prospect, considering how easy it is to set up a funeral planning business.
Compaines are only regulated by the Financial Conduct Authority (FCA) when the money they receive is paid into a bank, otherwise, if it is in a trust, it falls outside of the regulatory eye.
Mr Moran said: “[You and I] could go and set up a funeral planning firm, set up a trust, a trust bank account, a limited account and get some brochures – and to a certain extent you are up and running. It’s not that difficult.”
MPs have also raised concern about this lack of oversight. During a reading of the Financial Regulation of Funeral Services Bill last December, SNP minister Neil Gray, said: “A debate is necessary on whether the current system is the best to ensure consumer confidence in what is going to be an ever more important area of the market in coming years.”
To support his concerns he pointed to a report from Citizens Advice Scotland, which found evidence of apparent mis-selling by some funeral plan salespeople.
Some funeral plans cover all associated costs for the funeral, but others cover only basic funeral director costs.
It was suggested in the report that some salespeople were misleading customers about what is included in the contract they are signing up to.
One member of a focus group quoted in the report said: “They were very pushy and I think trying to pull the wool over my eyes. I knew the amount they were quoting wasn’t enough to cover the cost, so I think they can mislead people.”
Mr Gray added: “Some of those are third-party salespeople are paid on a commission basis for selling contracts, which makes me a little uncomfortable, as this can encourage people to chase harder for sales than to ensure the consumer is entirely aware of, or happy with, what they have signed up to.”
So how did the funeral planning market grow so rapidly? Between 2010-2012 there was a steady pace of growth. By 2013, the growth had spiked as the retail distribution review bedded in, Mr Moran explained. Also, PPI was reaching its peak and cold-calling firms were looking for the next source of business.
This drove the creation of a large number of direct sales models, some of which Golden Charter also dealt with. But Mr Moran said the company learnt its lesson after having to deal with the fallout from the plans that were sold. The company experienced higher than expected level of cancellations and was not comfortable with some of the sales practices.
Intermediary focus
It decided to exit that market and in 2014 turned its attention to the professional intermediary market. But it has not been easy trying to get intermediaries like IFAs to see the benefits of funeral plans. In the early days of the strategy, when Mr Moran approached financial advisers and networks, they were not keen.
Fast-forward to 2016-17 and Golden Charter now works with 11 IFA networks, giving the business access to more than 12,000 IFAs.
But Mr Moran said there is still a lot for IFAs to learn when it comes funeral planning and firms. They need to have done the right level of due diligence, he said. This includes finding out where the money is invested, who the fund manager is, how many plans they have and the average cost of plans on their books.
Ima Jackson-Obot is a features writer at Financial Adviser
Mark Moran's career highlights:
Jan 2016 to present – Director of intermediary sales, Golden Charter
April 2015 to Jan 2016 Director of corporate partnerships, Golden Charter
June 2010 to April 2015 – Head of intermediary sales, Golden Charter
May 2003 to June 2010 – Affinity sales and marketing director, Soccer Savings
March 1998 to April 2003 – Senior relationship manager, Cater Allen Private Bank
