This month’s question: Are advisers wrong to keep neglecting protection business?
Yes
Alan Lakey, director at CIExpert
We continually hear about the ‘protection gap’, and how underinsured UK plc is, and even the newest adviser will be aware that the UK compares unfavourably with other mature economies when assessing the levels of life and health insurance owned.
Let’s face it, it’s simply not cool to announce yourself as a protection adviser when you can claim the perceived higher ground populated by wealth advisers. There is undoubtedly an element of elitism that is restricting the sale of essential protection products.
Mortgage brokers are also missing out. They are often so busy arranging mortgages that they never get around to promoting the benefits of life, critical illness and income protection plans. There is a moral issue here as the act of arranging a mortgage is assisting a consumer in obtaining debt. Surely it is beholden on every mortgage adviser to ensure the debt can be extinguished if death or severe ill-health comes calling?
Perversely, it is financially more rewarding for an adviser to arrange a protection plan than arranging the mortgage. But perhaps it is not simply a matter of time constraints, maybe it is due to a fear of delving into the murky waters of critical illness and income protection plans. This is no real excuse as there are numerous systems available to assist advisers in selecting an appropriate plan.
The FCA has largely ignored protection, which it considers to be a low-risk area. Maybe it should confirm that assessing a client’s protection needs is an essential component of financial advice.
No
Tom Conner, director at Drewberry
It’s fantastic to see the protection market growing again. But before we give ourselves too big a pat on the back, it’s important to realise there’s still much work to do.
Drewberry’s 2017 Wealth & Protection Survey of 3,000 working adults across the UK found that 44.9 per cent had a mortgage, whereas only 10.9 per cent had critical illness cover and just 6.2 per cent had income protection.
Is this an indication that advisers are neglecting protection business? Not necessarily. From RDR to MMR and now Mifid II, the advice industry has faced significant regulatory change. In addition to the enormous time commitment to implement, these changes have added time to the advice process For advisers where protection isn’t their core offering, such as for mortgage brokers and wealth advisers, it’s natural that non-core offerings suffer.
Also, the introduction of pension freedoms has increased the demand for pensions advice, at a time when there aren’t enough wealth advisers to go around. You’d be hard pressed to find an adviser who doesn’t believe that protection isn’t important or want to write more protection business, but you can easily find advisers that are struggling with workload in their core area.
Hopefully as these regulatory changes become more embedded, advisers will find more time to pay protection the time it deserves. If an adviser has no interest, or time, to arrange protection, then they have a moral obligation to partner with a protection specialist so that their client is properly looked after.
