Without an income, everything from a client’s pension planning to their family’s financial future is at risk. But while protection can underpin just about every financial plan, it is a taboo topic in many adviser offices.
There are many reasons for this. For some, especially in the mortgage advice market, time pressures mean it falls off the agenda. Others see it as a rather foreboding area of financial services, requiring them to discuss death, disease and their clients’ intimate health records.
Some advisers are also apprehensive about the underwriting process around protection products. Justin Harper, head of marketing at LV, explains: “Advisers fear the loss of control. They worry there might be delays if additional information is required, and that the premium they quoted for their client at outset will not be the final one they are offered.”
While these reasons mean protection stays off limits, there is growing pressure on advisers to examine their clients’ protection needs. Harper points to Financial Conduct Authority initiatives, such as its work on consumer outcomes under treating customers fairly and improving access to insurance, as evidence of the need for advisers to make protection part of their service.
In addition, the Insurance Distribution Directive has introduced new requirements to ensure advisers work in their clients’ best interests. Roy McLoughlin, associate director at Cavendish Ware, explains: “Anyone who intends to sell protection will need to do 15 hours of continuing professional development every year. In addition, any adviser who sees a protection need must be prepared to either address it themselves or signpost it.”
With pressure mounting, there are plenty of signs of improvement across the industry. The mortgage networks were first off the blocks with rules around making protection part of the advice process. For instance, back in 2015, Pink, which is now part of Primis Mortgage Network, brought in new rules requiring its advisers to discuss income protection with clients.
More recently, Sesame Bankhall relaunched its Rewire Routines campaign in May, asking advisers to sign a charter to make protection part of every mortgage advice conversation over a three-week period.
Some advice companies have also signalled their commitment to protection by bringing it in-house. These include St James’s Place, which acquired specialist advisers Future Proof in December 2018.
Although there are signs of improvement, more needs to be done, given how many people are still unprotected. Katya MacLean, chief operating officer at Guardian Financial Services, says timing is everything when it comes to introducing the topic of protection. Sadly, where the focus is on a mortgage or investments, time pressures mean it can often be something of an afterthought, with lacklustre results.
Rather than wait, Ms MacLean recommends bringing it into the conversation at a much earlier stage. “Talk about protection when you are looking at the financial planning goal, whether this is buying a home or securing a good standard of living in retirement,” she explains. “By connecting protection to something positive, it takes away the negativity that can be associated with death and serious illness.”