Why this protection adviser shut up shop after just six months

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
Why this protection adviser shut up shop after just six months

Starting a business protection adviser is not easy and some question whether it is a viable business model at all. 

When Samuel Marriott and his business partner, who does not want to be named, went down this route in May 2021 things quickly became costly and difficult, leading them to close their business a mere six months later. 

The pair had relied on a strategy of low start up capital and high initial income from advising clients with individual voluntary arrangements. But when their network told them it no longer tolerated the comparatively risky line of business, they quickly realised funds were drying up and they had nowhere else to go. 

Lewis Shaw, director at Shaw Financial Services, said providing business protection advice alone was not feasible.

“Business protection can be a pain and certainly is not a viable business just doing that, as most of the time if it's necessary we'll talk it over during a mortgage application,” he explained.

Shaw said concerns such as ‘what happens if you die’ and ‘how do we buy you out of the business’ were all typically covered in a mortgage meeting, meaning a business protection adviser might struggle to cover fresh ground.

Tom Conner, co-founder of business protection advice firm Drewberry, said he often met self-employed advisers who were having to spend half their time trying to generate prospects, with only the other half left for the advice and administration.

“It's very tough,” he said. “Whether it's in the business protection space or any other space, going out alone is incredibly difficult. The hardest part of any business is obtaining clients.”

Kevin Carr, chief executive of Protection Review, agreed client acquisition can be hard, but also highlighted the need for advisers to know their markets.

“All businesses need customers and if you don’t know - or haven’t properly researched - where you’re going to get them from pretty early on you’re in trouble,” he said.

“The question is whether or not it's feasible to only do business protection, or if you need to start with wider family protection and build from there. 

“If I was going to launch a stand alone business protection only adviser, I’d be talking to accountants, solicitors, and local businesses first, as that’s where a lot of clients can come from.”

Starting from scratch

Samuel Marriott, co-founder of now disbanded CSE Financial Services, started up his firm in May 2021, but closed it in October of the same year.

Without significant starting capital, Marriott and his business partner were determined to keep costs down from the outset. They spent just £50 converting one of their garages into an office, for example.

Its business plan was split into word-of-mouth referrals and leads via introducers. 

The firm decided to approach broker network Primis. Fully aware building relationships with accountants would take time, Marriott told Primis the business would generate the bulk of its income in the first 18 months from advising clients with individual voluntary arrangements.

IVAs are a debt repayment solution. Those on one are given an allowance for outgoings, and life insurance can form part of that allowance. If there is money left over, IVA introducers can refer clients to an adviser for a fee.

Marriott said CSE had managed to land a number of large contracts with IVA introducers. One contract generated 40-80 leads a month.

You do need quite a bit of capital to keep you going if business is wholly based on referrals. It was naive of me to think otherwise.Samuel Marriott

“An IVA firm only works with a client for three months,” Marriott explained. “Whereas accountants work with their clients day-to-day over years. There’s a much bigger trust barrier to overcome.”

He continued: “You want them to pitch business protection to their clients and then hand them over to you. So they might give you one client. Then they’ll wait. And maybe you’ll get another. But nothing is guaranteed.”

Marriott had previously advised at Freeman Jones - a firm which specialises in IVA clients - for more than three years.

“We'd dealt with these clients before so we knew they were potentially very vulnerable,” the founder explained.

“We would give full advice first, and then tailor it to the allowance, and we would tell them we were separate from the IVA firm and that this wasn't compulsory.”

The business plan was approved by Primis and the firm got started. 

‘Leads dried up overnight’

But five months down the line Primis told CSE it could no longer take on any business from IVA introducers, which had devastating consequences for the young start up. 

“Our leads dried up overnight,” said Marriott. He tried to change the network’s mind.

“We did a report for Primis to prove our ability to provide whole advice,” Marriott explained. “But we still weren’t allowed to do it. So we asked Primis for more training and said they could listen to our calls.”

In the end, Marriott and his partner were told no business model with IVA introducers involved would be considered. “They kept saying they didn’t want that risk profile.”

Primis does have other firms in its network dealing with IVAs however. 

It told FTAdviser it did not implement a blanket approach when it came to firms working with customers who have IVAs and was dealing with each scenario on “an individual basis”.

“If we deem that a customer is or could be put at risk as a result of the firm’s processes, we will not work with that particular firm,” it said.

Whether it's in the business protection space or any other space, going out alone is incredibly difficult.Tom Conner

Struggling for income, Marriott said they were left with the option of buying leads, but Marriott deemed this to be a “false economy”.

“We never wanted to buy leads, they’re almost definitely sold to different broker firms over and over,” he explained. 

“So as great as it might feel to advise on them at first, you’re always going to have cancellations. Whilst big firms can pump money into leads, they only ever achieve 12-13 per cent conversion. We’d need 50-60 per cent to break even.”

Meanwhile, CSE had been waiting for authorisation from the Financial Conduct Authority. This had seen Marriott and his partner get dual authorisation under another firm at Primis in the interim.

At this point, with no leads and authorisation still pending, Marriott said CSE was just one month away from running out of cash, meaning he felt unable to switch networks and decided to call it a day.

Marriott is happy to admit he was naive in thinking CSE would succeed without upfront capital to invest in marketing alongside a referral-focused model.

“I learnt you can’t rely on anyone,” said Marriott. “And you do need quite a bit of capital to keep you going if business is wholly based on referrals. It was naive of me to think otherwise.”

Marriott has returned to advising at Towergate Health & Protection, a previous employer of his. He said he’ll stick to the employee side of the coin for now. 

ruby.hinchliffe@ft.com