Rules may increase quality of advice but not necessarily adviser numbers in the market
Last month saw the introduction of the Insurance Distribution Directive, which means anyone involved in the distribution of insurance products must complete at least 15 hours of relevant continuing professional development each year.
The new rules place no additional burden on advisers in excess of the FCA’s existing requirements for 35 hours of CPD a year and many commentators see it as having a positive impact. If you want to sell protection you need to show you know enough about it, which is difficult to argue against.
However, introducing a minimum number of hours advisers must devote to this effectively forces them to decide whether they want to sell protection or not. For some, doing the CPD rather than turn away clients’ protection enquiries is a no-brainer. But do the new rules risk putting others off it altogether?
Not a hurdle
New rules are never a problem for people who are complying with them anyway, so advisers already active in the protection market are likely to be unaffected by the CPD requirements of the IDD.
Gale and Phillipson mortgage manager Richard Rutherford says: “The new rules should have very little impact on advisers who work in protection. When you take into account the resources made available by protection providers, such as webinars and workshops, the requirement is achievable.”
Rutherford does not expect the CPD to put advisers off dealing with protection, but he hopes it will improve the quality of advice. It is a sentiment shared by Royal London protection specialist Jennifer Gilchrist, who does not think it will be a hurdle, especially for those already involved in the space.
“I hope it will not only support the quality of advice but also enable other advisers to consider protection as an area they could include within their advice business model if it isn’t part of it already,” she says.
At the very least, the new CPD requirement looks set to prompt advisers to make a choice as to whether they are in or out of the protection market, rather than simply ignore it.
“Anyone who has got anything to do with protection now has to get some training on it. Far too many advisers don’t know enough about protection and the CPD requirement is an education tool or process to help with that. I welcome it,” says Cavendish Ware associate director Roy McLoughlin.
“Part of this whole IDD thing is to adjust people’s mindsets and to get wealth managers and mortgage brokers to think more about what they should be doing for their clients. It’s dangerous to talk to someone about a mortgage and ignore what could happen if that person becomes ill. Advisers who say they have not got the ability or inclination for it can marry up with someone who has and refer protection business to them.
“Even in the protection community, there are some blind spots due to a lack of training. There are still advisers who need help, which is evidenced by the number of sales each year – around one million life insurance policies, 500,000 critical illness products and 125,000 income protection plans.
“Life insurance is easier to sell but advisers are selling the wrong products. I think the CPD requirement will impact quality of advice as more advisers will be forced to think about the order in which they sell protection products.”
A double-edged sword?
Providers such as Royal London and Legal & General are already building training and development for advisers with CPD in mind. As Legal & General intermediary director Craig Brown says, advisers are “the shortest path to the biggest difference” in helping people understand the need for protection. However, Altus Consulting consultant Rory Gravatt points out providers are limited in what they can afford to do – and if they are not seeing demand for the more engaging CPD activities such as roadshows, they may opt to deliver much of their support online.
Gravatt believes the new CPD requirement is a double-edged sword, improving protection advisers’ knowledge for the benefit of their clients, but not engaging others to promote it.
“We’ve had experience with a partner who wanted to tap into wealth management but the wealth manager didn’t see protection as part of their business unless clients asked for it. It would be more likely for that type of adviser to walk away and farm protection business out to another advice firm,” he says.
“General practitioners will tend to shrug their shoulders and build it into their businesses but those who only tinker with protection may focus on the wealth management sector and say they do not deal with it. The new CPD requirement will define advisers’ business models and add to what they want to focus on, rather than signal a sea change in the way we envisage protection.”