I am not opposed to enlightened self-interest but LifeSearch’s no advice, no protection campaign is proof that it can be taken a little too far. I feel that it is time to air an alternative viewpoint.
LifeSearch, and indeed Money Marketing, are concerned that non-advisory protection players do not have to fund the considerable costs of professional indemnity insurance and of maintaining training and competency standards when the majority of consumers do not understand the difference between advisory and non-advisory sales.
It is proposed that all non-advisory sales include a warning that consumers have no recourse to the Financial Ombudsman Service.
I am well known for championing any cause that is indisputably in the interests of the consumer but there are two sides to this story and the other one never seems to get told.
Consumers can benefit from good advice but can also benefit from saving money by buying products via the internet at considerable discounts.
Even the most expert advisers are limited in what they can recommend due to the fact that there is a maximum amount that clients can afford to pay in premiums. But consumers who sidestep the advisory process can often afford a significantly higher sum assured or maybe stretch to an additional protection policy. What stands to be lost on the roundabouts can sometimes be compensated for on the swings.
If non-advisory sellers are to be required to give a health warning that hands a huge commercial advantage to their advisory competitors, would it not be reasonable for advisory sellers to be required to spell out that it can be possible to obtain more affordable prices elsewhere?
If specialist intermediaries are truly concerned that most consumers do not understand the difference between advisory and non-advisory sales, then surely this concern must stretch to the fact that consumers who rely on their advice could be missing out on the opportunity to obtain a significantly higher degree of cover for the same premium via the internet?
I take my hat off to the huge educational role that some specialist intermediaries have played in raising awareness of protection issues but their debates have become one-sided. They delight in inferring that only those who seek expert third-party advice can end up with satisfactory protection arrangements but this is clearly untrue.
Protection is a complex subject and disputed claims can be highly emotive because they tend to involve people who are in poor health or who have suffered the trauma of a recent bereavement. But I would also point out that there are many other products with the potential to produce emotive situations which no one argues must be bought through an intermediary.
Those who eat the wrong food can cause themselves no end of harm but I have never heard anyone maintain that the average consumer is not capable of making an informed choice at the supermarket unless they pay to seek advice from a professionally qualified nutritionist.
It is important to realise that someone can come unstuck by taking advice as well as by not taking it.
Take the case of a man who has discussed his protection needs with an adviser and formed the impression that he could afford significant life and critical-illness cover but could not stretch to income protection as well. He shops around online and finds that the savings he will make can enable him to obtain a measure of income protection. If he is later off work with a long-term back injury, which would be covered by income protection but not critical illness, he will be better off than if he had taken the advice.
If well-informed consumers are free to buy with-profits bonds, Isas and even self-invested personal pensions from discount brokers on an execution-only basis, they should be equally free to buy non-advisory protection products online.
There are pitfalls to be avoided but there are enough objective financial articles published for those who wish to educate themselves to become well aware of these.
Just as the financial press can warn consumers about the dangers of incurring market value adjusters or of having portfolios with lopsided asset allocations, it can explain how protection policies differ, spell out the dangers of non-disclosure and warn that those who go without advice have no recourse to the FOS.
Whether they are buying protection products, investment products or food, well-informed consumers should always have the right to choose whether or not to seek advice. There is clearly room in the market for both distribution channels and anyone who insinuates otherwise is doing the consumer a disservice.