Advisers who fail to offer life insurance, income protection and critical-illness cover could lose their independent status.
In December’s retail distribution review consultation paper, the FSA says only 40 per cent of investment advisers currently sell all three protection products but warns that the 60 per cent of investment advisers who limit their advice to one type of protection product will have to label themselves as restricted.
CWC Research senior partner Clive Waller says: “What the FSA is saying, and quite rightly, is that if you are an IFA you cannot exclude one of the most important protection products that a client would need, which is income protection. If you do not look at the whole of protection then you cannot call yourself an independent adviser.
Master Adviser IFA Roy McLoughlin says: “There are lots of advisers who should be selling protection but don’t. However, they are going to have to unless they want to state that they are giving restricted advice. You cannot talk to your clients solely about their investment needs and ignore their protection needs. That is the crux of holistic financial planning.”
McLoughlin believes that many investment advisers look down on protection.
He says: “We have all become obsessed with wealth management at the expense of equally important areas such as protection.”