Regular readers of this column will be familiar with experts from a multitude of different areas airing their views on why their particular area of expertise holds the key to the future prosperity of the IFA market. The fact is that of all the areas of personal finance, protection possibly represents the one which is most likely to enable IFAs to overcome the challenge to business growth and profitability posed by the new stakeholder regime.
Protection should ideally form the foundation stone of any financial planning solution, whether for individuals or businesses. As a simple example, there is little point in an individual making pension provision and eventually buying an annuity if he has no cover in place to ensure that his nearest and dearest are provided for if he dies prematurely.
Protection has tended to be an implicit client need. Whereas a client generally has a clear idea that he wants or needs to take out a pension plan, it may not have occurred to him that he needs to protect himself or his family against eventualities such as critical illness. As a result, many IFAs may have been able to run a highly successful business without needing to become too familiar with the protection market but now is an excellent time to change this.
The entry of new players will freshen up the market and provide IFAs with a wider variety of protection options to suit clients with specific needs which may change over time.
The key players in this market are keen to make it as easy as possible for IFAs to write protection business. This invol ves dispelling a number of common misconceptions that IFAs have about this market. For example, although in the past they may have been daunted by the prospect of long-winded underwriting processes, some providers offer dedicated underwriting helplines manned by qualified under writers who can make quick decisions and who have been trained to be able to explain underwriting matters in plain English.
Modern menu-based protection products provide an ideal means for IFAs to cement client relations and grow their business over time.
The business protection market – including products such as keyman insurance and business loan protection – is another area which has been woefully overlooked by many IFAs. In fact, protection can be as crucial to business growth strategy as investing in infrastructure and personnel, and IFAs should be ready to highlight this to corporate clients.
This is another area where client needs are implicit rather than explicit. A corporate client may approach an IFA looking to implement a group pension or employee benefit sch eme, which can provide a catalyst for the IFA to ensure the cli ent is furnished with the appropriate business protection.
One historic client objection towards business protection has been the cost of elements such as keyman protection but this is no longer a potent argument. In a modern business environment where companies shell out hefty fees to recruitment agencies to attract the best staff, it surely is an important commercial decision to ensure that the business is protected against the impact of illness or death of key personnel.
Menu-based business protection allows IFAs to help companies adapt their protection provision in line with the growth of the business and, taken alongside pension and employee benefits, enables IFAs to offer a complete financial planning solution.
IFAs who are not familiar with protection should be aware of the attractions of this fast growing market and use protection to protect their own businesses against the challenges of the stakeholder environment.
Alun Beynon is head of sales at Scottish Equitable Protect