We have all heard the old adage that protection needs to be “sold, not bought” alongside the possible reasons why take-up is not higher, such as consumers not knowing what it is or advisers finding it more profitable to operate in other areas like investment.
But could one contributing factor be the advice market’s transition from sales industry to profession?
Eastcote Wealth Management managing director Trevor Law sees a dilemma for advisers who are moving away from selling products as part of that transition.
“Protection has to be sold but selling is a skill that is different to advising and it doesn’t sit well. Everybody tries not to be over-zealous with selling when they want to be seen as a professional. It is a dilemma.”
Law even sees problems for intermediaries selling protection as part of the mortgage process.
“Most home buyers are pushing themselves to the limit as it is, considering how expensive it is to move house. This leaves little in the budget for protection.”
He sees the answer being for advisers to review clients’ insurance arrangements around six to 12 months after they have taken out a mortgage, as part of the overall advice process. However, he points out this needs to be handled sensitively, not to push products.
The meaning of selling
Protection Review chief executive Kevin Carr thinks it is important to clarify what is meant by protection needing to be sold, not bought.
“Few people come along asking to buy protection so clients often need to be persuaded about the products, the reasons and benefits first,” he says.
While protection should sit well alongside mortgage business in theory, it does not always work that way in reality.
Carr says: “The Mortgage Market Review hasn’t helped and while some brokers do sell a lot of protection, most say they are too busy with the mortgage to worry about anything else. The bottom line is surely about what the customer needs. If the client needs protection and the adviser – regardless of their status, experience or views – doesn’t mention it, isn’t that a market failing?”
PFS chief executive Keith Richards says the contraction and changing shape of the advice landscape, coupled with banks and building societies withdrawing from advice, means less proactive promotion of products such as life insurance is taking place.
He points to the EPRISM hierarchy of needs (emergency fund, protection, retirement, investment, savings and mortgage) which he says is still the cornerstone of holistic financial planning, with emergency funds and protection taking initial priority when assessing client needs.
“The reality, however, is that investment advisers have moved further away from clients with protection needs, or may inadvertently disregard them due to their primary focus on investment and retirement planning for clients with accumulated assets,” he says.
The adviser community’s relative lack of enthusiasm, twinned with a general complacency among consumers about their protection requirements, means there is an untapped market.
Richards says: “Advisers need to realise it has the potential to turn into a very valuable income stream. Professionalism in our sector drives better consumer outcomes, and if advisers shy away from a protection conversation that will surely be the opposite – especially if that client could be eligible to make a claim in the future.”
Protection Distributors Group head Emma Thomson is certainly surprised at the idea of advisers not arranging protection due to bad perceptions of selling.
“This could be seen as an excuse for not ensuring clients receive valuable protection advice. Some advisers feel protection is beneath them and look for reasons to justify it, but they could be putting clients and their families at financial risk, which isn’t professional,” she says.
Duty to the client
LightBlue UK principal Mark Dennison says that not avoiding a difficult conversation actually enhances an adviser’s professionalism, not detracts from it. He says: “It is a huge misconception to believe you are more likely to be seen as a professional by avoiding your obligation to do a thorough job.
“We all have a duty to put the client in an informed position to make a decision on what’s important to them, and to make recommendations around that, highlighting any areas we feel should be considered. Avoiding this neither helps our industry nor our professionalism.”