Let’s recap what Money Marketing’s No Advice, No Protection campaign is really about.
Consumers who buy protection products without advice cannot seek redress from the Financial Ombudsman Service regarding the suitability of their purchase. No one tells them this and we do not think that is fair.
Two pieces of independent consumer research show that at least 60 per cent of consumers are unaware of the difference between advice and non-advice while many think that non-advised sales are actually advised, echoing the ombudsman’s recent words on the subject.
The “opposite” view has been aired many times but eventually it has always been dismissed as poorly informed sales puff. Simon Burgess’s recent words in these pages make the same trite points that Lifesearch and the campaign have thought through and comprehensively rebutted many times before. His comments, like those of many other non-advisers before him who have sought to dismiss the campaign, ignore a key point.
Before consumers can make an informed decision, they need information and no non-adviser in the UK, website or human, provides anywhere near enough information with which to make a properly informed choice.
If Google had existed 20 years ago, would consumers have bought their endowment policy online to save money? You bet they would. Yet if this had been the case, there would have been no endowment misselling scandal and no compensation because there was no advice given.
This campaign is simply about the truth that it is fundamentally right to make consumers aware of this crucial point before they decide to buy.
The suggested flip-side is that advisers should point out to consumers that a potential consequence of taking independent advice is that they could be missing out on obtaining higher levels of cover via the internet. I agree. If the adviser feels that the internet might provide a better value-for-money solution, they should say so.
Back in the real world, the adviser can treble the amount of life cover a family would receive in the event of death, all for the same premium, by showing the value of single-life family income benefit in trust over a joint-life lump sum not in trust.
As any adviser or provider knows, the suggestion that the savings made buying life cover online are enough to buy income protection is absurd. In the current market, the difference between the cheapest five providers of life insurance is rarely more than 50p a month. The average income protection premium is well over 40 a month.
The idea that buying food is the same as buying financial services products is a false analogy. You know whether or not you like food once you have eaten it. If you do not like it, you probably will not buy it again but as long as you have not been poisoned, the consequences, if any, are small.
Perhaps protection sales should be as closely regulated as food safety because, as with food poisoning, you do not know you are in trouble until you are ill or dead and it is too late to turn back the clock.
Let us rather consider the emotional and financial consequences of making a buying mistake in differing financial services areas.
If we take loans, investments, mortgages, bank accounts, Isas and so on, what is the worst that can happen if you get it wrong? You eventually realise your mistake, discuss it with your partner and change it. Financially, in all but the most extreme of circumstances, you will be a few hundred or perhaps a few thousand pounds out of pocket. If you took advice, you might even receive some compensation but you will not lose the house.
The consequences of making a mistake in buying protection are different. It is just too important for consumers to take the risk of error without compensation unless they genuinely know what they need. Emotionally, we are talking about serious ill-health or death. Financially, we could be talking about several hundred thousand pounds or 20 to 30 years of lost income and, sadly, losing the house is a possibility.
Supermarkets and other non-advisers will naively argue that their customers are savvy and know what they want. If there were any truth in this, those very customers would seek income protection and family income benefit written in trust. But supermarkets and their kind offer none of these options.
So this campaign remains strong and has cross-party Parliamentary support for good reason. It is aimed at saving consumers from shock and pain at the hands of our industry. There is no doubt that the campaign also benefits anyone who seeks to provide advice and, while this includes Lifesearch, it also includes every tied adviser and IFA in the UK.
If non-advisers really want truly informed customers, why don’t they tell them about the ombudsman and unsuitability? Why not explain family income benefit, income protection, the benefits of single-life cover and trusts, too?
Yes, the debate has become one-sided. That is what happens eventually when knowledge, ethics and common sense meet unethical sales that put profit ahead of treating customers fairly.