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Pink introduces formal protection review requirement

Pink Home Loans advisers will now supply documentary evidence that they have discussed protection with their clients in every mortgage they arrange.

From this week the network’s brokers have been advised to ask clients to bring in their employment contract to illustrate what benefits they will be entitled to if they become too ill to work. The borrower will be asked to sign a declaration if they do not wish to take the advice.

The move is designed to encourage more clients to take out income protection so they can meet their mortgage payments if there are off ill from work.

Statutory sick pay rules mean employers must pay claimants at least £87.55 per week if they are ill, although many homeowners would struggle to meet their mortgage obligations on this.

Pink director Mark Graves says: “Customers are at the heart of every decision an adviser makes, so asking a client to provide a copy of their employment contract or policy documents is a natural progression to make.  

“An adviser should, in every situation, be able to point out how long the client could maintain the mortgage and put food on the table if they suffered a long term illness or lost their job. In my experience very few consumers will be familiar with just how little they are likely to receive from their employer in the event that they are no longer able to work.”

Rival networks have no plans to follow the move, however.

Homeloan Partnership commercial director Neil Hoare says members of his network are expected to discuss protection with each client but are not formally required to do so.

He says: “Any move that improves the consumer outcome is a welcome change but we believe our advisers are already aware of the need to do this.

“I don’t think we would introduce a formal policy whereby a protection chat is required, but brokers know that any poor outcomes experienced by their clients will lead to a review of the advice process and as a result, we expect them all to be taking the necessary actions to make sure this doesn’t happen.”

L&G Mortgage Club managing director Stephen Smith says: “A protection discussion is prudent and proper in any advice process but I would imagine many networks already recommend their members should do this.

“We certainly have no plans to introduce a formal policy like this but it certainly cannot be a bad thing to do so.”

PTFS marketing director David Carrington adds: “It’s great to see more distributors placing a focus on the need to protect your mortgage. That can only be commended.

“I would, however, agree with the view that most brokers, and certainly we would like to think our members, are already engaging in these conversations to make sure their clients are in the best position in terms of managing their finances. The proper approach to advising clients should mean you are discussing their entire situation, and that definitely means making sure they are able to meet their mortgage payments in the event of long-term illness.”

Adviser view

Alan Lakey, partner, Highclere Financial Services 

I think its a very commendable idea, but in truth I do not like when things are made to be compulsory. In my view, any adviser worth his salt would be having this duscussion anyway with each client, but it can’t be a bad thing to make sure the consumer is protected even if it takes a policy like this.

Adviser view

Roy McLoughlin, partner, Master Adviser

I think it is a hugely positive step to ensure that this conversation is happening with each and every mortgage transaction. Mortgages are the biggest undertaking in most people’s lives and to not at least check that it is protected in the event of illness can be very dangerous.



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There are 5 comments at the moment, we would love to hear your opinion too.

  1. We have done this for many years.

    Two years ago a client tried to claim against me saying we had not offered life assurance to her and her husband on a mortgage arranged in 2006. The signed form and documentation saved me from a very large claim. The husband had refused cover and both parties had signed to say they did not want cover.

    The FOS agreed it had been advised and discounted by the husband on the strength of the signed form.

  2. I do not understand why it has taken them so long, should be standard practice!

  3. Apart from getting some free publicity why is a mortgage network only now making this a compulsory conversation to have? Good advisers have been doing this routinely as part of the overall fact finding process. It is only common sense to discuss this, not rocket science. Just my own very humble opinion of course

  4. We're all doomed!!!! 4th February 2015 at 5:16 pm

    Pink have obviously been struggling to get some of their advisers to discuss Protection, hence they are now making it mandatory to hold a copy of the client’s employment contract on file, together with a compulsory piece of protection advice.
    However, it has long been a requirement that protection is discussed when giving Mortgage Advice, so I can only assume that a Network going public with this has fallen foul of the regulator, in terms of weaknesses in their Systems and controls, and are doing their best to give this a positive spin.

  5. We at Berkeley Alexander applaud Pink Home Loans for taking a stand on this issue. whilst borrowers need to be warned about the possible impact of future interest rate rises, a much more dramatic impact will be felt should the client be unable to work due to accident, sickness or redundancy. It’s perfectly reasonable for clients to expect this very serious subject to be covered in full by their mortgage adviser, and those who don’t give the issue the attention it deserves may well find themselves walking on thin ice.

    Our industry has been bruised by allegations of past miss-selling and we certainly don’t want to be fuelling a time-bomb of ‘non-selling’. Simply burying heads in the sand and ignoring protection sales for fear of miss-selling claims is clearly not in the best interests of the customer. It is in their best interests that brokers are aware of the protection products available on the market today. We’re mindful of the rather involved processes which advisers must now go through in order to write this type of business, and referring clients to a willing provider is a viable alternative. This puts the client into the hands of experts, removes the adviser from the time-consuming advisory process, and also transfers compliance responsibility to the service provider. Just make sure that your provider is happy to provide the peace of mind that comes from a Client Ownership Guarantee.

    Well done Pink! We hope that many more will follow your lead.

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