View more on these topics

Tom Baigrie on protection

Some industry commentators have been saying recently that simplified advice and generic information will not work. Or to put it another way, if you do not thoroughly know what you are talking about then you are a liability and should shut up.

The commentators are talking about government initiatives to lower the bar of knowledge needed when giving simplified investment advice. I agree with them. But I would say that oversimplified generic advice is already the norm in another market area. It is the protection market that is the current natural habitat of the generic advice bluffer.

With protection still deemed to be the simplest of commodity purchases, 1,000 websites, retailers and non-specialist advisers are still recommending term life, when it is income protection that their clients will claim on or FIB that they really need. And it is no good me trying to persuade consumers that knowledgeable advice makes for a better decision. Oh no, the spirit of the age is to DIY.

But consumers need to be made aware that DIY is dangerous. An historic example of consumers getting it wrong might help.

In the late 1980s, thousands of consumers left or never joined their employer&#39s pension schemes because they were fed up with the low transfer values they got when they changed jobs every few years. When they took advice, they either got their decision corrected or were compensated handsomely a few years later, because it was a stupid thing to do. But those many who took no advice just had to lump it.

And in future, when consumers&#39 protection buying mistakes are shown up (normally at a time of maximum personal and financial upset) those who did a DIY job will just have to lump it too. Or their penniless widows will.

The FSA has said that consumers who buy direct do take on greater levels of responsibility than those who seek advice. But I never hear consumers told that on BBC Moneybox.

Now regulation might just start to trouble the generic protection advice givers, though as long as they can claim non-adviser status (that is the new term for execution-only) they can continue their pile it high, sell it cheap and don&#39t blame us if it&#39s not right, you chose it, philosophy.

The trouble is that regulation will certainly expose the poor advice of so many advisers of all types who have for years dabbled in the protection sector without the relevant knowledge.

Frustratingly, when the claims start arriving at the Financial Ombudsman Service, they will centre on misadvice, not mis-generic advice. And it will be you, dear adviser, who cops it.

The fact that oversimplified, misleading, generic protection advice has been the norm in consumer information will not be the issue. It is the advisers who advised without thoroughly knowing what they were talking about who will cop it. And quite right too, although the financial services industry can be excused for feeling a bit chippy that the know-it alls who inform the public rather than advise them will escape censure once more!

The array of generic advice givers is much wider in protection than it was in pensions or endowments for example, because protection looks really easy to those who only know a bit, and regulation has not yet arrived to show just how easy it is to get things wrong on a big scale. But never fear, the FOS is near, and will surely start pointing this out in just a few months time.

Tom Baigrie is managing director of Lifesearch


Reap protection rewards

In a significant move by the FSA, the final rules governing the sale of protection and general insurance policies extends the remit of the Financial Ombudsman Service to rule on complaints relating to advice on protection plans. This means, for example, that when the FOS considers a complaint about a disputed claim, the advice given […]

Skipton Building Society – Flexible 3 Year Capped Rate

Type: Flexible capped rate mortgage with discount Capped term: Until February 28, 2008 Capped rate:5.99% Discounted term: Two years Discount: 0.75% Payable rate: 5.34% Minimum loan: £5,000 Maximum loan: Up to 95% of valuation subject to a maximum of £200,000, up to 90% of valuation subject to a maximum of £300,000, up to 85% of […]

Wary advisers are pulling out of equity-release business

Advisers are becoming wary of the market for equity release and are starting to pull out and refer to other firms, according to Key Retirement Solutions. KRS managing director Colin Taylor says more IFAs and mortgage brokers are deciding not to bother with equity release because of concerns about the risks involved, preferring to stick […]

&#39Providers to lose power in IFA field&#39 Sesame to target mature staff with experience

The influence of product providers in the IFA sector is diminishing ahead of depolarisation. That was the message at a round table last week, at which marketers said they believed the control that providers had exerted up to now was waning and IFAs were developing their businesses without their help. Punter Southall Financial Management managing […]

Testing the Foundation

The global economy isn’t headed into recession, at least not yet. This month, David Lafferty, Chief Market Strategist at Natixis Global Asset Management, examines current capital market and portfolio risks for signs of recession. Click Here for Capital Market Notes


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm