You will soon be able to buy all kinds of protection and post-retirement solutions from platforms.
Not only will the platform businesses need to offer such additional services in order to shore up their revenues, maintain your interest and secure your patronage, they will need to make the whole process easy and quick.
The process of buying critical illness, income protection, and even good old term, is still a pain in the backside for too many of us – unnecessarily complex, lengthy, expensive, inaccurate and generally disappointing.
Too often, the experience is unsatisfactory for the adviser, insurer and the client – resulting in uncompleted sales and the wasted time of everyone involved.
I believe this goes some way to explaining the fact that far too few mortgage advisers sell protection, why there is a £2trn insurance gap in this country and perhaps why protection sales keep on trickling slowly but determinedly downward.
Maybe the platforms will help to turn this situation around. It is in their best interests to create new revenue streams as their traditional platform margins decrease and they increasingly have to compete with adviser technology systems (Intelliflo, Distribution Technology, Iress, Time4Advice et al) for your attention.
In Australia, approximately 15 per cent of all protection sales are initiated through platforms; mostly via tied arrangements or panels of insurers. And the technology now exists to make the process of applying for and the fulfilment of insurance simple, quick and accurate.
Platforms may even start to treat their customer bases as group schemes to increase approval ratios and decrease application times. Some may have a critical peak at what Nucleus launched earlier this year, and think about designing protection solutions that the end client could tailor to meet their individual requirements.
With a bit of creativity, a dose of inventive thinking, the close involvement of advisers and the right collaboration partner, platforms could really do something innovative in this space.
But it won’t just be in protection that platforms should make a real impact, they also have an opportunity to turn the whole world of post-retirement on its head.
Our population is ageing fast. Around 18 per cent of the population is aged 65 and over today, up from 15 per cent in 1985. This number will accelerate to 23 per cent by 2035. 3.3m people in the UK will reach retirement age in the next five years.
This will result in a steady stream of funds exiting platforms – unless the platform has a compelling post-retirement solution that benefits the adviser as well as the end client. ‘Annuity’ remains the UK’s automatic answer to the question of retirement; reach retirement age, cash out your pension and buy an annuity.
If you have been a smoker or suffer from a life-threatening condition you may be able to get a few extra quid per month from your annuity provider, but purchasing an annuity still means taking all of your hard-earned retirement pot and handing it back to a life insurer – forever.
Of course, for many investors with medium-to-large pension pots, buying an annuity may be last thing they should do. A myriad of other options exist to deliver the “post-full-time-work” financial outcomes that a customer is looking to achieve, and a platform is ideally placed to make sure that a customer approaching retirement understands all of the options open to them – and, in the process, keeps as much client money on the platform for as long as possible.
Retirement presents an opportunity to service the customer for the rest of their lives, rather than a last-ditch effort to sell them an annuity and wave them goodbye. Surely the key to success in the post-retirement market is to make life easy for advisers and clients to understand, plan and execute the retirement options that best suits the client’s needs. Working out what this actually means will require a completely new way of approaching this ‘post-accumulation’ market.
Financial services has traditionally defined customer needs in terms of products; customers as purchasers of said products and advisers as “distributors” of products. This mind-set is no longer appropriate.
I would argue that it hasn’t been appropriate for years. Providers and platforms (increasingly the same thing) will follow in the footsteps of advisers, acknowledging that they now provide services and solutions, rather than products per se.
“Would you like fries with that?” underplays the opportunity for platforms to expand beyond their core investment offerings. I think the opportunity is not only significant but also vital to the future success of almost every platform. There is only room for a few pure low-cost utility players in this market.
Campbell Macpherson is managing director of Campbell Macpherson & Associates