The ‘protection gap’ is often mentioned but, as time passes, there seems little progress in terms of closing it. Certainly, from a mortgage point of view – and I know that many advisory firms will have very good penetration rates but this is not the norm – having the protection conversation is often not a priority especially when the customer can seem as apathetic as the adviser themselves.
Unfortunately, while this attitude prevails, that gap gets worse. At our recent Annual Conference, Steve Fallon – marketing development manager at L&G – gave an incredibly heartfelt presentation on why protection matters, the reasons why mortgage advisers should get much better at selling these products, and the overall benefits to both adviser and client that can be the result. As a network we think we are providing plenty of support and resources to our ARs and advisers, but I suspect there is more that can be done by all of us.
The numbers, as Steve pointed out, are truly terrifying – in the UK 59% of all mortgages are unprotected and 93% of mortgage holders have no income protection whatsoever. There are of course all manner of reasons why this is the case – why isn’t that penetration there? Are we, as advisers, too happy to accept the client’s excuses, such as, “I’ll do it next year”? Are we too afraid to rock the mortgage boat and fear risking the client’s ire by ‘going on about’ protection too much when they’re just getting their heads around the costs of their mortgage? Are we just content to move the client on, and move ourselves onto the next mortgage case, rather than covering off their protection needs?
We shouldn’t be doing any of that, but I suspect there is some truth in all of the above. Then there’s the perceived complexity, the explanation of why it’s important, the cost, the sales aspect, the list goes on. Sometimes advisers might just think it’s too much hassle, even when the client’s circumstances and needs seem to cry out for a protection policy.
Clearly, it’s a worry for many, not least the regulator. The ‘word on the street’ is that the FCA itself is attempting to get its head around why the ‘protection sale’ is not up there with the mortgage conversion. Given the numbers of unprotected mortgages, perhaps the regulator can envisage a future in which many people are left in financial dire straits because a) their adviser didn’t go through the options, or b) they did but the client felt it wasn’t relevant. But, apart from prescribing protection as a statutory part of all mortgage sales, what can it do? Could it force a protection policy on every single mortgage borrower? I suspect it would be loathe to do this but it could answer a fundamental problem.
At the end of the presentation, Steve played a recording of a call between a protection provider and a client. Now, for the provider representative this might have been a run of the mill conversation, one they have with clients every single day, but for that lady it was make or break. The reason was that the client in question had cancer, was going through treatment and needed to know that she was going to be protected and was going to have the money to support her and her family through this incredibly difficult period of her life.
If you weren’t there, or if you’ve not heard this recording, I’d suggest as an adviser – indeed, as a human being – you seek it out. The gratitude and relief in this lady’s voice when she is told she’s covered is hard to convey, but let’s just say that the word ‘relief’ in no way gets to the heart of what she’s feeling right there, right then. And that’s all come from an adviser spelling out the benefits of taking out protection and the lady in question seeing its value and going ahead with the ‘purchase’.
Needless to say that if it wasn’t for both sides of that adviser/client relationship doing this, then the outcome could have been very, very different. So, when you’re sat in front of a client and you’re perhaps both feeling apathetic about the protection offering and what it can deliver, perhaps think back to those it’s helped in the past, and those it will (undoubtedly) help in the future. This should never simply be a regulatory requirement but one that makes sense for everyone involved. We really have no excuses – let’s get on and do it.
Richard Adams is managing director of Stonebridge Group