For as long as I can remember, the advisory profession has been grappling with how it can make a dent in the ‘protection gap’; a particularly tricky chasm to span given that the majority of advisers’ focus on the borrowing requirements of the customer, far less than their protection needs.
The question is – how can advisers ensure that, while they are sorting out the primary objective of their clients, namely their mortgage finances, they don’t fall into the trap of brushing over their protection needs?
This is not a new quandary for individual advisers, their firms, or the industry at large, but it is one which – as the years go by – we still don’t seem to have a hugely effective resolution for.
Of course, I’m generalising here. There are large numbers of firms – many within our network – whose protection penetration rate is an enviable statistic at the best of times. Analysing what these advisers/firms do in order to achieve this tends to illicit one common theme, i.e., they actually spend time with their clients specifically discussing they protection needs and they are professionally insistent about doing that.
I don’t mean aggressively selling or pushing product, which never works in the medium term, but thoroughly reviewing their lifestyle/job prospects/family situation and everything else, and looking at where protection might be required, what it could deliver, and what it might mean to that individual and their family should they ever need to claim upon their policies.
Overall, it’s not difficult to see how important protection is to clients. Recent statistics from L&G showed that most family units in the UK have savings of just £1,205 to fall back on; over a third have nothing in reserve at all. Take a regular income away from these families – be that through job loss or illness or death – and you should be able to understand quickly what is at stake.
And yet, we are still at a point where (according to Mintel) 58% of mortgages have no life cover at all, and vast numbers of families would find themselves in real economic difficulty should they lose their breadwinner.
We understand it is often a tricky conversation to have, but there are so many cases and evidence now to show how that conversation resulted in a positive outcome for those who took out a policy, that it seems ridiculous not to be choosing it, regardless, of what state of mind the client is in when it comes to their mortgage and whether they like the cost of protection alongside it. As has been proven many times before, any cover is better than no cover.
This is especially the case for those perhaps jumping onto the housing ladder for the first time. To even get to that point can mean a financial leap that seems a scary business, but the conversation still needs to be had, perhaps focusing on the positives of protection to these younger clients rather than a doomsday scenario.
Some providers now provide a range of added-value services with policies, such as cheaper gym memberships/health and fitness offers and family-focused discounts.
We all know that when you have your life ahead of you, outcomes such as job loss or ill health – regardless of the fact that they happen to people every single minute of every single day – can seem like they’re never going to happen to you. So, it can require a two-prong ‘attack’ on advisers’ part, to highlight the importance of protection when things do go wrong, but also the clear benefits that policies provide.
The important part in all this of course is to have that thorough conversation, and even if you’re not going to write the business yourself, refer to a specialist who is.
What we’re able to do as a business is facilitate the preferences of our member firms when it comes to the protection gap. That’s not only providing encouragement and practical support, but some considerable and tangible benefits in terms of provider/product access and the commission rates we deliver reflecting our size and the performance of our business.
If advisers are making the appropriate efforts in terms of highlighting their protection proposition to clients and making the real case for cover, then the least we can do is ensure they have the very best of everything protection-related to deliver to their clients. It’s also why our recent annual conference focused on tackling the protection gap, outlining how the best firms provide cover, and looking at how every single adviser can ensure they are doing their best protection work with every single client.
With a clear focus and a genuine commitment to talking to clients thoroughly about protection, we can start to close the gap – consumers deserve it from our sector.
Rob Clifford is chief executive of Stonebridge