Networks and support service firms are looking at new ways to help pensions and wealth-focused advisers bridge the protection gap and tap into a much-neglected market.
Experts say the reticence of some firms to engage in protection advice is yet another symptom of the industry’s shift towards older and wealthier clients that was sparked by the RDR and the move to adviser charging.
They warn that this change could be costly for younger families who are left unprotected and disenfranchised as the financial planning world has left them behind.
Yet advisers do recognise the importance of protection, even if they are not choosing to engage in the market themselves.
Research by Royal London this week found that 74 per cent of IFAs believe that consumers are not addressing their protection needs early enough, and 87 per cent believe that income protection is undersold.
Advisers cited the main barriers to recommending the product as a lack of awareness of this type of insurance among clients, but also affordability, despite the fact that for younger customers, income protection is typically cheaper than a monthly gym membership.
From creating centralised teams to taking on cases for advisers who do not want to write their own protection business to introducing technology that speeds up the process for those who do, networks and support services are testing different approaches.
Putting the puzzle together
Openwork mortgage, protection and general insurance proposition director Paul Shearman says that two major innovations have helped the network to post double-digit protection business growth since 2015.
The innovations include iPipeline’s Solutions Builder, which launched with Openwork as its first client in 2015 and allows advisers to view multiple protection products on a single page, based on a one-screen questionnaire. It also includes XRAE underwriting software to refine quotes based on a client’s height, weight and smoking status.
In addition to this, Openwork launched personalised risk reports which highlight to mortgage applicants their chances of death or critical illness during the term of the mortgage. Advisers can also choose to outsource the administration of a protection application to LifeQuote, or they can hand the whole case over to a central team of seven protection specialists who work at Openwork’s Swindon office. The network also gets all mortgage clients who choose not to buy protection to sign a declaration explaining that they understand the risks.
While pensions and wealth advisers can also benefit from these innovations, Shearman says the network has taken further steps to link up with providers that have greater appeal to an IFA’s typical client base. These include The Exeter, which has managed and impaired life products for customers with health conditions that are more likely to occur among the older demographic of clients that advisers tend to deal with.
But training and succession planning are also key for Shearman.
He says: “Quite a few of our wealth firms have brought new advisers into their businesses, sometimes even their own children to pick up the reins. In many cases, they have started them off with protection. We have got our academy programme so we can train those individuals. Fundamentally protection is the cornerstone of financial planning and financial advice, and therefore it is a great place for younger advisers to cut their teeth before they get involved in the wealth market.”
Technology over targets
Intrinsic mortgage network managing director Gemma Harle says cashflow modelling tools such as CashCalc, Voyant and Money Scope help advice firms to identify gaps in protection for clients.
She says: “We don’t set targets for protection, but we review a lot of the advice and we would expect firms to have considered protection as part of that. Sometimes where IFAs do annual reviews they do not use that as an opportunity to delve further into the protection area. They should not just be looking at the investments but also any changes in circumstances.”
She says that advisers who do not want to carry out much protection business can refer to others within the network, but the ideal solution is for members to employ a specialist protection adviser within the firm. Roadshows and online training webinars are also important in developing advisers’ skills, she says.
Head of protection at Paradigm Mortgage Services – part of Tatton Asset Management, which also operates a discretionary fund manager and adviser support service business – Mike Allison believes some advisers are put off by an overly pessimistic and outdated view of the protection market, and so a big part of his job is challenging this.
He says: “Quite often it is down to perceptions about how difficult the underwriting process is, but over the past five years, a lot of providers have changed their stance to help grow the market. There are the myths that insurers will not underwrite people who have diabetes or those who have had previous medical conditions.
“Nowadays, a lot of providers are more empathetic to those customers and therefore the opportunity to sell those products is greater than the perception of some IFAs.”
As well as running events to educate advisers about the protection market, Paradigm also offers its member firms free access to iPipeline’s Solution Builder, he says.
Sesame Bankhall executive chairman John Cowan says the network is planning to set up a centralised protection desk over the coming months that advisers can use if they do not want to write this type of business themselves. But he argues that it is far better to educate advisers about the potential for growing their protection business than to try to force them down a particular route with targets.
He says: “As IFAs have focused on becoming highly qualified post-RDR they have focused on pensions and investments and almost by definition they are reaching an age demographic of people, leaving those who have a lower value of assets disenfranchised.
“But ultimately [a network] is a lot of autonomous businesses and we do not control what they do, so it is about raising awareness.
“You are building real value in your business and a succession plan if you can make a link to the next generation.
“They are going to inherit the money in the future, so it is a virtuous circle and it makes sense.”