With the Insurance Distribution Directive introduced on 1 October, the regulator now expects suitability assessments to be made whether the protection is advised or not.
We mortgage advisers are perfectly placed, and duty bound, to advise on the client’s protection needs. But do we, and can we?
Brokers give all our energies in finding clients the best solutions and we pride ourselves on being specialists in our field, and this is as it should be.
But should we feel comfortable if a specialist mortgage adviser were to take on complex protection advice?
We know and treasure our specialist subject, but could we enhance the service we give to our clients?
As a broker firm Austin Friars Financial developed a process to ensure that we place as much emphasis and importance on the protection needs of the client as we do on advising on the correct mortgage but, and this is very important to us, without compromising on our specialist ethos.
We make sure we separate the fact find meetings into a two-stage process.
The mortgage adviser drops some anchors, establishes a budget and gathers the soft facts.
A separate meeting is then arranged with one of our protection specialists.
In this way, the client appreciates that two specialists are working on solutions together and doesn’t see protection as an add-on.
This principle can still apply to the sole practitioner by emphasising the separation of mortgage and protection advice.
This has a number of benefits to the adviser’s business:
Segregating duties compliments and reinforces specialisation.
This means that the risk of advising clients when you have inadequate product knowledge or experience is dramatically reduced through employing another set of eyes.
The protection specialist ensures that the referral is made from the mortgage adviser and the mortgage adviser expects the protection specialist to correctly document the advice and recommendations concerning protection.
Accordingly, giving proper mortgage and protection advice as specialists reduces both compliance and professional indemnity (PI) risk to our businesses, while our clients can feel safe and secure.
When discussing mortgage needs with our clients we want them engaged, focused and attentive.
We also want our clients to be similarly inclined when we discuss their protection needs.
This is not always easy to achieve and as a result, protection can suffer as an afterthought.
By separating the mortgage and protection advice we do not overload the client with information. We keep the initial fact find meetings shorter and manage our own and the client’s diaries more effectively, resulting in saving time, and money, for both parties.
Proper mortgage advice, as well as proper protection advice, produces the best value for money for clients.
Satisfied happy clients refer other clients and the businesses are all the better for it.
The segregation of mortgage and protection advice into two specialist areas, working in unison, will promote protection advice to a level that equates it with mortgage advice.
This ensures that the adviser and our clients both benefit from the reduction of risk, saving time and creating value.