Quite a few I’d guess.
By now you will have either ‘moved into protection’ or not and no article, this included, is going to make you suddenly start thinking seriously about protection and the other insurance opportunities if you haven’t already done so.
This article then is for the mortgage advisers who have already ‘converted’, the advisers who have embraced protection as a part of the advice they give to their clients and who now want to take it to the next level.
Mortgage advisers, amongst all financial advisers often have the most transactional of relationships with their clients when contrasted with other adviser types.
Remortgages have helped improve the basis of the relationship with clients through more regular contact, but if your FSA permissions do not only allow to advise on investments then, whilst there may well be an income stream from referrals (and it may be part of a reciprocal arrangement), in truth such arrangements don’t deepen the importance of you to your client.
Advising on and arranging protection cover therefore represents more than just another line of income, it also represents an opportunity to increase your importance to your client. However, for that to work it has do be done well.
Long before regulation, a good friend of mine once characterised the mortgage broker role in insurance as one of “slipping a little life insurance into their clients pocket as they passed through a mortgage transaction”. As I look at the market statistics, it is clear that some, but certainly not all mortgage advisers, also bolt on some critical illness cover and a lot less also arrange some form of income protection.
It’s interesting when you look at the numbers of sales of life insurance, critical illness and income protection – the volumes are the inverse of the statistically most likely to occur.
Of course, such statistics have no relevance to individuals’ purchasing demands or their particular needs or priorities. The truth is that customers buy the cover for the ‘thing’ they feel would be the hardest for them/their family to cope with financially – death.
Talking to clients about the more complex cover than ‘simple’ life insurance is one thing, dealing with the significant increase in costs above life insurance is another, and practices among experienced, successful advisers have emerged over the years, which have proven very successful – for the customer and for the adviser.
The first is ‘never assume anything’ or as it was in old parlance ‘ski down hill’. A proper fact-find including individual’s personal ‘risk’ priorities followed by a presentation of the Key Features for each type of cover and then the cost is a great investment of any adviser’s time. Even if the customers pocket doesn’t stretch to them taking all they want, they may take at least some if they understand and appreciate the benefit of the cover available.
The second is all about getting the amount of cover right. That’s easy when you are dealing with just the mortgage debt, but the really successful advisers extend their advice beyond the mortgage debt, particularly where a family is involved.
It could be the case for many advisers that if all the customer is concerned about is putting in place life insurance and you stop at the mortgage debt the family home is still probably at risk – once all the other costs of owning and running a home are added up. And whilst it’s unlikely and unrealistic that you can establish the perfect amount of cover for all, building in some additional cover on a fully-advised basis as a contingency is certainly better than nothing.
My advice having observed this market for over 20 years:
1. Embed this ‘customer care’ or ‘ski down hill processes’ in your business culture so that if the market volume grows your business grows too, and don’t just end up giving less advice to more customers. I suspect that if you really embrace the needs of families, your business will grow whether or not the market does.
2. The quality of your advice and breadth of your service is what will differentiate your business from the competition customers, which is self-servicing through the growing number of non-advised services.
3. Protection income works differently to client fees and proc fees. If you take your commission on an indemnity basis don’t forget to set aside a provision for clawbacks. Failing to do so can cause businesses to fail and everyone has to accept that customers circumstances can change.
Richard Verdin is protection director at Aviva
