The Financial Conduct Authority’s (FCA) proposed consumer duty means advisers can no longer avoid having conversations about protection, but they should treat incoming regulations as a positive intervention in client conversations, according to two networks.
They believe these new responsibilities can be the trigger to start talking about income protection (IP) and when advisers do so, these conversations can be mutually beneficial for customer and adviser alike.
Speaking during Income Protection Awareness Week, Paradigm Protect and The Right Mortgage & Protection Network urged advisers to embrace their regulatory responsibilities and use them to emphasise their duty towards customers.
TCF on steroids
Mike Allison, head of protection at Paradigm Protect spoke about the FCA’s new consumer duty, in addition to the existing Treating Customers Fairly (TCF) approach, which the regulator is set to impose on advisers that will ensure they are operating in the customer’s best interests at all times.
Allison explained that the rules are currently being consulted on ahead of the introduction of a new rulebook at the turn of the year.
“One of the best ways of putting it, is it’s going to be TCF on steroids and is therefore going to be quite a significant change to the way in which the FCA looks at a range of products and services, but protection for once is going to be a big part of what they do,” Allison said.
While Allison was unsure whether the new rules would force advisers to discuss protection insurance, he said he understands that the rules will change “quite significantly”, with the FCA looking at four key areas – communications, products and services, customer services, and price and value.
“In those first two, in terms of products and services, it will be how advisers communicate to their clients, what is available and when they communicate, and importantly are they communicating what is advisable at the right time?” he continued.
“There will be a duty to communicate to them what is available and I think that is going to be a main change in the focus on how advisers may have to look at protection in relation to other products where they haven’t previously.”
Lean on the regulator
There were other examples where increased regulation was not necessarily bad news, as Vincent O’Connor, head of protection at The Right Mortgage & Protection Network, said advisers should see it as an opportunity.
“You can explain that regulation is a really good thing as far as the client is concerned and that’s because it protects clients and it maps out rules that advisers must follow to deliver the highest level of service and care,” he said.
“So you can explain to clients that we have a regulatory responsibility to talk about the risks associated with taking out a mortgage – that means a duty of care to you and that’s to make sure that should the worst happen, you and your family don’t lose your home.”
O’Connor called on advisers to have the conversation with clients about the risk of losing their home if payments are not met and “leaning on the regulator” by referring to risk statements which appear on mortgage documentation.
“You can tell them that these statements appear on all mortgage illustrations and on mortgage offers and they’re written by the regulator.”
Customers are more likely to use IP
And underlining the case for IP, Will Shackleton, mortgage protection adviser at First Mortgage Services, told the audience he always recommended IP because customers were more likely to use it over other forms of protection insurance.
“When you start to look at the statistics of everything there’s a much higher likelihood of your client needing to use it,” Shackleton said.
“So from a moral point of view, you’re doing the best for your client but also from a selfish point of view, you’re almost protecting yourself because you’re not inviting anybody to try and make a claim against you.
“You are providing everybody with that advice and giving them as much as possible that they can need to make that decision for themselves.”
SimplyBiz Mortgages CEO Martin Reynolds echoed the point about the importance of IP and increased likelihood of claiming on it.
He called on advisers to “invert the pyramid”, noting that while advisers tend to start a client conversation with life insurance, they should begin with IP, as customers were more likely to use it and it would enable them to continue their everyday life.
Perfect time to talk about IP
Sam Marriott, director and co-founder of CSE Financial, then threw down the gauntlet to start conversations early about this important form of protection and to invest time in learning about it.
“What I would say to anyone especially those looking to sell more income protection is really learn the market,” he said.
“Get the business development mangers (BDMs) out. Get the providers out. Look on the websites. All it is is just learning. It’s reading and taking it in. I can promise you – I’ve done it myself, it’s very, very simple once you know what it is.
“When should you introduce that mortgage income protection conversation? Really get in early. Get it in right away. You’re doing the income and expenditure anyway. It’s the perfect time to start talking about the protection side.”