With the Government publicly looking to significantly cut welfare benefits spending, is it compliant with regulation for advisers to be raising clients' awareness of this and using it as a tool to increase protection sales, bearing in mind that the widows tale is not compliant?
Mark Jones, LV=
Absolutely. The role of the professional adviser is to explain to clients what risks they are running and how to protect against the financial impact of those risks. This is their raison d'être.
Cigarette packets carry the warning ‘Smoking Kills', not everyone who smokes will die from smoking but it is a perfectly reasonable message to create awareness among smokers of the extra risk they are exposing themselves to.
The cuts in welfare spending will not prevent all clients from receiving welfare benefits but it is equally reasonable to point out that with less money to go round it will reduce the chance of a client making a successful claim on the State. So it is important that clients who have chosen to rely on State benefits to manage their risk are aware of this reduction in their cover. It is also imperative to impress upon clients the paucity of that cover even if they are successful in claiming.
Frightening clients into buying protection is not the foundation for a long-term sustainable business. Disturbance selling is not the answer. People are very adept at reflecting on why it will not happen to them and subsequently cancelling the policy.
However, clients who have understood the risk and feel good about taking action to guard against that financial risk are far more likely to both retain what they have and to talk to others about why they have bought protection. That is good advice.
Dean Mason, Masons Financial Planning
I remember very clearly ‘The Widows Tale' as I am sure many reading this will do, back in the days when a ‘Training Video' was a novelty.
I also recall tales of advisers putting mini cardboard coffins on desks during client meetings in order to sell the ‘benefits' of certain types of protection.
We live in very different times now, where the client is often protected from their own decision making process (both current and retrospective) by necessary but sometimes over-zealous regulation. The government cuts in welfare benefits are very much in the public domain, but do the public actually make the connection between this and their own financial stability? Some will, probably the majority will not.
This then becomes a grey area, compliance is primarily there to protect the consumer, and rightly so. However, if we look at two of the guiding principles of TCF; ‘Receive clear information and be kept suitably informed before, during and after the point of sale' and; ‘Receive suitable advice which takes account of their circumstances', then there is a clear regulatory as well as moral case to keep your clients informed.
Now more than ever, it is not what you say, but how you say it which is important. Clever advisers can take time to explain this to clients without taking a ‘scaremongering' tone. The tricky part is how we educate those who still ‘sell', rather than advise, to handle and distribute this information, and that may be where the compliance line is drawn.
Alun Beynon, Aegon
Protection is invariably an implied customer need rather than expressed customer need and it is this fact, which overtime, has given rise to the everyday saying - protection is sold not bought. Unless the customer can express a need then he/she is unlikely to buy.
This being the case, advisers can use various strategies to help customers move protection along the spectrum from implied need to express need.
One such strategy will be to notify the customer of government plans to reduce welfare benefits and in so doing, help the customer reflect on the fact that this and future governments will become an increasingly unreliable safety net for financial support and so the need for self provision will become more acute.
Similarly, the Widow's tale can be construed as another strategy to illustrate the need for protection, or more correctly, the potential financial implications on self and family of not having any.
The adviser could also cite the use of critical illness occurrence data as another tool to highlight to the customer the importance of taking action now.
Such strategies are really a precursor to the advice process. Once the need has been recognised, the advice process will analyse the need and deliver appropriate solutions.
It is this aspect that the regulators should be most interested in.
Peter Staddon, BIBA
It is absolutely essential that the broker makes the client fully aware of potential complications which could arise following the government's announcement. Brokers should advise their clients of potential ‘what ifs' so that the client can make a reasoned judgement to protect themselves.
This was brought home in a recent court case, as explained by Mr Justice Steel, where he said "the broker must ensure that the person has an appropriate understanding" and cannot purely rely upon written documentation, but must be satisfied that the client has fully understood what they have been told.
As professionals, we must also avoid the challenge of elaborating a position which could create, within the minds of the policyholder, a scare tactic purely to enhance the sales process or to obtain irrelevant or ineffective cover.
The Government has indicated that it is happy to work with outside agencies and the insurance sector is one. We should embrace this, but the sector needs to get its own house in order first. Looking at the Ombudsman's report issued this month, it found with regard to private medical and dental insurance in favour of the consumer in 49% of the cases it saw.
This is far too high and it identifies that there is a misunderstanding of what we are selling, but even a greater misunderstanding of the insurer in what they are covering.
