COVER editor, John Brazier, takes a look at Lang Cat’s recent report on the UK advice gap to see if there is anything new to be gleaned into how the protection sector can address the aperture between those who engage with advice and those who don’t.
The protection gap is old news; it's all about the advice gap now. While many in the protection space still focus on Swiss Re's £2.4 trillion figure or various reports that highlight what percentage of the UK population aren't covered by any form of protection policy, there is another gap to mind.
Depending on where you look, some say the advice gap is narrowing as the industry modernises and releases new products that are more focused on specific consumer needs, while sales of new policies continue to grow year-on-year in what can only be a positive trend for the industry and customers alike.
So, the advice gap has become the focus for the industry as the biggest obstacle to getting more people covered and financial services consultancy Lang Cat released an in-depth report last week examining the extent of the divide, the current drivers behind it and, importantly, what can be done about it.
The caveat to make here is that the report covers the UK advice profession across financial services (FS) sectors, so this isn't protection specific, but also includes wealth and mortgage advice too - protection inclusive, if you will.
The headline of the report - which you can read in full, if you're so inclined - is that there are three primary barriers to consumers accessing advice: a lack of awareness of advice itself, where to find advisers and low confidence in managing money.
As Lang Cat notes: "The advice gap is not simply a question of who is and who isn't receiving paid-for advice. If the advice sector wants to increase the number of people paying for advice, it is vital to understand what is preventing the majority of the adult GB population from doing so."
One day at a time
I'd like to think, given the conversations I have heard and been part of so far in the protection space, that this particular slice of the FS market is fully aware of these barriers to greater protection take-up. So, let's look at those three barriers and how the protection sector can address them.
First up is the awareness of cover; this is an obstacle the industry is well aware of and has taken measures to alleviate, the most obvious of which is the promotion of signposting/referrals to advisers who may be better placed or more knowledgeable to handle specific consumer needs.
Working with adviser cousins in other sectors, such as wealth or mortgages, will go a long way to help more consumers reach the right adviser for them, while embedding signposting into other financial journeys - such as rental agreement processes or general insurance purchases - will also help expose more consumers to protection advice.
As to the issue of how people engage with advisers in the first place, that's a trickier beast to wrestle with, but the second challenge highlighted by the report, and what the industry is doing about it, should also help here.
Next up there is how and where to find advisers. In my opinion, I believe advisers are doing a good job of promoting their expertise through traditional and new channels, and the elevation we've seen on this - particularly on social media - is marked even in the past two years.
Instagram, Twitter, TikTok, LinkedIn, Facebook, YouTube…advisers are all over these channels. Although you may not agree with their messages or how they choose to portray themselves, they are growing awareness of advice, products and the market, especially in an area where younger consumers go first for information and recommendations.
Educate to elevate
Finally, there are consumers lacking confidence in managing their finances, something we all have probably felt to some degree at one stage or another. Many advisers in our space bemoan the lack of financial education taking place at schools, meaning many teenagers are thrust out into the world without a basic understanding of how money matters work.
As such, an increasing number are taking it upon themselves to visit schools to talk to students, both early and late, about protection policies, advice and personal finance issues - essentially providing knowledge directly to youngsters to better arm them against ignorance and low confidence while at a formative age.
One could make a solid case that introducing a financial education class from Year 9 (i.e. from age 13 onwards) would have a far more constructive impact on young generations than extending the requirement for students to learn maths up until 18 years old could ever achieve.
Taking all this into account, what should the protection advisory space take from this report?
First of all, we need to acknowledge that the gap is real and shouldn't be dismissed; people are struggling with the cost of living and the fissure between them and the advice profession could become an insurmountable divide if ongoing efforts are allowed to flag.
The protection space has the tools and the knowledge to help reduce the advice gap, and knowing the passion that so many intermediaries have for their work, the challenge will simply be to keep on keeping on with what they are already doing.
Jas Briah will also be looking into what role technology can play in helping reduce the advice gap in the protection space in a COVER feature coming soon.
