"There will always be clients that may decide to not take out cover, but in the new Consumer Duty world, there shouldn’t be any advisers who are not at least broaching the topic of protection with their clients. "
It has been just over a year since the FCA first introduced its Consumer Duty legislation, which placed greater onus on advisers to ensure positive outcomes for all their clients.
Its implementation has meant advisers are now compelled to look at more protection options alongside the mortgage needs of their clients and make sure they adopt a holistic approach to each of their clients’ borrowing – and other financial - needs.
Historically, general insurance and protection products such as life insurance, income protection and critical illness cover have often been overlooked during the advice process. In many cases, protection advice has even been siloed, offered by advisers working outside, or independently, from the mortgage process.
In addition, knowledge of protection products among consumers has also been relatively low, with many unaware the products even exist, while others assume they are too expensive or do not understand how they work or why they may be needed.
With the aim of Consumer Duty being to change this mindset, it is imperative mortgage advisers raise the issue of protection with their clients during the advice process. If not, then the best thing to do is to refer them to someone who can.
Taking out a mortgage is one of the biggest financial commitments many of these people will ever make, so highlighting the importance of protecting that income, or the person earning that income, is crucial.
Asking clients how they would meet mortgage repayments if they fell ill or were unable to work is a simple way of raising the topic. Similarly, drawing comparisons between other types of insurance such as home, car or pet cover can also help them to gain a better understanding of the impact a loss of income could have on their lifestyle.
Just over one year on from the introduction of Consumer Duty, advisers should already have implemented these changes into their daily discussions with clients. This means having a conversation about what protection is, why it’s important and why the client might benefit from having some in place.
While this may not necessarily mean providing the actual advice, it should at the very least mean raising the topic and utilising the referral options available if they are unfamiliar with this area of the market. If not, the adviser could be putting themselves at risk of receiving a complaint from a client.
As well as avoiding action from the regulator, raising the need for clients to have protection in place can also open up opportunities for advisers to grow their business and generate more income. Whether this is by upskilling and giving the advice themselves, or by referring clients to specialist advisers such as those within a network.
In fact, the referral process can be an excellent way for advisers to continue to generate a passive income long after they have retired, as they will continue to be remunerated for any repeat business in the future.
Given the fact that clients’ needs and circumstances are always changing, this can help prevent the client going elsewhere for their protection needs and safeguard the loss of potential income for the adviser.
Inevitably, there will always be clients that may decide to not take out cover, but in the new Consumer Duty world, there shouldn’t be any advisers who are not at least broaching the topic of protection with their clients.
For those who are not yet comfortable with advising on their clients protection needs, referring their clients to a specialist at The Right Mortgage & Protection Network can help. This will ensure their client gets the advice and outcome they need while also enabling the referring adviser to secure a regular income.
Having the conversation early will not only help to ensure advisers are doing their job and fully meeting their obligations in this Consumer Duty world. It will also help to educate consumers on the importance and workings of protection cover and increase protection sales.
