Menu protection plans will help advisers combat the increasing competition in protection business from non-advice distribution channels such as supermarkets, according to Defaqto.
The research company’s latest report – Menu Plans – The Protection Platform – says advisers need to focus on providing long-term solutions for their clients and argues menu protection plans will be an important tool in enabling advisers to demonstrate they are adding value.
It believes the industry should develop a platform proposition to allow investment, banking and risk products to be managed on a single platform because, it argues, developing separate platforms for each area is inefficient and does nothing to encourage holistic planning and efficient future-proofed advice.
Evidence from providers is that menu plans are not succeeding in encouraging the take up of multiple covers at outset, but Defaqto suggests this is partly because of the unhealthy reliance of the protection market on mortgages to drive sales and partly because current plans still have fundamental shortcomings in some of the component covers.
To maximise its potential, the firm says the menu proposition needs to provide an integrated life, health, asset and income protection proposition with medical expenses cover added to the bill of fare.
Further, it states guaranteed insurability options are essential if a menu is to provide a long-term flexible solution.
Nick Telfer, head of life and protection at Defaqto, says: “Financial advisers concerned about price competition from direct writers like Tesco and Sainsbury’s need to position themselves as advisers, not simply product sellers.”
Unless IFAs are successful in differentiating themselves this way, Telfer claims the likelihood is the overall quality of cover will slip, products will become increasingly similar and consumers will suffer from poorer cover and tighter underwriting.
Defaqto believes the menu concept is far from maturity and is likely to develop significantly as providers and advisers increasingly recognise the significant advantages to providers, advisers and customers in a more advice-led approach to protection planning.
It says menu plans require skilled advice if they are to offer genuine long-term solutions for clients and, for intermediaries, menu plans offer considerable opportunities to write their business on a more profitable basis by significantly reducing the administrative burden.
Telfer adds: “Investment wraps are the role models for protection menu plans. Much has been done by both providers and intermediaries to develop this market but until the menus on offer are all-inclusive with the gaps and overlaps removed, the plans will remain more ‘bill of fare’ than an integrated menu.”
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