Financial services are often referred to others with more expertise, so why is that less frequently the case with financial planning and protection? Asks Roy McLoughlin
Many of us in our lives would have used the services of our sister professions being lawyers or accountants.
Indeed, arguably since the Retail Distribution Review (RDR) these two professions have increased their respect for ours and it is increasingly normal for advisers to work alongside them.
If you go to a lawyer for, let's say, conveyancing, and then ask them to do your will they will signpost you to either a colleague or quite often a different firm. If you use an accountant for a basic tax return and then ask them for an audit, they will also signpost you in the way previously mentioned.
What is unfortunately the case is that many mortgage brokers and wealth managers do not offer proactive protection advice.Roy McLoughlin, Associate Director
What is therefore surprising - and concerning - for our industry is that for the large part this cross-fertilisation does not tend to occur. Historically, this may have been because advisers were more of a one-stop-shop, but with the increasing complexity and variety of product types, financial services has seen these roles splitting.
As John Cowan, executive CEO of Sesame Bankhall, correctly argues, this was always going to be an inevitable consequence of the RDR. Therefore, there are large numbers of advisers who use the title mortgage broker and an equally large number who use the title wealth manager or financial planner.
Halfway house
Sitting in the metaphorical hinterland are protection advisers; some of whom will naturally overlap the other two. What is unfortunately the case is that many mortgage brokers and wealth managers do not offer proactive protection advice.
From speaking to large numbers of both parties, there are varying reasons for this lack of appetite. However, from a positive point of view they both acknowledge the important role that protection has to play.
This situation has been exasperated by the regulators insistence on Insurance Distribution Directive (IDD) and advisers need to demonstrate protection knowledge if the intention is to discuss the subject.
It is also just over five years since, on 3 February 2015, the FCA shared its vulnerable customer thinking in its Occasional Paper 8, highlighting a number of best practice drills: one being TEXAS with the S standing for 'Signposting'.
Many in these two groups argue that they are time-poor and would rather continue to specialise in their subject, which brings us to the analogy of the lawyer and the accountant and thus the subject of signposting has thankfully come to the fore.
The theory suggests that if you truly do not wish to advise on protection, then it would make sense for your clients to have the facility to refer such business to a specialist. What is already evident is that, faced with this question, some mortgage and wealth advisers have quite rightfully looked at whether they should be setting up internal divisions to advise on it themselves.
We have already seen the spectacular conversion rate of one of the industry's biggest wealth managers, who went out and purchased a protection specialist and are now doing vastly increased levels of protection.
Thus, if a consequence of everyone discussing signposting is a result that some of these firms take this route then it arguably achieves the same results. In reality, many smaller ones will probably be better forming strategic alliances with protection firms, while some of the bigger ones may decide that staying in their specialisation is where they should remain.
Where next?
The vital point here is that where signposting ends doesn't matter; it is the fact that 25,000 advisers have protection at the forefront of their minds.
If this crisis has taught us anything, it is the reaffirmation that sometimes things do go wrong and that the generally positive advice of buying a house or investing in a pension or ISA should be considered alongside protecting the situation.
So far, we have not heard too much scepticism about signposting - instead just some questions about the practicalities. These will have been the same types of questions that lawyers and accountants were faced with, so it would be great to reach out to mortgage advisers and wealth managers to investigate next steps.
A welcome unintended consequence of signposting will be that greater bridges will not only be built within our industry but more importantly to the consumer.
When you have a government frequently mentioning income protection and life insurance at the dispatch box, the public will arguably have an increased awareness and desire to source more information.
If they suddenly realise that their mortgage broker and wealth manager can help them, all that will do is strengthen relationships.
Another buzz expression that has emerged is ‘intergenerational financial relationships', which complements this extremely effectively too, as different ages sometimes require different advice.
I would also add private medical insurance (PMI) and employee benefits consultants to this list, as arguably both of these specialists will have similar situations.
Finally if we do not signpost, what are the consequences? It's very straightforward: too many people will continue not to have the cover they need and that, we believe, is not a situation that anyone agrees is a good outcome for anyone.
Roy McLoughlin is the associate director of Cavendish Ware and co-chair of the Income Protection Task Force
