The old adage of protecting what you have and then invest the rest has never been truer, writes Tony Müdd
At St. James's Place, protection has always been an essential element of our proposition, since the formation of the company nearly 30 years ago. Today, we see no diminution of the need for cover. In fact, quite the reverse.
We do however continue to identify a gap in giving as much protection advice as is needed. As a wealth management business, we are not alone in this and we are determined to address it.
For all too long it seems that the whole distribution landscape has been polarised in its outlook. If you go back as far as 2015 and look at the FCA paper on vulnerable customers, signposting is mentioned. However, signposting is not just about helping vulnerable customers. It is there for all customers when a protection need is identified.
The more I ponder about it, the more I struggle to square the circle. How do you develop a strategic investment policy for a customer having understood their goals without protecting what they have already accumulated? How could you advise a client to accumulate funds into a pension without protecting the source of funding? Two simple examples of many. The old adage of protecting what you have and then invest the rest has in my view never been truer.
More recently than the FCA paper, there has been a great deal written about signposting with Professional Adviser's sister title Cover holding the flag and leading from the front on the subject. Roy McLoughlin and our own David Mead have in recent months spoken and written on the subject. But is the message really getting through?
To present the case for signposting I think that you only have to look at the benefits of signposting rather than just ignoring the protection need.
- The client and their family are protected. Most importantly, this must be at the top of the list and if ever there was a time that this is at the front of people's minds, it is now. Just look at the numbers of Covid related claims that have been paid by the various providers. The industry has stepped up to the plate. In addition, the recent ReMark study reported that two fifths of adults have changed their minds towards life and health risk. These products are becoming more desirable and that is not something I thought I would have written in an article!
- By passing a client onto a specialist the wealth adviser is able to concentrate upon on what they are good at and manage the portfolio on behalf of their client
- You are meeting your obligations as a holistic adviser by trying everything possible for the client, whether they are vulnerable or not, so the regulatory risk is lower for you
- By fulfilling all the client's needs you have a lower chance of losing the client to somebody else who may offer the complete holistic service. Or even worse, the client shopping around online which could result in them having incomplete cover, poorly constructed cover and little chance of an appropriate trust being in place
- From a cash flow viewpoint, you would still receive an additional income from a protection sale due to commission splitting
At St. James's Place, we are not just paying lip service to signposting. We have put our money where our mouth is and in 2018 acquired FutureProof. With this capability, we have developed and launched SJP Protection Planning.
This is an in-house specialist protection service available to all our partners. If for any reason the partner is unable to provide the protection needs required, they can refer the client to them. This in-house service shares the same values and culture. The team believe in long-term relationships with the client. They only undertake protection advice and ensure that a client is fully protected, complementing the role of our partners providing wealth advice.
In addition, we recently undertook a series of webinars for partners who either had not provided protection cover to their clients or where protection represented a small percentage of their business. We had over 200 partners register and follow the webinar.
As I write this, I am convinced more than ever that too many advisers across the board are failing in their duty of care by not considering their clients' protection needs. I am not suggesting we have completely solved this age-old issue but at St. James's Place we now have a simple mantra. Either write it or refer it. Do not ignore it.
We would encourage all the distribution landscape to follow this lead.
Tony Müdd is divisional director, development & technical consultancy for St. James's Place Wealth Management