IFAs lack protection knowledge as RDR presents 'colossal opportunity'

The protection sector has a “colossal opportunity” to expand after the Retail Distribution Review (RDR) but many IFAs lack protection knowledge and those that do have it do not use it, according to new research.

The survey also revealed that many advisers were still unaware of the critical illness (CI) oral disclosure guidelines introduced following last year's ABI coordinated project.

Clive Waller, senior partner of CWC research and co-founder of the Income Protection Task Force (IPTF), presented the results at the Protect trade body meeting.

More than three quarters of IFA firms' bosses said RDR would result in increased protection business with 59% fully agreeing and 24% partially so.

Just 12% disagreed.

This feeling is further buoyed by similar numbers suggesting they would give greater prominence to income protection (IP).

Waller described the "colossal opportunity" now facing the protection market.

"RDR is such an incredible opportunity," he said.

"The number of advisers who are going to survive on charges on investment portfolios is small.

"A lot of them are going to have trouble and the bosses know that, so many see protection as a way out of RDR troubles," he added.

The research also found many IFAs did not know the most frequent causes of long term disability claims and that they had not been informed of the CI guidelines.

Earlier this year COVER revealed that many advisers had not been given the script due to a misunderstanding between the Association of Independent Financial Advisers (AIFA) and the ABI.

The guidelines were released in the autumn having been initiated in the summer.

Around 40% of IFAs did not offer a suggestion for IP claims reasons, while more than half (59%) said they did not know if they were in favour of the CI guidelines.

"If you don't understand the causes of long term disability you can't advise on it, and sadly most advisers don't know anything about it," Waller said.

"And it gets worse, if you talk to advisers who know that stress and muscular-skeletal injuries are the causes of long term disability, when it comes to product selection they don't use that reason.

"So you've got two problems, a lack of knowledge and those that have it don't use it," he added.

Regarding the CI oral disclosure initiative, Waller concluded: "Bosses are aware of the papers but not feeding it down to advisers. That's quite fascinating."

Although not conducted for the IPTF, Waller queried many of the points identified by the Task Force's work with 100 industrywide IFAs.