Aegon's Stephen Crosbie discusses why wealth managers and generalist advisers could use protection to bolster their business models.
If we've learnt anything in the last year or two, it's that the future is very unpredictable.
Who knows what's around the corner? As the saying goes, we should probably all ‘hope for the best and prepare for the worst'.
The impact of political uncertainty caused by Brexit, the recent general election and the Trump effect, coupled with rising inflation, increased levels of debt and very low interest rates has made it difficult to know what's best for any business. And while investments are riding high just now, what if confidence slips?
Despite all of this, protection has remained constant. If you cast your mind back to 2007/8 in the depths of the recession, protection averted many an adviser business from having to shut up shop.
It provided useful upfront income and opened many doors for conversations with clients on their other financial planning needs.
In this current climate, advisers should be considering steps to future-proof their business ― and bringing protection into their business model is one way they could do that.
During times of uncertainty, another income stream for advisers could be just what they need.
Wealth advisers work hard to provide advice on their clients' financial and investment objectives to get them the best outcome. A natural extension of this is to consider how their clients would achieve their investment goals if they were unable to work or became seriously ill.
If this were to happen, not only would your clients and their family's financial security be at risk, but it would also jeopardise yours.
Protection is a core customer need that forms the bedrock of all financial planning. But with advisers often focused on managing clients' assets and producing detailed portfolio reports, the impact of the loss of the main family earner is often overlooked.
This sudden loss will almost invariably make a bigger difference to family life than a 1-2% annual loss in investment growth, even over longer time periods of 20 years or more.
Wealth advisers are in the perfect position to identify all aspects of their clients' financial needs and present recommendations as to how to address them.
And many do, but with the reduction of support from the State and the ever present protection gap in the UK, there's always room for improvement.
The ability for advisers to receive commission from protection provides the flexibility to create income streams suited to the needs of the adviser's business.
Generating either short term capital injections or ongoing revenue to create value in the firm to ultimately strengthen the business.
These additional income streams for advisers is unaffected by variations in the stock market, and can help stabilise revenue in more difficult times.
There are also regulatory aspects of the decision to add protection to your repertoire.
In the interests of demonstrating due diligence, an adviser might consider what their fact finds look like in terms of identifying the protection needs of their clients and providing the solution to meet these needs.
So what's stopping advisers getting into the protection space?
The nature of the product means it's often misunderstood. Many advisers think it's complicated and difficult to process.
This is where providers need to step up and play their part, supporting advisers who want to give it a try and to develop the next generation of protection advisers.
This is the only way to show how easy and worthwhile protection actually is, and how much support is on hand if needed.
For example, advisers have a direct line to underwriting support through the Aegon pre-submission underwriting helpline.
We get around 1,000 calls a week to answer questions on existing conditions, occupations or pursuits that might impact the price of the cover.
This is a valuable service for advisers who want to get answers quickly to manage client expectations and advise on the best course of action.
Something else that might be deterring advisers is the idea that protection might be a hard sell due to a lack of trust in providers paying claims.
The press tends to fuel this misperception and as a collective we need to rewrite the news to showcase claims statistics and stamp out any lingering doubt that insurers don't pay legitimate claims.
In reality, as an industry we've supported more than 97% of claimants and their families through some really difficult and devastating times in the last year.
The final, and probably most difficult, barrier facing advisers is that you can't really talk about protection without talking about death and illness.
It's not a subject people get into very easily and it makes a lot of people uncomfortable. But in the wider landscape of financial planning, talking to clients about this subject is part of managing their client's families' risks.
There are techniques and tools available to help you have these difficult conversations and demonstrate why protection should be considered.
Most protection providers have people who are just a call away to help advisers find the tools that can do the talking for them, as well as helping advisers develop their skills in this area.
A client might thank you one day for broaching this difficult subject with them.
Stephen Crosbie is Protection Director, Aegon
With Alex Koslowski in charge
As a result of significant increases in life expectancy, an additional 71,000 care home places will be needed for older adults spend with substantial care needs, according to a study published in The Lancet.
'Lack of transparency'
Debbie Kennedy, Group Head of Protection Proposition Strategy has resigned from Royal London.