With a passion for promoting advice and doing right by consumers, Tom Baigrie talks to Angela Faherty about the protection market
Arriving in the UK at the tender age of 20, South African born Tom Baigrie had the world of protection at his feet. Today, 24 years later, he is a respected expert in his field.
It was while working as an independent financial adviser addressing the protection needs of high net worth clients in the late 90s, that Baigrie realised the market was missing a trick.
Aware of an opening for an advisory firm that would reach the whole market rather than only those rich enough to pay fees, Baigrie set out to create a service that offered advice from a low-cost operational base. The result was LifeSearch.
Baigrie says it was an awareness of the common mistakes and over simplifications people make when buying protection products that prompted him to make the move.
"The experience made me certain that the most important aspects of financial planning that any individual undertakes are the basic protection elements to secure their family's financial position," he says.
Delivering advice in a low-cost format by telephone and email, Baigrie is keen to stress he does not run a call centre operation. All members of staff answering calls at LifeSearch are trained and qualified professional advisers, fully capable of offering advice to callers.
The firm has 85 members of staff, with an additional 30 employees working for its sister company, Baigrie Davies. Last year the group's profit reached around 6% of turnover of £10m, which Baigrie views as the first fruits of the firm's long-term approach.
Baigrie considers LifeSearch to be a market leader in the protection industry and while competition is fierce, he is confident it will remain ahead of the game.
When LifeSearch first started out, its main competitors were Marks & Spencer and Virgin. The only operation similar in approach was Direct Life & Pension Services. Baigrie says all three are now very low on the firm's competitor radar, the latter in particular as the large majority of its business does not come from the direct consumer market, it comes from introducers.
Awareness
LifeSearch's, and indeed, the entire advisory community's competitor situation has changed since those early days, with the main threat now coming from non-advising supermarkets and insurance company websites, much to Baigrie's dismay.
"They are not giving professional advice, nor are they choosing from anything like a complete product range and therefore the customer is infinitely worse off by dealing with a brand name rather than an adviser," he says.
Baigrie says the most obvious example is in the case of a young family where family income benefit would be a key form of protection, but this is never mentioned on websites. Furthermore, he says, no one should buy critical illness cover if they haven't considered income protection (IP) first, yet IP is rarely featured on these websites either.
"Our main competition now and going forward will arise from the current view that protection is an extremely simple product, suited to being sold like a commodity and being bought off-the-shelf. This is our key battle in 2005."
While Baigrie admits that consumers should be granted the option of buying off the shelf, he stresses the need for such products to come with a heed of caution.
"We feel that non-advice purchase decisions should come with a risk warning. We should not deny the consumer an option, but they should be made aware that what they think is simple, is not. Buying without advice is folly," he says.
Baigrie's passion for the need for advice in the protection market is clear, as is his business acumen and desire to do good, the evidence of which can be seen through LifeSearch's recent initiative, LifeSearch Care. Through the service, its customers are offered free access to the professional nursing advisory services of Red Arc.
"We wanted to reach clients at the point of their maximum level of trauma, whether that was bereavement, illness or disability. It is then that individuals and families need to speak to someone who knows what they are talking about. The NHS is too busy to satisfy anything other than medical needs," he says.
Providing services that range from care guidance to arranging counselling sessions, the service is determined according to individual need. It is not limited solely to claimants or to policyholders of any one insurance company, but is available to all LifeSearch customers. The reasons for offering the service are obvious, but financially, it is a risk.
"In terms of customer service it was a no-brainer," explains Baigrie, "but the commercial costs are considerable and can only be justified if it differentiates us from our competitors and wins us more business as a result," he says.
Baigrie adds that vital to its success is overcoming media and consumer cynicism about special offers. "It will be hard going to get through this, to reach a point where people understand the genuine value of what LifeSearch Care can offer," he says.
But in a market where cynics are paramount and challenges par for the course, Baigrie relishes having the opportunity to change the way people think.
"The key thing for advisers working in this market is to accept that protection is not a quick and simple sale. A client's need has to be addressed. The zeitgeist leads consumers to expect a completely price driven purchasing decision, they have no expectation of getting proper advice or speaking to someone who is capable of addressing their needs. What we are trying to do is change that," he says.
Challenge
While Baigrie hopes that the arrival of Financial Services Authority regulation will help sift out those half-hearted advisers, he does have some concerns over the direction the market is taking.
Chief among these is that regulation will almost certainly drive up the cost of advice long-term, while not doing so on the non-advice side. This could create a pricing disparity between the off-the-shelf 'seller' and someone trying to do a professional job.
"This would be disastrous for the UK consumer because they would be offered a chance to buy cheap, which would be very attractive. But if you buy cheap, you buy twice," he warns.
The rising threat of retail brands aside, the landscape for the protection market is likely to change significantly over the next five years. Much like other markets before it have, post regulation. But Baigrie thrives on the challenge and remains focused on the protection market.
He says that LifeSearch's percentage share of the sector is still quite small, and while diversification has been explored, LifeSearch's unique approach means it is focusing all its energies on increasing its market share, not broadening its product range.
"My personal key challenge is to prove my worth to the business by getting the market to understand the importance of advice in this area and change consumer perception. Particularly as we expect non-advisers to grow their share of market unless the regulator understands the need for advice and acts accordingly. My hope is that it doesn't take a mis-buying scandal to trigger this," he says.
