Selling income protection as lifestyle protection can make it a much easier sale, as Phil Calvert explains
Scottish Equitable Protect is quite right to call for IFAs and providers to place more emphasis on income protection (IP), rather than mortgage protection.
The current era of low interest rates and a more proactive approach to selling protection has made mortgage payment protection a much easier sale. But with continued consumer spending and rising personal debt, it is vital much more attention is paid to protecting income ' with both IP and critical illness cover. .
Let's get back to basics. Most people are not fortunate enough to be able to live off their personal savings. Theoretically the standard of our lifestyle is proportionate to our income, but we also know people are increasingly living beyond their means. This suggests we aspire to a better lifestyle ' something normally achieved in even steps as we grow older, earn more, children leave home, and so on. But for a variety of reasons, people today want that better lifestyle now ' and we know how it is being paid for.
Funding the dream
To fund even our current lifestyle ' let alone the one we aspire to ' needs income. And for many, their homes are one of the biggest symbols of this. As part of their protection fact-find, advisers should encourage clients to talk about their lifestyle ' in detail. Ask them to describe it and tell you what aspects of it they could not live without. Clients will tell you their home is something they couldn't live without, but question them further and there will be many other luxeries they value.
The key to this line of questioning is to get clients to admit two things: first, that there are aspects other than just their home that are vital to them, and second, that their income is the key to everything they value now, and aspire to in the future.
Living on credit
The fact that so much debt is currently on credit cards is proof that we demand tomorrow's lifestyle today. Monthly mortgage payments are now considered a relatively low outgoing in the scheme of things, so why not spend a little?
If advisers only focus on just the client's home as if it is the only thing that really matters, then it's likely that only enough cover will be taken out to cover the mortgage payments. Of course, we know a roof over our head is what it is all about at the end of the day ' but through structured and open questioning, clients today will admit there is much more to their lifestyle than just where they live, for example the labels in their clothes, the holidays they take, the people they socialise with, the clubs they join, the car they drive and so on.
If you encourage clients to focus on their complete lifestyle, rather than just one part of it, this approach will make the selling of IP much easier, and will attract higher levels of cover. If you use flexible menu plans, you will find it a simple matter to encourage the client to complement their cover with critical illness ' and it will be cheaper too.
It is just not acceptable that 95% of the population have inadequate cover for their income. Mortgage payment protection is too much of an easy sale at the moment, and much more effort needs to be made to help clients see their home is only one part of their lifestyle.
What other ways are there to encourage clients to buy more from you? One way is to talk to them more often. People are spending more because stores are making it easier for them to do so, and they make it more fun ' whether it is with special offers, more attractive packaging, home delivery and so on. The more the stores expose themselves attractively to their customers, the more likely they are to buy. Once in the store, they work hard to keep customers there, and when they feel comfortable, they will buy even more.
IFAs can also do this. The key to increased profits is increased service and value. Think about how you can integrate your business into your clients' lives, and how you can become key to the maintenance and enhancement of their lifestyle. For example, you might consider offering additional services to clients you might not normally associate with an IFA firm. Once clients feel comfortable, it follows that they will do more business with you.
And if you make the process enjoyable as well, they will buy even more. A recent survey showed 70.9% of people polled would switch stores or suppliers or vendors if the new company was more fun to do business with. Critical illness and IP might not be the most enjoyable buying experience ' and there are various schools of thought on how they should be sold ' but it is worth noting some basics in store psychology and applying them to our industry.
Many in the industry will not feel comfortable with some of this, but times are changing. If we do not try some changes ourselves, we won't see appreciable differences in our own lifestyle ' let alone our clients'.
Phil Calvert is the proprietor of Training Strategies
