Errors can easily be made when selling LTCI, so the introduction of a specialist training organisation would help advisers and their clients, says Owain Wright
A client walks into your office, and proceeds to tell you her mother is in a care home with severe mental impairment. The mother owns half of her house, valued at £300,000, the other half having been bequeathed to your client and her brother on their father's death. She has capital of £11,000, income of £7,000 a year and faces care fees, according to the local authority, of £26,500 a year.
She carries on providing you with information for half an hour, then proceeds to ask you a barrage of questions ranging from what the local authority are allowed to charge, the best way to meet the care fees, the Government benefits that are available and many more besides.
In this case, as the adviser, would you feel comfortable taking responsibility for this person's financial circumstances?
If I were to tell you that there are two pieces of information in the above scenario which could mean the person in question will not have to pay her own care fees, would you still feel comfortable?
The long term care insurance (LTCI) sector is one of the most complex areas of advice in our industry at present and this fact linked to the relative immaturity of the sector means that mistakes are easy to make.
The products themselves are probably the most simple component of this complicated sector yet just a week ago I encountered an adviser from a large bancassurer attempting to sell a purchased life annuity to a client at four times the cost of a care fees annuity.
If this sort of mistake can be made at the product level, then what will be possible when some of the more complicated subjects such as notional capital rules, continuing care legislation or shared beneficial ownership raise their heads?
In an advice-oriented service industry, knowledge is everything and exams are a vital component for increasing an individual's knowledge. The present LTCI exam is G80 and for such a complicated sector the title alone ' long term care, life and health protection ' perhaps suggests that the exam is not the shining pinnacle of achievement that it could be. There is cause to suggest that a standalone LTCI exam would be advisable.
Exams alone, however, will not be enough. The model set by G60, the advanced pension exam, could well prove suitable for the LTCI sector with financial services organisations insisting on appropriate exams to be held before advisers can give advice.
Similarly, financial services companies might consider making membership of a non-profit, specialist training organisation such as IFACare, compulsory before advice on LTCI matters can be given.
This is a growing market which makes a wide and varied number of demands on advisers. At present a vulnerable sector of the public are in danger of receiving bad advice from unregulated, inexperienced and poorly-trained advisers.
