Regulation: Intermediaries must offer failsafe advice if they are to avoid mistakes
Intermediaries trying to predict how the protection market will look post Financial Services Authority regulation are likely to make mistakes, warned Tom Baigrie, managing director at LifeSearch.
Speaking at the recent COVER Protection Forum, Baigrie set out a number of steps he believes advisers should take in order to prepare themselves for the changes, which come into effect in January 2005.
Baigrie warned delegates that it is impossible to predict what will happen under the new regime and stressed the importance of quality advice. "Those who predict, make mistakes. Change always leaves the old certainties looking wrong. As advisers we must set about ensuring that the advice we give is failsafe in hindsight, or we must stop giving it," he said.
Baigrie also outlined four stages of regulation. The first two stages, he said, consist of trying to prepare for the changes and attempting to be failsafe. The final two stages occur when regulation is in place, and this is when those who predicted the outcome of regulation may find themselves in trouble.
"Advisers too often provide customers with what they ask for," said Baigrie. "However, if you don't know what you are talking about, then the solution is simple. Do not advise."
Baigrie warned that while it is possible for advisers to weather the storm once the regulatory regime has been established, the size of the industry would have reduced significantly as a result. He also outlined the increased threat from the retail sector.
"The bancassurance sector is not about quality of advice. A bigger share of the protection market is going to non-advisers. However, this will only flourish if the product becomes too simple and commoditised," he said.
Baigrie added that it is actually better for clients to have done nothing in terms of insurance and quickly realise they need cover, than believing the wrong cover will protect them from future mishaps.
Intermediaries wanting to steer clear of the most common pitfalls should note that there are ten ways of avoiding the Financial Services Ombudsman, he said. They include taking into account the type of policy recommended, the number or conditions covered by that specific plan and making sure the client knows the term of the policy.
