Does the Mortgage Market Review (MMR) and subsequent change in the mortgage market present opportunities for protection advisers?
Mat Manser, Holloway Friendly Society
The MMR will present opportunities, because it will send more clients to advisers for mortgage advice, and will make it much more difficult for people to choose their mortgage purely on who they bank with or what they’ve seen on a comparison site.
With more people in front of them, advisers have more opportunities. This could be crucial for sales of income protection (IP) because it takes an adviser to help someone to understand that they need to protect their most important asset, their income, and because IP has to be actively sold. Anything that gets people in front of advisers is a good thing.
This could take the form of mortgage advisers selling more protection, or mortgage advisers spending extra time organising the mortgage and then passing clients to protection-only advisers.
This will be most crucial for protection products such as IP because there is more to consider than with a life policy which pays out once. IP pays out multiple times, so it needs an adviser to explain the differences, features and benefits of each policy.
IP needs an adviser to advise on what is within the product (for example, a defined benefit period or deferment period) and to explore whether the client wants something with bells and whistles or that will just pay out when someone needs it.
My advice would be to make sure you take the opportunity presented by the change rather than being a victim of it.
Mark Graves, Pink
The MMR has created an opportunity for advisers through affordability and stress testing.
The objective of stress testing is to ensure that when a client takes out a mortgage they can afford to stay in that house whatever befalls them. Protection, therefore, should be an integral part of selling a mortgage under the MMR, which has to be an opportunity for every adviser who could or should sell protection.
If a client cannot afford a critical illness plan or income protection as part of the mortgage payments, I would suggest they cannot afford the loan. If an adviser cannot satisfy themselves that the client can continue to make the mortgage payments for say a period of a year if they are made redundant or if they are off sick from work, I do not feel that the mortgage has been properly stress tested.
Many advisers still specialise in selling the mortgage as a standalone sale; a protection inclusive sales process would resolve this problem and work towards keeping the client in their home no matter what their circumstance. History tells us that most borrowers have less than one month’s worth of savings, so there is a real need for good-quality protection advice.
I believe the way to look after a client’s best interests is to make sure they have the ability to pay their mortgage, and this has to be by providing them with income protection and critical illness in numbers that we have not seen to date.
Toni Smith, First Complete
Every interface with a client is an opportunity to talk about protection. We know the MMR will bring about increased dialogue and time with clients, and presents increased opportunities to raise the need for protection.
We are not saying that every person who takes out a mortgage must take out protection, because we acknowledge that every client situation is unique and some may not require it. However, it is a moral obligation and duty of care of all advisers to at least talk about it.
With the amount and depth of information that advisers now need to establish under the MMR, they will have much more to base a protection conversation on. As the mortgage sale will take longer they will also have more opportunity to bring up this topic of conversation.
Having to go into the minutiae of somebody’s financial information will also present more information about lifestyle and expenditure. The opportunities will open up because the adviser will need to have a more in-depth conversation with the client over detailed expenditure.
It is not the advisers’ job to tell someone what they should and shouldn’t spend their money on, but it is their job to advise and recommend suitable protection and what level of protection they could get if some of their expenditure was redirected. If someone spends, for example, £15 a week on going to the cinema, an adviser could recommend that they spend it on protecting their family and give the client information to make the choice.
Michael Aldridge, London & Country Mortgages
Despite the glitches providers have had when implementing the MMR, mortgage business is good. The winners will be the clients and brokers: the good ones that have the systems in place to advise on it.
Advising on protection is no more important now than it was before. It’s always been important. However, a key mantra of the MMR has been understanding clients’ affordability more than ever, and doing detailed budget planners detail to understand if they can afford the mortgage.
The opportunity there is you have more detail than ever to understand the client’s financial position and the lack of provision they have, should they be unable to work, they or their partner passing away, or contracting a critical illness.
Having that information and sharing real facts with the client is very powerful and an opportunity to highlight to clients why they must consider it. Clients often don’t want to face the issues.
With MMR it’s important to understand affordability now, but also a duty of care from an advised point of view, to ensure affordability in the future and should the unforeseen happen. That has always been the case, but it’s more apparent now.
Taking it to its natural conclusion, it’s what you as an adviser must do. The adviser has more tools and leverage to justify that conversation with clients, not that they need it, but some advisers may find comfort from that.