Alan Lakey highlights the reasons why he believes mortgage advisers tend to have difficulty in making the protection sale.
I am regularly called upon to present the CIExpert system to networks, large firms or affinity groups.
One consistent message to emerge from the sales managers I speak to is how difficult it is for them to persuade their mortgage advisers to promote protection products.
When assessed from a logical perspective, this failure is difficult to understand. A typical life/CIC protection sale can easily generate three times the revenue garnered from a procuration fee alone, so we cannot blame protection sales for being unrewarding. Therefore, what are the roots of this failure?
Could it be that financial advisers (primarily mortgage advisers) do not believe in the concept of protecting the mortgage they are arranging?
I don’t believe so, because two large conglomerates tell me that their advisers average one protection case for every four mortgages arranged. If they didn’t believe in the products, they wouldn’t sell any.
Lack of time and confidence
I believe that there are two prime reasons for this collective failure, and the first relates to time expenditure.
Interviewing clients in relation to a potential mortgage can be time-consuming, particularly with the myriad and idiosyncratic rules that each lender favours using.
Having endured such a meeting, most clients are unlikely to relish a further discussion about life and/or critical illness cover.
The second relates to confidence. While most advisers will select a life plan using premium lists or favouring companies with good name-awareness, it is harder for them to delve into the worlds of income protection and critical illness. These are more complex products that have proven harder to sell, yet we know that statistically they are more likely to result in a claim.
Unless you belong to the ‘cheapest is best’ brigade – that subsection of the adviser world that believes all plans are essentially the same, so cost becomes the differentiator – you have to reach a value judgement, and this takes time and skill.
How then to reduce time and increase skill sets? When the CIExpert knowledge base was designed, we aimed to assist advisers in a number of areas, two of which relate to the problems highlighted above.
Evaluating the merits of competing plans is a time-consuming affair that is only possible if you have the plan definitions to hand, the UK incidence figures available,
and an understanding of how the definition impacts on the incidence statistics. Throw in the impact of gender and the variable impact of being a smoker, and you have a nightmare research project that eats up valuable time.
The lack of either knowledge or the time to undertake such a comparison has an impact on adviser confidence in being able to explain the concepts and merits of CIC. I know many advisers who have been unable to sell CIC plans and are unwilling to make any future efforts to do so.
The Retail Distribution Review perpetrated the myth that financial advisers need to be generalists – well versed in all areas – and the current widening advice gap has shown how such thinking produces unwanted outcomes.
Nonetheless, those advisers who are serious about protecting their clients’ future wellbeing really need to use available tools in the same way that wealth managers make use of technology to assist their fund selection and cashflow analysis requirements.
Finally, from personal experience I have found that broaching the subject of mortgage protection at the outset assists in obtaining a commitment that can be revisited later.
Alan Lakey is director of CIExpert