As an adviser running a busy business, finding the time to have an in-depth discussion with your clients about their protection needs can be a challenge in itself. But we believe that opening up an informed and honest dialogue with your clients about protection is about more than making the most of business opportunities, it is also about ensuring you are providing the right advice to your clients.
Whether you have already begun to make protection a major part of your business plans, or if you have not had the opportunity to think about it properly, we want to ensure you are equipped with the tools and guides to make the next step. Insight Magazine answers two of the most important questions an adviser will ask when contemplating selling protection:
“Why do I need to provide protection?”
To provide the most suitable advice for your clients…
Thoroughly going through protection options with your client proves your credentials as an adviser. Building trust comes from displaying a real belief in the purpose of your protection role: To provide your clients with the insurance advice they need to most effectively protect themselves against possible scenarios of financial detriment.
Looking back over your client base, how often does the client only opt for the protection option directly linked to taking out a mortgage? Protection should become a separate conversation, one that targets a different set of needs. We have an Insurance Recommendation Summary form on our broker website for just that purpose. To work through with your client, this is an important document that is used to evidence the conversation.
To make sure you’re Treating Customers Fairly…
One of the guiding principles of the FCA Sourcebook is for you to: “pay due regard to the interests of customers and treat them fairly’. You have a moral obligation to ensure your client has been given all the proper advice on what you can offer, how they can be covered and how little it can cost. So it’s not just about selling protection, it’s about staying compliant.
One of the most underused questions when discussing protection, is to ask your client whether they truly understand what is meant by: “Your home may be repossessed if you do not keep up with your monthly payments on your mortgage”. This can be a very effective tool to ensure they fully grasp the implications of suddenly being in a financial crisis. After all, your client is looking to build on their lifestyle, the last thing they would want is to go back a step.
To tap into an undersold resource…
The infamous protection gap in the UK is as big as it has been in years, with sources suggesting that it stood at an unfathomable 2.4 trillion pounds in 2014. This is testament to the attitudes regarding insurance for many people, as they prioritise how they spend their money.
But most forms of insurance are there to provide financial peace of mind. We believe that given a thorough and informed breakdown of how they spend their money compared to how much they spend on protecting themselves, many clients might soon change their preformed opinion on their insurance needs.
“What is the best way to discuss protection with my client?”
Empower your client with the facts…
There is no perfect solution to selling protection. But we believe that by equipping your clients with all the information, the tools and the advice to make their own decision, they will have every opportunity to realise how sensible a good protection plan really is.
Start off by asking the right questions: Do they know how the chances of developing a Critical Illness increases every ten years compared with the chances of death? Do your clients realise how lengthy financial processes can be in the event of a family member passing away? Do they know how much quoted premiums increase over time, suggesting a “wait till I can afford it” approach is detrimental to them financially?
But your client will also require hard facts to back this up and reinforce your assertion of their protection needs. Have factsheets and datasheets ready to produce that are catered for their situation, age and household circumstances. Clear infographics and charts are always a great way for clients to take the information on board. This can also include timescales regarding releasing finances, statistics around the probability of developing a critical illness, or current state payments for absence from work. People will always naturally want to protect themselves against the most likely scenario, which means given the facts, many would consider taking a protection policy.
Create a Menu Plan…
This is a crucial element of the protection dialogue you open with your client. Ensuring you always strive to offer the ideal world scenario or the ‘Utopian Version’ of protection is essential in complying with FCA guidelines. We encourage the creation of a comprehensive protection package for your client, where you can break down and individually discuss what each type of cover provides. Make sure you ask the right questions: Do they think they could live on their savings? How long would their employer provide full salary when they are off of work? Are they the sole bread-winner in the household?
This will allow you to segregate your client’s needs, so that each situation is covered on its own. This can then be collated to produce a full protection package for your clients. If possible, produce a professional and thorough family protection document for your clients to take away, in case they do not wish to make an immediate decision. You can always pick the conversation up another time with a follow-up appointment, which is protection-focussed and separate from the mortgage dialogue.
Make use of materials…
Lifestyle planners are another great way to discuss protection with your clients and to create budget margins to calculate expenditure. By breaking down what they spend on each luxury per month, you can work together to cut down on life’s little pleasures slightly, freeing up a surprising amount of money that they can spend on maintaining that lifestyle in the first place. Clients are often taken aback by how much they actually spend, which can open up more conversations around whether they actually need so much of a certain luxury. After all, many clients think about what they have “spare” at the end of the month, not what they have spent in the first place.
Some providers have bespoke toolkits available for downloading on their sites. These fantastic factsheets, planners and guides save you lots of time. There are even digital versions that can be worked through together live with the client. This can use quick calculations to produce financial solutions for your client, providing the most suitable advice on protection.
With the 2015 general election fast approaching, it seems pertinent in our adviser magazine to look at the possible effects that a new, or even remaining, party would have on the housing industry. As we speak, the opinion polls are generally showing a close fought game, with the possibility of a hung parliament and another coalition being spoken of. But do any of these parties offer anything other than over-inflated projections of house building and speculative changes in the approach to the industry? Insight takes a look at the main parties vying for your vote this May:
Conservative
Whilst the Conservative party and its leader David Cameron look to take advantage of an arguably unpopular Labour leader, their policies on housing still outline a determination to create more homes and to give first-time buyers the best chance to get onto the property ladder.
Some of their reforms in this current term have proven relatively successful, with many homes being purchased as a direct result of polices such as Help-to Buy and the re-established Right-to-Buy. With the new Rent-to-Buy scheme also proposed at the 2014 party conference, it seems the Conservatives are determined to continue on the path to what they feel is a healthier housing market.
Also in last year’s conference, Cameron outlined a plan to build 100,000 new starter homes, selling them to first-time buyers at a 20% discount, if they won the next election. But to some experts, this does not do enough to address some fundamental problems underlying the industry and the continuing issue of affordable housing.
Even in their own manifesto, the Conservatives recognise that “houses are just too expensive”, with some areas of the country seeing house prices now seven times the annual salary. It is clear that they recognise the problems, but whether the voters believe they can solve them, is a different matter.
Labour
Ed Milliband’s big promise to build 200,000 homes a year by 2020 has received a mixed response, with some suggesting it is simply a vote-winning speculation, instead of a policy-based plan. But according to the National Planning Policy Framework (NPPF) Plan for Housing document, “It is estimated that around 232,000 new homes are required each year, and in the 12 months ending September 2014, only 117,070 houses were completed.” This highlights a major shortfall that has made housing a hot topic in the economic and political world. Labour also hope that their “use it or lose it” policy on housing will prevent developers from hoarding usable land to sell at a bigger price.
Interestingly, some areas where the housing shortage is felt the most are where the political swing could determine the outcome of the election itself. Labour would therefore be unwise not to use this time to back up their targets with a realistic plan to help with the ever-rising waiting lists for social housing in areas such as Burnley and Brighton, two key Labour targets. In fact, Burnley has seen waiting list numbers rise from 326 in 2009 to 2,001 in 2014.
The main opposition party also pledged to double the number of first-time buyers in the market. But again, this was not backed up with any real details, leaving many scratching their heads as to Labour’s clear plans to directly tackle the housing crisis.
Liberal Democrats
As the party that has seen the biggest decline in popularity since the Coalition’s inception in 2010, the Liberal Democrats and Nick Clegg are struggling to reinforce their left wing status by opposing David Cameron’s cautious approach to housebuilding. But their own plans seem slightly too ambitious for some experts, promising in 2012 to raise housebuilding to 300,000 homes a year, a full 50% higher than Labour’s own pledge.
Other plans laid out in the 2014 Liberal Democrats conference suggested that councils should be allowed to suspend Right-to-Buy privileges, until housing stock is suitably replaced in that area. More social housing to support the promise of 300,000 homes and a new Housing Investment Bank were also pledged, which would simplify the allocation of public funds and draw in private finance.
The Liberal Democrats also argue that the key factor in the housing crisis is the Government’s lack of direct control and power in the industry. In a slightly radical approach, they propose to address both the nature of the market and the supply of housing by giving the Government the role of Commissioner of Housing. This would apply to both the social housing sector and the growing private sector. These are certainly interesting policies, but as their popularity dwindles, it is surely only another coalition that would potentially see their plans implemented.
UKIP
As the political parties tussle back and forth over their pivotal and vote-winning policies such as UKIP’s (led by Nigel Farage) stance on immigration, studying their other policies on equally big issues such as housing, is often overlooked. Mark Henderson, chief executive of Home Group, suggested that “although housing may not be top of the agenda nationwide, it is a critical factor in key marginal seats”. It is indeed rarely a headline-maker in the mainstream papers, but for the thousands struggling to get onto the property ladder, it may be a key factor in how they vote this May.
UKIP’s National Housing Spokesman Andrew Charalambous has big plans for the industry. Unsurprisingly, his central stance is the link between “open-door” immigration policies and the housing crisis. He argues that the immigration policies of the current and previous governments did not factor in a potential housing shortage.
UKIP therefore propose to prioritise Brownfield land and disused industrial sites in their housing policies, protecting what they feel is treasured Greenbelt land. Mr Charalambous also points out that there are currently 700,000 properties lying empty. UKIP also plan to introduce binding planning referenda, giving local people and councils more power and incentive to build and shape their own local areas. The party definitely has some strong plans for the future of UK housing, with their views possibly bearing fruit if they become part of the Government come May.
Green Party
The party that has recently seen the most rapid increase in its supporters, could also be the party that would create the biggest movement in the industry. Voters possibly looking for a new form of Government, or disenfranchised left wing supporters unhappy since Nick Clegg’s alignment with the Conservative party, have begun to side with the Greens. This has meant a new surge in support for Natalie Bennett’s party. But where do they stand on the important subject of housing?
Like UKIP, The Green Party recognise the need to look at the number of homes currently unused, but primarily focus on an increase in social housing across the country. In their policies, they speak of “the inability of the free market to meet diverse housing needs and a lack of investment in public housing spanning over two decades”.
They clearly feel that the approach to housing needs to be fundamentally changed, ushering in an era of “housing policies under local participatory democratic control.” This type of localisation echoes throughout the party’s polices, as they seek to “increase the amount of social housing and commonly owned housing”. The Greens no doubt have conviction in their beliefs, but whether their recent rise in the polls has come too close to the election to gain political power, remains to be seen.
Last week marked the 9th Annual Conference for Mortgage Intelligence Holdings, which was held on Thursday 5 March at the East Midlands Conference Centre in Nottingham.
The event attracted over 180 attendees, with brokers from the Mortgage Intelligence, Mortgage Next, Network, FYB Network and the Next Intelligence club.
A range of the industry’s top banks, building societies and insurance providers also lent their support to the event by laying on a series of one-to-one meetings and themed master classes during the afternoon’s conference proceedings.Two panels of experts took part in question and answer sessions about the lending and protection markets, led by Nigel Stockton Financial Services Director of Countrywide.
The conference was rounded off with keynote speaker presentations by Alison Platt, Countrywide Chief Executive Officer and Sally Laker, Managing Director at Mortgage Intelligence providing an insight into the future of Countrywide and Mortgage Intelligence’s success in 2014. An inspiring speech by fivetime’s Olympic champion Sir Steve Redgrave completed the afternoon’s proceedings.
After the conference, attendees and exhibitors enjoyed drinks and refreshments and were able to take some time to network with their peers.
Sally Laker, Managing Director of Mortgage Intelligence Holdings, said:
“Our annual conference provides us with a unique opportunity to meet our advisers and gain valuable insight as to their experiences of the current market.
“The conference was a great success and gave us the vehicle to showcase our new branding and Mortgage Intelligence business insight. The feedback on our new style event has been fantastic with advisers feeling positive for the year ahead”