This is a question I’ve found myself asking of several firms that I worked with this year. Their businesses are growing revenue strongly, their proposition is very client focused and they are seeking to add value at every turn… but there seems to be surprisingly little focus on protection.
When I dig a little deeper, it typically emerges that their background is in the investment and/or pensions space and this is the foundation on which they have built their business. They live and breathe economic matters, the markets and investment propositions. Most have successfully transitioned their businesses into the financial planning space too, with excellence being delivered in this area. But somehow, protection doesn’t seem to feature much.
The need for protection is clearly understood by them – they have heard and sometimes seen among their own clients the devastating impact of illness or death on individuals and their families, and the peace of mind afforded by protection insurance.
So, what are the reasons I’ve heard that are stopping them from selling more protection business? And what are the alternative perspectives they maybe should consider?
Our clients want us to focus on their investments
This is a legitimate reason, as it is one that I believe clients sometimes put forward. They see the value in their financial planner being delivered by the development of the financial plan, and then the support they get in selecting the optimal investment and pension propositions. They see the value coming from the growth of their wealth.
However, in these situations it is prudent for the financial planner to take a step back and demonstrate the importance of considering financial protection as one of the bedrocks of a comprehensive financial plan. After all, much of the conversation about investments will centre around risk – the economic backdrop, achieving the optimal asset allocation, potential stock market outcomes and even the performance of individual active managers. How can you have a conversation about risk without discussing the most impactful risk of all – the mortality, health and circumstances of the client?
Our clients see protection as unnecessary / poor value
This one takes education of the client. Certainly, if discretionary income is tight, clients can baulk at seeing protection premia dripping out of their bank account each month. And while car insurance is a legal requirement and mortgage protection is a condition of approval of a mortgage, the likes of specified illness cover and income protection are not a mandatory requirement. And so, they become a grudge purchase…
The answer to this is in stressing the importance of financial protection. After all, if someone loses their income due to an accident or illness, every asset and service that is reliant on this income is threatened. Income protection is the glue that holds everything together. Without an income, a mortgage can’t be paid and a home is at risk, loans cannot be repaid, day to day expenditure becomes a major challenge and all luxuries are gone. Is this a risk worth even contemplating?
I don’t have the time or expertise
This is one I’ve heard and that I just don’t buy… Your clients are poorly served by your lack of time or expertise. You claim to have their interests at heart but are neglecting a fundamental part of the service they should be receiving from you. Your clients are probably not even aware of the importance of financial protection, but you as their professional adviser are the person responsible for raising this awareness.
A lack of time or knowledge are not acceptable reasons. Hire another person and/or build your own knowledge and deliver a truly comprehensive service to your clients going forwards.
My clients generally have enough cover anyway
Again, this one is valid – some of the time. Some clients have benevolent employers who provide a broad range of employee benefits that may include life assurance, income protection and some sick-pay benefits. But there are equally many more employers who provide partial packages only, or in lots of cases no benefits at all.
When a client suggests they have sufficient employee benefits, I believe it is still incumbent on a financial planner to validate this information, with a view to confirming that there is sufficient cover in place… or not. Again, your client will thank you for this. Yes, there is a financial cost to putting more financial protection in place, but for clients who as a result of your advice become fully financially protected, the peace of mind is immeasurable.
My personal belief is that a financial plan is not complete without a full view of future cashflows, and that the real value of this part of the plan is considering a broad range of scenarios – the “What if” questions. When you get into these scenarios, this exercise can only be considered to be complete when you have examined the impact of an illness or death. And the results of these scenarios in most cases raises the need for protection products.
So my challenge to these advisers is; Are you actually completing a comprehensive financial plan, without a full conversation around protection needs and solutions?