Quarterly Q&A

We caught up with Andy Walton, Protection Proposition Director at Mortgage Advice Bureau who shares his views around the future of protection. A year on since the Consumer Duty came into force, improvements to deliver better outcomes for customers have been made. But there’s still more to be done around the protection advice process, as Andy explores.

Andy, tell us what you believe the future of protection looks like and how do we get there?

Protection has always been seen as the foundation to all financial planning. Without the right protection in place almost all other financial planning can easily fall apart.

But in reality, protection advice has too often been the last part of the discussion with customers and therefore given least priority. More often than not though, it has been left out altogether.

However, post the pandemic and post Consumer Duty there definitely seems to be a renaissance in this crucial advice area. It is now an increasing priority, and many firms have a renewed focus on how to position protection, when to position protection and how to engage customers effectively.

A key word in Consumer Duty (mentioned 8 times) is the word “journey”. The FCA want advisers to go on a “journey” with the customer.

A customer journey could refer to the journey they go through when initial advice is being given. But it can also refer to the customer’s ongoing journey during the “life cycle of the product” and how our advice needs to adapt and change to their circumstances.

These are two key areas that the industry (provider and distributor) needs to think about and improve.

What’s key in the protection advice process?

It is vital that protection is positioned as part of the advice agenda from the outset. Not from a product perspective, more from a customer need perspective. The protection need should be engaging and most importantly – consistent. Too often a busy adviser in other areas might decide consciously (or unconsciously) to skip protection advice. Therefore, it becomes critical to ensure that whatever process is being followed it is followed every time. This almost certainly means that protection advice must be embedded in the initial advice technology and process.

In terms of ongoing advice and protection, this is probably the biggest gap in the UK market. Where protection is sold today it is too often forgotten tomorrow. Protection is arranged on a long-term basis and in many cases is either never reviewed again or at best it is reviewed at a future mortgage event. But customers’ needs may have changed substantially during that time. Plus, we find that many customers forget what the original policy was for. This puts us at risk of a future lapse – for which customer would want to pay for something they can’t recall what it’s for or what it does?!

So how do we go on an advice journey with a customer so that it is effective for everyone involved?

The answer is almost certainly using technology to go on a nurture journey with the customer. The technology needs to interact with customers at the right time – highlighting outstanding needs, encouraging customers to update their changes of circumstance and to automatically highlight the need for advice reviews – and serving this all back to the adviser.

If we are to go on this advice journey with regards to protection there is probably a huge shift required from providers in terms of flexibility and ease of being able to make changes to long term policies. Many providers offer the flexibility to change and update existing policies BUT to do so is manual, time consuming and clunky. The whole industry needs to rethink how we encourage ongoing reviews and allow the policy to live and breathe with customers as their lives and needs change.

If we genuinely go on a customer journey it will feel far less like we have “sold” them a policy. Rather it will feel like we care about the customer and are looking out for them on an ongoing basis. This in turn will improve lapses and improve engagement.

Most protection in the UK is sold currently on the back of a mortgage event. But going on a journey with the customer will decouple the protection advice from the mortgage event. Yes, the initial advice might start with a mortgage, but the ongoing protection advice will occur when customers’ needs change which could happen outside any mortgage change.

Think for a minute of all the changes that happen in our lives (in customers lives) that require new updated protection advice: Change of job, change of relationship, change of marital status, new dependents, childbirth, increased outgoings, change of mortgage, moving house … the list goes on!

With customer heightened awareness of their financial vulnerability post-Covid and with new regulation helping the industry focus on customers’ needs surely NOW is an amazing time to turbo boost protection from the fairly static levels we have seen for so long into a far more customer focused world which will bring results we have only dreamt about …. until now…