Shelley Read, Senior Intermediary Development and Technical Manager at Royal London, considers where advisers can find the protection opportunities within the Consumer Duty.
A colleague shared a Thomas Edison quote a few weeks ago, which I think sums up perfectly my thoughts on Consumer Duty in the adviser market:
“Opportunity is missed by many because it is dressed in overalls and looks like work “
Not all, but for many firms Consumer Duty will bring some extra work, some anxiety and possibly even some dread. The more I study Consumer Duty, the more I firmly believe it brings a massive opportunity to advisers and their firms. Focusing on good customer outcomes and showing we’ve done that will no doubt avoid risk, increase reputation, aid customer retention and increase revenue.
Let’s look at an example of each of these….
First avoiding risk. Consumer Duty will help to avoid risk for both adviser and client. I think the focus on avoiding foreseeable harm and good outcomes will mean advisers must look at all eventualities that could cause harm or hinder their clients reaching their financial goals and objectives. This will encourage conversations around a possible solution and, in the protection space this could mean adding Critical illness, Family Income benefit or Income Protection Cover to their protection planning – or discussing features such as flexibility, underwriting niches or even indexation.
For the client having these robust protection conversations, over and above basic life cover whilst considering the risks they and their families face, will give them information to make an informed decision on how to protect their family, their home and their lifestyle.
Looking at increasing reputation, engaging clients and building a bespoke protection portfolio that evolves as their families, their jobs and their housing evolves, must increase adviser reputation. Not only amongst clients and their families but also amongst other professionals they will liaise with, such as accountants, lawyers and wealth advisers.
Advisers who also take the trouble to discuss the benefits of placing a plan in trust will most definitely put their advice head and shoulders above the majority.
That really leads me onto customer retention. Clients who are engaged, fully understand the value and reasons they took out their protection portfolio are also less likely to cancel their cover.
It seems to me that clients may be more likely to prioritise the importance of a protection plan that includes solutions that go beyond cover if they die prematurely – like diagnosis with a serious illness, injury from an accident or being unable to work long term due to ill health – and therefore maintain those premiums.
Once again policies written in trust may have a higher chance of staying in force for the duration of the plan. I think frequent reviews, and importantly ones that the client comes to expect, will also almost certainly aid customer retention.
And finally, increase revenue. We’ve heard much about signposting with regard to protection advice over recent months. Whether advisers choose to give that protection advice themselves, refer to a protection expert within their company or refer to a protection expert within their network or business community – this can result in more revenue generated. The new duty may also lead advisers into areas of protection they have done little in before, such as business protection or inheritance tax planning, once again creating a possible new stream of income.
So in summary, yes the new Consumer Duty may result in more work for some adviser firms but as we get closer to the rules coming into effect on 31st July 2023, you can use our Consumer Duty Hub to understand more about what it means for your firm and the steps you must take to meet its requirements.
The new Consumer Duty: Guidance and Support – Royal London for advisers
