What is interesting to note therefore, is how few advisers heed this advice when it comes to diversification within their own business.
The percentage of revenues received from investment based products has formed the vast majority of total revenues for numerous adviser firms for many years.
But it was these firms who were most affected by the market downturn in late 2008 and into 2009, and who turned to protection opportunities to help plug any income gaps they were suffering.
And it isn’t just the personal protection market that advisers have started to tap into; the protection market for small to medium sized businesses has proven to be equally lucrative for many advisers.
In fact, the starting point to opening up the protection market is often examining the protection needs of the adviser’s own business.
By completing a needs analysis on your own business, you quickly understand the information needed to fully appreciate the protection needs within a client’s business. This then helps you to consider the questions you can use to obtain this information from your business owner clients.
In many markets, protection sales are often seen as the ‘ugly duckling’ when compared to savings and investments business. Investment business is perceived to be easier to process and advisers can receive their remuneration quicker than with protection products.
However, for those advisers that have built protection sales within their core proposition, the positives easily outweigh any perceived negatives.
The most common reasons why advisers say they don’t concentrate on protection business include “it takes too long…”; “my clients aren’t interested in discussing protection…”; and “it’s just not worth it…”. So instead let’s look at the reasons why advisers should consider devoting more of their time to providing protection advice:
- Protection is the bedrock of sound financial advice. Without adequate protection in place, the goals and dreams of clients – and their families – may never be realised.
- Market conditions frequently change and diversification of revenues is key to any size of company in any market. The revenues generated from protection business can help maintain cash flow when stock market volatility increases the challenges in securing revenues from savings and investment advice.
- Market penetration is low in terms of protection plans, so there is a huge opportunity to provide protection advice to clients – both personal and business – in any market.
- Increased trust and credibility. Discussing protection needs can be difficult, but can also strengthen a client/adviser relationship. This is a proven method of securing more referrals from your existing client base.
- A greater need for regular reviews. As a client’s circumstances change, the need to ensure any protection plans remain suitable increases; this provides opportunity for further business of all types.
- Profitability. Protection business has high persistency rates, so those adviser firms that have built a strong book of protection business have also built a strong recurring revenue stream from the renewal commissions.
Many advisers do have the necessary skills formed from years of providing generic financial advice, but what is often lacking is the knowledge they perhaps once had, which can lead to a lack of confidence in discussing protection needs fully with their clients. Is it time to dust yourself down and take a serious look at what opportunities might exist in the protection market?
Here’s a five step action plan to help those advisers who want to become more involved in the protection market:
- Identify any knowledge gaps you have and look to improve in the areas that seem lacking. And don’t just consider knowledge around product features; are you fully aware of the underwriting process? What information helps an underwriter? What can you and your client do to make the process work more efficiently? Consider the differences in provider processes.
- Complete your own personal and/or business protection needs analysis. By understanding your own situation and potential gaps in protection, you give yourself a better chance of understanding your client’s needs.
- Practise asking open questions – it can help your clients to discover their own wants and needs for the future. ‘What if…?’, ‘How would…?’, ‘Who could…?’ will be questions used daily but not always when discussing protection needs.
- Overcome your own objections as to why clients may say ‘no’ when you raise protection. Think about all the positive reasons why clients need protection; remember protection is not bought – it is advised. Consider the prospects for your clients who do not have any, or insufficient, protection plans in place; the wider financial goals you are helping to make happen are under constant threat without the solid foundation that protection plans provide.
- Identify those clients with the potential for the greatest protection needs. Those with unprotected debts, those with families or other dependants, those with large estates that may suffer Inheritance Tax. Work out a contact and marketing strategy to start discussing protection with them.
Building protection into the core of your day to day activity can only provide a more secure future for both your clients and you.
Key points:
- Update your knowledge on protection products and the underwriting process.
- Engage with providers to understand how they can assist with the application process.
- Consider which clients would benefit from a review of their protection needs.
