The industry has less than 12 months until the new Consumer Duty comes into force. Our Head of Intermediary Development and Technical, Clare Moffat, explains what the changes will mean for protection advisers, what steps they can take to prepare and how clients and their families will benefit from the new regulations.
1. What will the Consumer Duty mean for protection advisers?
When we asked advisers – 55% said they expect to have to make changes to their business practices.*
Sitting at the heart of the Duty is the new Consumer Principle, which will move the bar from ‘treating customers fairly’ to acting to deliver good outcomes for clients.
This means businesses of all sizes must act in good faith and avoid foreseeable harm, while enabling and supporting customers to pursue their financial objectives.
More compliance often feels tough and taxing but it does mean more protection for customers so can only benefit our industry.
2. How can advisers prepare for the Consumer Duty?
Protection advisers should start by mapping out the various stages of the mortgage protection journey through a consumer lens. How do you communicate with prospects and customers? Think about your firm’s compliance monitoring frameworks. And about the products you currently sell – do they offer fair value?
What about data and documentation? What do you have now and what will you need in the future? Evidence is important – it’s not just about doing the right things for consumers but being able to clearly show what and why something is being done.
Firms will need to monitor, identify, and review outcomes, and they will have to understand the ‘why’ behind these outcomes. And they’ll need to have processes in place to adapt and change products, services, policies and practice.
Finally, advisers will need to think about signposting. They should make a client aware they’ll cover protection or signpost clients to a protection specialist to provide access to services like will writing or tax advice.
3. How will the new regulations benefit clients and their families?
We hope to see greater financial resilience across society and fewer complaints about poor value and products that don’t meet the needs of the client.
There needs to be robust conversations about probability and protection. These conversations should include discussions about the benefits of multi-benefit plans, which can include critical illness, income protection or family income benefit payment to protect clients against their biggest risks. Conversations could also look at putting plans in trust to help achieve better outcomes.
4. How to fulfil your duty when clients are cutting their spending?
Advisers can highlight the consequences of not having protection in place. For example, Statutory Sick Pay (SSP) is only £99.35 a week. ** Is this enough to maintain their standard of living?
Providers need to ensure they offer tools and resources to support these conversations.
Royal London has a personalised risk report and value of menu tool to help show the need for protection and how a plan can be tailored to meet varying budgets.
And remind clients of the different benefits that provide additional value. Royal London’s Critical Illness Cover includes several additional conditions, and our Income Protection includes back to work payments, fracture cover and hospitalisation payments.
If clients decide that they need protection but they just can’t afford it, we expect the new rules will require advisers to document this fact to fulfil the requirements of the Consumer Duty.
If you’d like more help with getting ready for the Consumer Duty you can watch our on demand webinar. And if you want to know what advisers are saying about the Consumer Duty, read our research report.
*Counting down to the Consumer Duty, Royal London, May 2022
** Gov.uk, July 2022