Cream Financial Solutions sets out four-point plan to close protection gap
The plan covers referral partnerships, social media awareness, client conversations and commission reform to help close the protection gap.
Cream Financial Solutions has set out a four-point plan to help the protection industry meet the Financial Conduct Authority’s (FCA) deadline for progress on closing the protection gap.
The FCA gave the industry between 12 and 18 months to show progress after its Pure Protection Market Study found 58% of adults had no cover.
Of those without protection, 59% had never considered it.
Cream’s plan called for more referral partnerships between mortgage brokers and protection specialists, particularly where firms lacked the time or resources to handle complex cases.
It also recommended a social media campaign focused on the personal reasons for taking out cover, including family and income, rather than individual products.
The firm said advisers should discuss clients’ children, earnings and plans before using terms such as income protection and critical illness cover.
Its final proposal called for providers to consider a hybrid commission model.
This would allow firms to choose how much commission they received upfront and how much was paid over time.
Simon Smith, managing director at Cream Financial Solutions, said: “We’re confident that the work led by AMI and the PDG will make a real difference in the long term, but the FCA has made it clear it wants to see progress sooner than that. The clock is ticking.
“We’re on the front line of protection advice every day and we can see what can be done now.
“When the regulator checks on progress, firms will want more than good intentions to show for it.”
Smith added: “Advice has become more specialised. It happened in wealth, where pensions and investments became disciplines in their own right, and the same can be said about mortgages and protection.
“Most mortgage advisers are perfectly capable of arranging cover, but their focus is on the mortgage.
“If a firm can’t give protection the time it deserves, it must either invest in dedicated in-house resource, which not every firm will be able to do, or partner with a specialist to make sure its clients are properly covered.”
He said: “These pathways can be set up quickly and can ensure a firm’s clients receive better outcomes.
“Nobody wakes up in the morning and decides to buy critical illness cover. They wake up and buy a new pair of trainers.
“So make it real. Ask a parent what they do with their kids at the weekend and how they’d feel if they couldn’t do it anymore.
“The dance lessons, football training, the things that make their child happy – that’s what income protection pays for. Once people recognise its value, you don’t need to sell anything to them.”
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