The coronavirus crisis and the sudden economic shutdown has shown how fortunes can change overnight when the unexpected happens and we are not prepared.
The pandemic shone a light on how readily many of us take our health and financial wellbeing for granted.
While the housing market lockdown left brokers questioning the resilience of their business model, their clients have also become acutely aware of how a sudden drop in income can affect their lives.
If there is one positive to come out of the tragedy of the Covid-19 pandemic, perhaps it is that advisers and their clients will make better preparations for future adversity.
For brokers this may mean diversifying into new lines of business, building referral relationships and adding new qualifications to their armoury.
For their clients it might entail starting a rainy-day fund, remortgaging onto a more competitive deal and considering whether their family’s protection needs are adequately covered.
Quilter Financial Planning mortgage network proposition director Charlotte Nixon says: “The current climate of financial uncertainty is prompting clients to re-evaluate whether they have adequate cover in place to protect the family. Under normal circumstances, it can feel easier for clients to postpone taking out cover or persuade themselves that they can get by without it.
“But the Covid-19 pandemic has really made people stop and think about how they would manage financially if they were to experience significant upheaval.
“As a result, those firms with diverse sources of income across mortgages, protection and perhaps general insurance as well, were in a better position to manage the inevitable drop-off in new mortgages when property transactions were halted. So the increased client interest in protection insulated them to some extent.
“For firms that have up until now focussed on mortgages, it has illustrated the importance of diversifying their business and embedding other income streams.”
Nixon says that Quilter is supporting firms to broaden their horizons with online training and with client-facing materials to help grow business in areas like protection.
She adds: “Equity release is another option that some brokers are considering. As we emerge from this crisis with many people’s savings plans having been disrupted, there is a possibility some clients will want to explore equity release as an option for their retirement. So taking the time now to look at obtaining the necessary permission and qualifications is another avenue for firms that are looking at.”
She says the network is also encouraging those firms that wish to do so to begin their journey towards full wealth management permissions.
Openwork director of learning acquisition Claire Limon says the network is also helping its member firms to reach into new areas of business.
She says: “It makes sense for advisers of all types to diversify and acquire new skills wherever possible as that enables them to ensure that they can meet all their clients’ financial objectives.
“Mortgage and protection advisers might want to consider wealth management or specialist areas such as equity release. Having a wide range of skills and qualifications protects their income streams while providing their clients with access to lifetime advice.
“We’ve seen that regularly in Openwork’s Academy – a third of the advisers who have trained with us who originally focused on mortgage and protection advice have diversified into wealth management advice to ensure their clients receive the right advice at the right time from a trusted adviser.”
For mortgage brokers who want to grow their protection business, London Money mortgage and protection adviser Jiten Varsani has the following advice: “Protection should really form a key part of a mortgage adviser’s business at all times, however now more than ever is a great opportunity to revisit existing clients, not only with the aim of diversifying one’s income streams but to ensure the best advice has been offered.
“The pandemic has certainly made many clients think about their financial security and how to safeguard their family. For many this has highlighted the lack of resilience they have to a major income shock. Be it a complete loss of income or a significant reduction in income. A client of mine has seen his gross income reduce by 59 per cent. Today it is a result of being furloughed, in the future it could be as result of ill health or a death in the family.”
For Varsani, one of the key ways to emphasise the importance of protection is to make it fully-embedded part of the advice journey rather than throwing it in at the end, which will make it feel like an up-sell.
Many borrowers will be looking to reduce their outgoings at the moment as financial pressures mount, so Varsani recommends that advisers contact their clients to warn them of the risks of cancelling protection policies.
“A simple email, call or WhatsApp to show support at these difficult times can go a long way. It is worth reminding clients of the benefits of cover and why the policy was taken in the first instance. It is also important to warn them that reinstating cover at a later date means premiums could be higher and with new medical underwriting, changes to health could affect the future terms available.”
For those who are really struggling financially, it may be possible to arrange a payment holiday with their insurer to prevent their cover from lapsing.
