Cream Financial Solutions creates four-point plan to meet FCA protection deadline
Cream Financial Solutions has developed a four-point plan to close the protection gap, following the Financial Conduct Authority’s (FCA’s) alert to improve take-up.
Last week, the regulator published its final report on its Pure Protection Market Study, imposing an 18-month deadline on the sector to increase protection rates.
Cream Financial Solutions said measures that could be put in place quickly would be the best way to meet the challenge, such as implementing referral partnerships.
The protection advice firm said this could be done alongside industry efforts to develop long-term solutions, such as the Protection Distributors Group (PDG) leading a consumer awareness campaign, while the Association of Mortgage Intermediaries (AMI) supports advisers in improving how they discuss protection with clients.
The advice firm said it would “double-down on referral pathways” to support advisers who do not have the capacity to advise on protection, particularly where cases require complex underwriting.
It will also run a social media campaign focused on emotional drivers, based on the PDG’s campaign, targeting renters, the self-employed and people who may not otherwise speak to a mortgage adviser.
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The campaign will mainly cover the reasons people take a protection policy, rather than mention specific products.
Cream Financial Solutions will also revise how advisers speak to clients about protection, focusing on matters personal to them such as their family or income, rather than using terms like ‘income protection’ or ‘critical illness cover’.
Over the longer term, it will rethink commission models to consider a hybrid structure where firms choose how much commission they receive and how much is paid over time as premiums take effect. It said that currently, advisers risked clawback if clients cancel a policy within a certain time frame, but could still earn an upfront payment once that period ends. Cream Financial Solutions said paying less upfront would take the timing out of the decision.
Advice has become more specialised
Simon Smith, managing director of Cream Financial Solutions, said the firm was confident that the work led by the AMI and PDG would make a difference in the long term, but the “clock is ticking” as the FCA wants to see progress made sooner.
Smith added: “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.
“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 resources, which not every firm will be able to do, or partner with a specialist to make sure its clients are properly covered. These pathways can be set up quickly and can ensure a firm’s clients receive better outcomes.”
