MMR lending slowdown could force protection bonanza

18 Feb 2014

It appears to be something of a self-fulfilling prophesy in the financial services industry that when we have any period which sees a growing mortgage market, the first casualty in terms of product sales is the protection sector.

There has been further evidence of this trend with the latest results from Royal London. This shows year-on-year protection sales for both Scottish Provident and Bright Grey brands falling by 15% in 2013.

One wonders how much regulatory change has also played its part in dampening protection advice and sales. Royal London itself is planning to launch a direct to consumer offering during this year apparently targeting individuals who do not use a financial adviser.

I suspect that, with the fall out of the RDR, there are also a large number of so-called ‘orphaned clients' who are no longer using the services of a fee-charging financial adviser. This group will, of course, still have protection needs and perhaps this is also an opportunity for mortgage advisers.

Whereas 2013 saw the advisory profession getting to grips with RDR, in our marketplace 2014 is all about MMR. What type of impact will this have on both the mortgage and protection markets? Many commentators are predicting a period around the implementation in the spring where we may see lenders focusing less on bringing in business and more on MMR compliance?

There has been talk that more complex mortgage cases may be eschewed by lenders in favour of ‘vanilla' business in order to ensure all systems and processes are functioning in the right MMR manner.

If this is the case, and mortgage business volumes fall off slightly, will we see advisers returning to the protection market in order to supplement income from a mortgage fall-off? This could very well be the case however it still appears to me that advisers are missing a trick if they are prioritising mortgage business over protection.

Perhaps it's simply a case of resource but what business benefit is there to letting a client go elsewhere for their protection needs? If they walk out of the door for this what are the chances they will come back? There is always a lot of talk about adviser ‘one stop shops' where the client's needs are covered in one place and this proposition still makes a lot of sense regardless of increased volumes in one specific product area.

Jettisoning protection advice in the current climate does not make sense - especially when there are a variety of propositions that make it very easy to conduct such business.

Bob Hunt

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