Income protection - how do I get it?

muhandis

Lots of sweeping generalisations and simplistic conclusions. Please see my responses below. While I don't particularly enjoy being rude or dismissive of any profession on these forums, all I've done is try and match your tone to the best of my limited abilities as a consumer.

"Historically, it has been the largest firms that have caused the most trouble. The small local firms are more reliant on local reputation and image and referrals from existing clients and usually deal with multiple generations of the same family. Lose one family member and you lose the lot."

Well it's a large firm, among many large firms that dot this country and service millions of clients every day (and have done so for many many centuries). Historically, there has been no dearth of small firms that have defrauded clients and taken advantage of vulnerable clients that come to them. A simple google search will confirm as much. So while you might think large firms are more likely to give poor advice, I think it's the corner shop IFA who's more likely to do that.

"You wont know the personality of a tied, multi-tied/limited panel or whole of market individual. However, you do know that an IFA is going to be getting the best advised prices and will be whole of market. So, the ideal scenario is a good IFA. Not a good limited sales rep/insurance agent. "

That's your opinion as an IFA, can't argue with that. Obviously, I vehemently disagree. In my opinion, as a consumer the ideal scenario is an FCA regulated advisor (be that an IFA, Protection only advisor or a Mortgage & Protection Advisor) who can give me the Protection advice that I seek tailored to my circumstances. Not a (theoretically) good 9-5 "whole of market" generalist investment-pension-mortgage-protection salesman/investment agent.

csgohan4

lets agree to disagree as you say and hope OP finds what they are looking, be it local or a large firm.


Just because they are FCA regulated doesn't mean they are equal with those with larger access. PPI was from FCA regulated banks was it not?

muhandis

Agreed. And just because an advisor has larger access doesn't mean that they will recommend the right product or have the client's best interests in mind or desist from hard selling.

csgohan4 wrote: »

lets agree to disagree as you say and hope OP finds what they are looking, be it local or a large firm.

Just because they are FCA regulated doesn't mean they are equal with those with larger access. PPI was from FCA regulated banks was it not?

Weighty1

muhandis wrote: »

Lots of sweeping generalisations and simplistic conclusions. Please see my responses below. While I don't particularly enjoy being rude or dismissive of any profession on these forums, all I've done is try and match your tone to the best of my limited abilities as a consumer.

"Historically, it has been the largest firms that have caused the most trouble. The small local firms are more reliant on local reputation and image and referrals from existing clients and usually deal with multiple generations of the same family. Lose one family member and you lose the lot."

Well it's a large firm, among many large firms that dot this country and service millions of clients every day (and have done so for many many centuries). Historically, there has been no dearth of small firms that have defrauded clients and taken advantage of vulnerable clients that come to them. A simple google search will confirm as much. So while you might think large firms are more likely to give poor advice, I think it's the corner shop IFA who's more likely to do that.

"You wont know the personality of a tied, multi-tied/limited panel or whole of market individual. However, you do know that an IFA is going to be getting the best advised prices and will be whole of market. So, the ideal scenario is a good IFA. Not a good limited sales rep/insurance agent. "

That's your opinion as an IFA, can't argue with that. Obviously, I vehemently disagree. In my opinion, as a consumer the ideal scenario is an FCA regulated advisor (be that an IFA, Protection only advisor or a Mortgage & Protection Advisor) who can give me the Protection advice that I seek tailored to my circumstances. Not a (theoretically) good 9-5 "whole of market" generalist investment-pension-mortgage-protection salesman/investment agent.

I am a protection only specialist.

I agree within Dunstonh! All things being equal an IFA *will* be the best option as they have access to the whole of the market whereas an adviser who is single tied or even panel tied does not.

In regards to complaints again Dunstonh is right. Compared to larger distribution channels IFA's receive by far the fewest number of complaints. This can't be argued against as the stats are proven.

muhandis

As I explained at the beginning of my comment, the tone of my reply to Dunstonh was deliberately sweeping and dismissive only to match his comments in the same vein.

"All things being equal....."

Of course, I don't dispute that. My comments were based on my personal experience trying to find good protection advice as an ordinary consumer.

"In regards to complaints again Dunstonh is right. Compared to larger distribution channels IFA's receive by far the fewest number of complaints. This can't be argued against as the stats are proven."

Again, larger distribution channels by definition will attract a larger share of the complaints simply because they process a far bigger amount of protection business than small IFAs (On average Protection makes up just 2% of IFA sales by volume).

And just because an advisor has larger access doesn't mean that they will recommend the right product or have the client's best interests in mind or desist from hard selling. On average, 87% of IFA protection income is made up of sales commission.

Historically, there has been no dearth of small firms that have defrauded clients and taken advantage of vulnerable clients that come to them. A simple google search will confirm as much.

Weighty1 wrote: »

I am a protection only specialist.

I agree within Dunstonh! All things being equal an IFA *will* be the best option as they have access to the whole of the market whereas an adviser who is single tied or even panel tied does not.

In regards to complaints again Dunstonh is right. Compared to larger distribution channels IFA's receive by far the fewest number of complaints. This can't be argued against as the stats are proven.

dunstonh

Again, larger distribution channels by definition will attract a larger share of the complaints simply because they process a far bigger amount of protection business than small IFAs (On average Protection makes up just 2% of IFA sales by volume).

Whilst it is correct that larger firms will attract higher volumes of complaint, the point being made is that they also attract a higher ratio of complaint compared to levels of business.

And just because an advisor has larger access doesn't mean that they will recommend the right product or have the client's best interests in mind or desist from hard selling. On average, 87% of IFA protection income is made up of sales commission.

You are correct. However, a tied or panel provider wont have access to all the providers. So, if the best provider is not on their list, you will not get it. Also, if their panel has increased premiums to cover the increased commission rates that panels normally offer (not all but many do) then it will cost you more.

Historically, there has been no dearth of small firms that have defrauded clients and taken advantage of vulnerable clients that come to them. A simple google search will confirm as much.

Yet FOS complaints stats do not support that.

muhandis

"they also attract a higher ratio of complaint compared to levels of business"

At this point, that's only your unsubstantiated opinion. If you point me towards stats showing that as a % of advised protection business written, IFAs attract fewer complaints than non-IFAs, I'll gladly withdraw my statement.

Also, as a consumer I'm more likely to complain against a larger firm (with a set and publicised complaint process) and expect them to do something about it than a smaller firm with an understandably small compliance dept or a one/two man band of IFAs.

However, a tied or panel provider wont have access to all the providers. So, if the best provider is not on their list, you will not get it.

As I said in my post, I don't disagree that a "whole of market" IFA can potentially sell you the "best policy", all things being equal. To reiterate, just because an IFA (overwhelmingly dependent on protection commission which is proportional to the premium of the policy he sells) has larger access doesn't mean that he will recommend the right product or have the client's best interests in mind or desist from hard selling or cross selling (the other 98% of his business).

Also, if their panel has increased premiums to cover the increased commission rates that panels normally offer

You're suggesting that large firms writing many multiples of protection business compared to that sold by IFAs (for whom protection forms but 2% of their business) do not have access to preferential terms from insurers like L&G, FL, etc. Needless to say, I completely disagree.

Yet FOS complaints stats do not support that

Given that protection sales make up just 2% of an IFA's sales volumes (on average), in my opinion you can't draw any conclusions from this.

dunstonh wrote: »

Whilst it is correct that larger firms will attract higher volumes of complaint, the point being made is that they also attract a higher ratio of complaint compared to levels of business.

You are correct. However, a tied or panel provider wont have access to all the providers. So, if the best provider is not on their list, you will not get it. Also, if their panel has increased premiums to cover the increased commission rates that panels normally offer (not all but many do) then it will cost you more.

Yet FOS complaints stats do not support that.

dunstonh

At this point, that's only your unsubstantiated opinion. If you point me towards stats showing that as a % of advised protection business written, IFAs attract fewer complaints than non-IFAs, I'll gladly withdraw my statement.

The stats do not break it down by product class. They are broken down by distribution. IFAs had the largest distribution (although it is in decline). DIY non-advised was next (any day now about to pass IFAs if it hasnt already). And tied distribution the lowest. The tied distribution had the highest level of complaints. I accept that the banks are a big reason for that as they come under that category.

For some IFAs, protection and mortgages will be their dominant area of business. For others it will be minimal.

Also, as a consumer I'm more likely to complain against a larger firm (with a set and publicised complaint process) and expect them to do something about it than a smaller firm with an understandably small compliance dept or a one/two man band of IFAs.

Small firms have the same regulatory requirements as large firms. They have identical complaints procedures. It is uniform.

As I said in my post, I don't disagree that a "whole of market" IFA can potentially sell you the "best policy", all things being equal. To reiterate, just because an IFA (overwhelmingly dependent on protection commission which is proportional to the premium of the policy he sells) has larger access doesn't mean that he will recommend the right product or have the client's best interests in mind or desist from hard selling or cross selling (the other 98% of his business).

So, do you choose a good IFA with whole of market access with, what are likely to be lower premiums, or do you pick a good restricted service with limited providers with what could be higher premiums? Both distributions can have people of different personalities. You cannot say one is going to be better than the other on that front.

You're suggesting that large firms writing many multiples of protection business compared to that sold by IFAs (for whom protection forms but 2% of their business) do not have access to preferential terms from insurers like L&G, FL, etc. Needless to say, I completely disagree.

You would be wrong then. IFAs can be members of networks or distribution groups where the single IFA is not the issue. These networks and distribution groups can get deals far better than firms that are not part of one.

Where is this 2% figure from?

muhandis

The stats do not break it down by product class.

In that case, I myself would not draw a conclusion about protection specific complaints but completely understand if you wish to do so as an IFA yourself.

Small firms have the same regulatory requirements as large firms. They have identical complaints procedures. It is uniform.

Having the same regulatory requirements doesn't necessarily mean that all advisors they treat complaints identically. In my opinion, larger firms devote more resources to compliance than smaller firms or one/two man bands. Hence why IFAs pocket a larger share of the commission than advisors employed by large firms. But again, as an IFA you might disagree.

You cannot say one is going to be better than the other on that front.

I never did. You're the one who repeatedly derided non-IFA regulated protection advisors as mere salesmen and commission focussed. Distasteful as it was for me to use that form of language on these forums, I merely responded in the same vein.

You would be wrong then. IFAs can be members of networks or distribution groups where the single IFA is not the issue. These networks and distribution groups can get deals far better than firms that are not part of one.

Given that only 2% of an IFA's sales volumes are protection related, I would disagree that "whole of market" IFAs always get "deals far better" than large firms that do more volumes.

Where is this 2% figure from?

From a recent APFA report on sales figures in the FA market (page 14) http://www.apfa.net/documents/publications/financial-adviser-market/apfa-the-financial-adviser-market-in-numbers-v3.0.pdf

dunstonh wrote: »

The stats do not break it down by product class. They are broken down by distribution. IFAs had the largest distribution (although it is in decline). DIY non-advised was next (any day now about to pass IFAs if it hasnt already). And tied distribution the lowest. The tied distribution had the highest level of complaints. I accept that the banks are a big reason for that as they come under that category.

For some IFAs, protection and mortgages will be their dominant area of business. For others it will be minimal.

Small firms have the same regulatory requirements as large firms. They have identical complaints procedures. It is uniform.

So, do you choose a good IFA with whole of market access with, what are likely to be lower premiums, or do you pick a good restricted service with limited providers with what could be higher premiums? Both distributions can have people of different personalities. You cannot say one is going to be better than the other on that front.

You would be wrong then. IFAs can be members of networks or distribution groups where the single IFA is not the issue. These networks and distribution groups can get deals far better than firms that are not part of one.

Where is this 2% figure from?

dunstonh

In that case, I myself would not draw a conclusion about protection specific complaints but completely understand if you wish to do so as an IFA yourself.

It shows culture. If complaints in the distribution channel are high then it is likely it is across all areas and not just one. It is highly doubtful that a low skilled or dodgy individual sits there thinking that they will do all their pension business perfectly but treat protection is badly.

Having the same regulatory requirements doesn't necessarily mean that all advisors they treat complaints identically. In my opinion, larger firms devote more resources to compliance than smaller firms or one/two man bands. Hence why IFAs pocket a larger share of the commission than advisors employed by large firms. But again, as an IFA you might disagree.

Larger firms have to devote more resources as they get more complaints. Most IFA firms get hardly any complaints. I would expect small protection only firms to also have low volumes of complaints too. The differential is not between employees and IFAs. That is like comparing cars and petrol. An employed IFA will normally earn less than a director/owner/partner IFA. A director/owner/partner in a protection only firm would earn more than an employed protection adviser.

Where is this 2% figure from?

From a recent APFA report on sales figures in the FA market (page 14) http://www.apfa.net/documents/publications/financial-adviser-market/apfa-the-financial-adviser-market-in-numbers-v3.0.pdf

Page 14 is the split on sales by Personal Investment firms. That would not include mortgage advisers. Also, it includes arranging only intermediaries (e.g. the DIY platforms which account for nearly half of the business nowadays) and the workplace pension administrators (which is why pension is so heavily represented).

If you go back to page 8 you will see the breakdown of business by financial advisers and insurance is around 30%.

Given that only 2% of an IFA's sales volumes are protection related, I would disagree that "whole of market" IFAs always get "deals far better" than large firms that do more volumes.

Given your assumptions were wrong in coming up with that figure, it would be fair to say that any conclusion you guess at from that would be wrong too.