It is being shaped by various social trends – perhaps most notably a much greater awareness of our physical and financial vulnerability, and our mental health and wellbeing too. All this is set against a backdrop of growing challenges facing the young, an aging population and a generation crying out for increasing levels of diversity and inclusion. So how are financial advisers adapting to this changing world? Such dynamics are inevitably influencing client conversations, offering advisers the opportunity to use the most relevant topics and trends of the day as building blocks when it comes to meeting the needs of customers. We kick things off by exploring five areas that financial advisers can no longer avoid given this rapidly evolving world we are living in. The article covers issues such as the need to fund later life options given the ongoing social care crisis, the importance of signposting and encouraging clients to make positive lifestyle choices, among other hot topics. Next, we take a more in-depth look at the way leading industry thinkers in the intermediary market are approaching vulnerable customers, an area that has seen significant scrutiny from the regulator in recent times. Our final article, contributed by Vitality, quizzes protection advisers on how they are using the extra value available within protection plans to not just benefit their clients, but boost their business too. We hope this guide helps to both inspire and entertain, while providing some practical support to improve adviser conversations in the post-pandemic era.
Getting more from protection conversations
John Brazier
Editor, COVER
The world today is very different to the one prior to the pandemic.
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Back
Moving with the times
Five client conversations
Welcome
Thinking outside the box
Spotting vulnerable customers
Five client conversations.
Welcome.
Thinking outside the box.
Spotting vulnerable customers.
Close
Five client conversations financial advisers should no longer avoid.
The pandemic has transformed the way many of us view our own mortality, and health and wellbeing is in the spotlight like never before. As a result, we’re much more aware of our potential susceptibility to vulnerability as a nation – and that includes financial, physical and mental health. These rapidly evolving issues are helping to shape the conversations many financial advisers are having with their clients. As protection and health insurance offerings continue to evolve, there is ample opportunity to start talking about – or to revisit – subjects that are more likely to connect with customers now than ever before.
The world is changing fast and financial advice is moving with it. In light of this, Vitality’s Adam Saville takes us through some of the key talking points on financial advisers’ radars at this time
Positive lifestyle choices.
Traditionally, life insurance has been about illness and death. However, product innovation has shifted attention towards encouraging - even incentivising – clients to stay healthy. This is helping to shape the conversations that many financial advisers are having. According to Emma Thomson, head of protection and GI propositions at Sesame Bankhall Group, advisers can play an important role in helping consumers make better lifestyle choices. “Just purely by asking questions related to protection, advisers are going into a space where they are going to be asking about things such as smoker status, weight and what health situation the customer might have,” she explains. “From here, there might be an opportunity to discuss how an individual can potentially bring down the cost of their premium, for example. “Then you have propositions, like Vitality, that lend themselves to conversations which involve gym memberships and other benefits achieved through getting more active or reaching a certain number of steps. This too can benefit Vitality at point of claim, because a healthier lifestyle should result in a better claims experience. And that can be used as a natural selling point by an adviser to show to why a customer should consider taking out protection.”
Even before Prime Minister Boris Johnson announced his plans to increase National Insurance (NI) to help pay for the NHS backlog from April, social care funding was widely regarded in the financial advice community as an area that desperately needed attention. Media coverage around the levy has put the social care problem back into the spotlight, offering financial advisers another chance to proposition clients with questions about their later life provision. “People are far more aware of the social care problem than ever before,” according to Tony Müdd, St James’ Place protection expert. “It’s unlikely than an IFA would encounter a client that is unaware that they will need to consider how to fund their later life care at some point.” There might not be many examples of long-term care insurance solutions on the market, but they do exist. Just take propositions such as Vitality’s Lifestyle Cover and Dementia and FrailCare Cover as obvious examples. Positioned as part of a conversation about intergenerational wealth as well as later life funding, Müdd’s view is that protection products such as these are poised to unlock the social care conversation for financial advisers.
Social care.
According to the FCA’s most recent Financial Lives Survey, more than half (52%) of adults in the UK (27.7m) are in some way considered as having a characteristic of vulnerability, a figure that has risen significantly since the start of the Covid-19 crisis [1]. The 2021 study also found that the percentage of those suffering from poor health, low financial resilience or the fall-out of a negative life event was up 15% compared to February 2020. The regulator has increased its focus on financial advisers meeting the needs of vulnerable clients in recent years, with fresh guidance [2] published in 2021 highlighting the significant impact the pandemic is likely to have, especially on those who had previously shown signs of vulnerability. As the fall out of the pandemic continues to take its toll on people’s mental and physical health, as well as their finances, and considering we all, at some point in our lives, have the capacity to become vulnerable – this is an issue that financial advisers simply cannot ignore.
Vulnerable customers.
As a society, we’ve seen more change in the past couple of years than we usually see in the space of a decade.
With this in mind, here are five unavoidable topics financial advisers should consider tackling head-on when facing clients.
[2] FCA, Guidance for firms on the fair treatment of vulnerable customers, Finalised guidance FG21/1, February 2021
[1] FCA, Financial Lives 2020 survey: the impact of coronavirus, February 2021
It is no secret there is a protection gap in our society. Swiss Re’s Term & Health Watch has estimated the UK life assurance protection gap to be around £2.4 trillion. [3] And it’s widely believed that those under 30 are a difficult nut to crack. Aside from many younger clients (understandably) not wanting to think about the prospect of death or serious illness, another reason for this is that life insurance is often considered a grudge purchase. “An insurance contract can be more of a box-ticking exercise for people,” says Matthew Chapman, commercial director for Plus Protect, who argues that because a protection plan often lacks tangible value in the eyes of a customer, it can be a difficult thing to sell. However, by providing rewards and benefits – or by helping clients achieve and maintain certain lifestyle goals – a plan can deliver immediate value from day one, instantly becoming more appealing to younger people as a result. “This makes my job as an adviser that much easier,” Chapman explains.
Younger clients.
The signposting agreement reached in January 2020 served as something of a watershed moment for the protection market. Supported by the British Insurance Brokers Association (BIBA) and the Access to Insurance Working Group committee, at the time led by Johnny Timpson, the movement has put pressure on intermediaries and insurers to ensure that those who cannot get access to cover – perhaps due to a pre-existing medical condition or a disability – are referred to a place where they can. Even if a product is unavailable, seems too expensive or does not meet the needs of your client, that does not always mean it’s the only option. There are specialist financial advisers trained to find cover at the most affordable price. Likewise, if an intermediary is not well-placed to offer advice on a particular product, there will be plenty of others out there who can. With signposting now a permanent fixture of the industry conversation, putting in place commercial agreements with other brokers can not only boost an adviser’s business, it’s also a way to help grow the market and do the right thing for customers. “Signposting is a real game-changer in our industry,” says Roy McLoughlin, director of Cavendish Ware. “If vast swathes of the population receive protection advice that they couldn’t have previously, then we will have climbed mountains and put protection at the core of all advice.”
Signposting.
[3] Swiss Re Term & Health Watch 2010
1
3
5
4
2
Number of adults in the UK who are in some way considered as having a characteristic of vulnerability
27.7m
The estimated UK life assurance protection gap [3]
£2.4trn
[2] Summarised from FCA, Consumer Vulnerability, Occasional Paper, 2015, Appendix 4, p.112-113: Practitioner’s Pack: https://bit.ly/3GtfgyE. Other useful protocols are presented in the same document, while this link from the Money Advice Trust explains how to use the BRUCE protocol to identify and support customers with mental capacity limitations: https://bit.ly/336D9h1
[1] Adapted from FCA, Finalised guidance, FG21/1: Guidance for firms on the fair treatment of vulnerable customers, February 2021, p.9-10
Sources
According to the FCA’s most recent Financial Lives Survey, more than half (52%) of adults in the UK (27.7m) are in some way considered as having a characteristic of vulnerability, a figure that has risen significantly since the start of the Covid-19 crisis [1]. The study also found that the percentage of those suffering from poor health, low financial resilience or the fall-out of a negative life event was up 15% compared to February last year. The regulator has increased its focus on financial advisers meeting the needs of vulnerable clients in recent years, with fresh guidance [2] published in 2021 highlighting the significant impact the pandemic is likely to have, especially on those who had previously shown signs of vulnerability. As the fall out of the pandemic continues to take its toll on people’s mental and physical health, as well as their finances, and considering we all, at some point in our lives, have the capacity to become vulnerable – this is an issue that financial advisers simply cannot ignore.
(where this is appropriate)
T
Kathryn Knowles: Communication skills are important for all types of vulnerability. You need to be able to actively listen and hear what is being said, and more importantly what isn't being said. You need to be able to change your language, manner and approach to respond to how that person is communicating with you. You need to be empathetic, but make sure that you don’t accidentally become condescending or fall into a counsellor role. There is no easy answer: you have to train and you have to get experience at doing this. You also need to give yourself a break, you won't get things perfect every time – if your heart is in the right place, that is what the client will remember!
Kathryn Knowles: Advisers can have a difficult time identifying vulnerable clients. We can try to go by some standard assumptions, for example, a client of older age, or with specific medical conditions, as a sign of vulnerability, but these aren't set in stone. For example, you can have someone in their 30s that is far more vulnerable than someone in their 70s. Vulnerability can be a new medical diagnosis, a language barrier, a growing family, presenteeism at work – and these are just a handful of examples. In some ways, most people have some kind of vulnerability that advisers might need to be aware of. For financial advisers, it can be hard to find training that helps advisers to identify vulnerability in the context of their role. Advisers need to be aware of this and seek out training with different people to be able to fully identify vulnerabilities, for example, through their compliance oversight, through people like myself, or with others who do dedicated training in specialist areas such as financial abuse. Try and undertake training with organisations like Purple, who will give you an excellent rundown of how to speak with disabled clients. A really simple thing that you can consider is installing accessibility software like Recite Me into your website: that can massively improve the way that people interact and engage with you.
If and when a client does become vulnerable – or displays an associated characteristic – it’s important they are dealt with in a way that feels human and appropriate to their needs. When discussing protection and health insurance with both vulnerable clients and clients more generally, there is a good chance a financial adviser will be talking about sensitive subjects, or their client will have been impacted by a major life change, especially at claim stage. Also, when discussing disclosures while taking out a new life or health insurance plan. That's why getting the conversation right is crucial.
The FCA’s definition of vulnerability embraces anyone especially susceptible to harm, and the wide set of associated vulnerability characteristics provided by the regulator captures the fact that someone who is not vulnerable today may become so at some point throughout their life. It’s a definition that potentially embraces the young, the old, and anyone suffering a common life event such as divorce or an income shock. Though not intended to be exhaustive, the FCA’s list of vulnerability characteristics also includes physical disability, long-term illness, mental health, low emotional resilience, bereavement, low financial resilience and a lack of language or numeracy skills. As our graphic below underlines, many of us can expect to exhibit a vulnerability characteristic at some stage of our lives.
FCA definition of vulnerability:
Identifying vulnerable customers and getting the conversation right.
Here, we explore the way the regulator defines vulnerable customers and how financial advisers can best support their needs
However, in wider society, the term can mean different things from one person to another. That's why it's critical that financial advisers are equipped with a clear definition and an awareness of what the regulator expects when it comes to meeting the needs of clients who may be vulnerable. According to the FCA’s most recent Financial Lives survey, more than half of UK adults display at least one characteristic of vulnerability at any given time.
And this worrying trend has only been catalysed by the ongoing pandemic.
Customer vulnerability is an issue that has, in recent times, become the focus of much attention, especially within financial services.
The estimated UK life assurance protection gap*
“Our definition of vulnerability refers to customers who, due to their personal circumstances, are especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care”
Are we all at some point at risk of being vulnerable?
The FCA’s four key drivers of vulnerability and examples of characteristics [1]
Johnny Timpson
Consultant and Financial Inclusion Commissioner
Johnny Timpson: The number of vulnerable or potentially vulnerable consumers – put at more than 50% of UK consumers in the FCA’s 2021 Financial Lives survey – is only set to increase with the withdrawal of the Government’s Covid-19 support measures, inflationary pressures and increasing energy costs. But identifying and appropriately supporting clients in moments and times of vulnerability is challenging, the more so as the FCA’s broad definition places an onus on firms and senior managers to determine how they apply this with their own organisation. No easy task as there are many dimensions to, and forms of, vulnerability. A client presenting, for example, with a disability is not automatically defined as vulnerable: it’s the circumstance they are in, or exposed to, that make them vulnerable. Additionally, whilst some vulnerabilities are permanent, others can be fluid, temporary, occur at changing intervals – or lead to other or enhanced levels of vulnerability. Financial advisers should therefore be alert to changes in an individual’s circumstances and engage with them empathetically.
Kathryn Knowles
Cura Financial Services
Roy McLoughlin: Vulnerable clients can mean so many different things. Advisers need to show compassion and understanding but more importantly have faith in the fact that there are very few people in society that we cannot help. We also have a role to encourage honesty and integrity around disclosure. If you’re unsure on these subjects often talking to fellow professionals, but especially underwriters, will help the uninitiated adviser gain confidence. Empathy, understanding and building solutions are imperative skills in this regard. If someone has particular circumstances or health issues then experience and collaboration are always the solution and this is where sometimes signposting is also appropriate.
Roy McLoughlin
Cavendish Ware
Johnny Timpson: Identifying and supporting clients in times of vulnerability means having a clear policy, an empathetic culture and a focus on building the right knowledge, skills and professional development. You need to understand the different types of potential vulnerability and ask yourself about the circumstances that could move a client from being potentially to actually vulnerable - be this vulnerability temporary or permanent. Observation, listening and open questions are key - it’s important that you don’t assume that client will disclose a vulnerability, particularly as they may have more than one, with these being compounding. There are various useful tools and drills to help improve your conversations, one of which – the TEXAS drill – which is summarised below.
E
X
A
How big a challenge does supporting vulnerable customers represent?
We asked some of the leading voices in the industry to tell us how they view this complex and challenging issue.
What are the core skills advisers need when talking to vulnerable customers?
50%
"If you’re unsure on these subjects often talking to fellow professionals, but especially underwriters, will help the uninitiated adviser gain confidence"
"A client presenting, for example, with a disability is not automatically defined as vulnerable: it’s the circumstance they are in, or exposed to, that make them vulnerable"
S
(what they have told you could be useful for everyone involved) “Thanks for telling me, as it will help us deal with your account better”
“Let me just explain how we’ll use that information, so you know” NB This includes why the information is being collected, how it will be used to help decision making, and who the data will be shared with/disclosed to.
Now ask the individual for their permission to use their information in this way...
1. Does your mental health problem make it difficult to repay your debt? If so, how? 2. Does your mental health problem affect your ability to deal or communicate with us? If so, how? 3. Does anyone need to help you manage your finances such as a carer or relative? If so, how?
The TEXAS drill.
The Royal College of Psychiatrists and Money Advice Trust have developed various protocols to assist staff in dealing with conversations around vulnerability, including the TEXAS drill: [2]
Tap on each letter below
Thank them
Explain how their information will be used
Explicit consent
Ask three key questions
Signpost to internal or external help
(these will help you understand the situation better)
Health
Life events
Resilience
Capability
Conditions or illnesses that impact day-to-day tasks
Such as bereavement, job loss or relationship breakdown
Low ability to withstand financial or emotional shocks
Low levels of financial capability, literacy or digital skills
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“At Vitality, our core purpose is to make people healthier and enhance and protect their lives. One of the ways we do this is through our unique Shared Value approach to life insurance. Based on the simple insight that by incentivising positive behaviour, we can deliver economic and health benefits that are good for advisers and their clients, as well as us as a business and society as a whole. The real power of this model lies in the integration of the Vitality Programme into our best-in-class products. In addition to protecting the things that the clients of financial advisers care about most, we encourage and reward them for being healthy, so all of our plans come with access to discounts and rewards. With our Optimiser, Vitality members receive the best available premium on our award-winning cover, and by taking steps to look after their health they can keep their premiums low. Our revolutionary approach is a win-win for all involved.”
“That’s why we call it Shared Value insurance”
Ria Wotherspoon, financial protection specialist for City Finance Brokers, believes “there is no one-size-fits-all” when it comes to talking about what’s available as part of a plan “because every client is different”. “To help ensure my clients get as much value as possible out of the Vitality Programme, I schedule two yearly reviews to catch up about their benefits and draw upon what’s included in their Anniversary Statements,” she adds. “As I tend to form an ongoing relationship and become friendly with my clients, I take a proactive rather than reactive approach to talking about their protection needs and the rewards they have available. I also remind them that the whole family can get involved with the Vitality Programme.” She also takes steps to advise her clients to put their plans into trust to mitigate any inheritance tax (IHT) costs and to safeguard their money. “This way my client can get the most out of the Vitality offering and they feel as if they have an adviser who is there for them and understands their needs, which can change over time – this increases the likelihood of return business and can lead to referrals to their friends.”
“I take a proactive rather than reactive approach my clients’”
Roy Allaway, principal for Taking Cover, goes as far as suggesting a monthly sit down with clients, or at least a regular catch-up about various aspects of a plan. Especially when it comes to Vitality, as there is plenty to talk about. “We suggest they just take 15 minutes to log into the Member Zone; have a play around, read some articles, check devices synced and so on - make it part of their routine.” Any other tips? “It is important to remember that anything that doesn’t work easily can make clients lose interest,” he says. “For example, if their fitness device is not synced and they haven’t realised then it is crucial they get this fixed.” In addition, the extra services brought in by Vitality during the pandemic have “helped my clients re-engage with their fitness and got them switched onto the Vitality Programme.”
“I enjoy much more touchpoints with clients”
Alan Knowles, managing director of Cura Financial Services, agrees that a more engaged client is far more likely to stay on-risk than one who is not getting immediate value from additional rewards and benefits. “It’s much more likely to stick,” he says. “If things are going well and people are using them – for example, by reaching daily steps targets or taking advantage of free coffees – then they are much less likely to cancel their plan,” he explains. “On top of this, it does give advisers the opportunity to go back to their client more often. A good adviser would regularly get back in touch with their client, hopefully at periodic points through the lifetime of a plan. By having these extras, it gives us a really nice way in. It can just be as simple as ‘how’s it going with the Apple Watch and the steps and things?’. Rather than it needing to be about reviewing their life insurance. It’s a much nicer opening.”
“If a client is engaging daily with a plan, it’s much more likely to stick”
“Many clients already understand the correlation between physical activity and improved mental health and wellbeing, so to be able to introduce a product that both rewards and encourages healthier lifestyles choices is a real positive,” explains Matthew Chapman, commercial director of Plus Financial. “Clients often want to make positive changes already and simply need a tangible incentive to be able to do so.” Extra perks and additional rewards baked into a plan give advisers a way to add fundamental value to their recommendations. These solutions can not only meet their client’s protection and health insurance needs but also help them take actions to improve their lifestyle in a way that supports their health and wellbeing too. Adding to this, regular engagement can also lower the cost of their premium. “We position this as more of a win, win, win,” says Chapman. “It benefits the client as they get the cover they need and are motivated to make healthier lifestyle choices. It benefits the insurer who is less likely to experience claims given the fact that healthier clients are less likely to claim. It benefits us, as advisers, as we have clients who are more engaged with their insurance as a result.”
“Encouraging clients to make positive lifestyle choices adds significant value to my business”
It’s not just clients that benefit from the shared value on offer within protection and health offerings. Financial advisers do too. Vitality recently caught up with some of them to find out how.
But, as we’ve explored in this guide, the world is rapidly changing, and this is impacting the way people view themselves and the society we live in. It’s safe to say that issues such as health, wellbeing and the need for solid financial planning are more relevant today than ever before. With insurance propositions becoming more sophisticated, financial advisers can therefore help clients think differently about the day-to-day decisions they are making. They can use such products to support and extend their quality of life too [1]. Not only at the point of claim, but from the very first moment they take on a plan. And it’s not just clients that benefit. Offering solutions that provide tangible value to clients from day one not only gives advisers an additional selling point when talking to customers, it can add value to their business in a number of ways.
We asked some top financial advisers to tell us how they are finding new and interesting ways to power up their protection conversations, given innovation in this space and the way things are evolving more widely.
Meeting the needs of clients and ensuring they take out the right cover should always be at the forefront of conversations about protection and health insurance.
[1] Maximising Healthspan report, Vitality Research Institute, October 2021
Matthew Chapman
Commercial director of Plus Financial
Alan Knowles
Managing director of Cura Financial Services
Roy Allaway
Principal for Taking Cover
Ria Wotherspoon
Financial protection specialist for City Finance Brokers
Neville Koopowitz
CEO, Vitality
Agents of Change.
We’ve all got our reasons to make positive changes in life. That includes you and your clients. Financial advisers are uniquely positioned to help their clients make positive lifestyle choices. That’s why we believe they can be Agents of Change. Watch the videos below to hear more about how financial advisers are bringing Shared Value to their clients and how they are also benefiting as a result.
Want to hear more about VitalityLife products? Find out here.
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