The Intermediary – May 2025 - Flipbook - Page 74
P RO T E C T I O N
Opinion
Income protection
should be part of
every conversation
I
ntermediaries know all too
well how quickly things move
in this market – interest
rates, product availability,
criteria shis, not to mention
regulatory requirements.
Given all of these moving parts,
being a general practitioner adviser
covering all aspects of the mortgage
market is becoming even more
challenging. Intermediaries have a lot
to contend with.
In addition, every customer is
different, with individual ambitions,
personal circumstances and financial
needs. With Consumer Duty now
in play, intermediaries should be
thinking foremost about whether they
will achieve a good outcome having
taken the advice on offer.
In today’s market there are some
firms that may not have the capacity
or expertise to give advice beyond the
mortgage. Nevertheless, protecting
clients’ incomes from future financial
shocks is now more important than
ever – particularly when you consider
the regulatory perspective.
At the peak the Covid-19 pandemic,
furlough was a reality that hit more
than a quarter of the UK’s workforce.
The word ‘furlough’ – which
originated from 17th Century German
and was used to describe paid leave
granted to soldiers – was suddenly
thrust into the mainstream, talked
about in the news, among friends, and
in everyday conversation. If you think
about it, though, furlough isn’t that
different to income protection (IP).
There is evidence that
consumers are ready to listen, too.
In the Association of Mortgage
Intermediaries’ (AMI) Protection
Viewpoint, 53% of consumers
answered that income protection is
important, but only 7% said they
actually had a policy in place.
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The Intermediary | May 2025
Noticeably, among younger people,
the percentages that consider it
important are larger. 65% of Gen Z
and 70% of Millennials responded
that having such protection in place is
important to them, compared to 48%
of Gen X and 39% of Boomers.
Younger people are more aware of
the fragility of their circumstances,
perhaps. There is plenty of evidence to
underline why. The Income Protection
Task Force’s ‘7 families’ campaign
illustrates as well as anything the huge
case for income protection. People’s
circumstances are incredibly unique
and demand beer protection.
Evolving attitudes
It is surely logical, too. A mortgage
is a loan that needs repayment, but
that is secured on the property. The
property piece has evolved, and so
should our aitude to protecting
people, their families and the income
they depend upon.
Now there are much greater
protections in place for consumers.
Lenders more frequently offer
borrowers whose incomes hit a
troubled patch the opportunity to
bring payments down via a term
extension, payment holiday or
switching from repayment to part and
part or just interest-only. Each of these
options is clearly preferrable to losing
the property, but that does not negate
the fact that each option also adds to
the cost of the mortgage longer term,
as interest is paid for longer.
This is just one reason why advisers
need to focus on educating clients
about the value of income protection –
it will take away the immense stress of
dealing with a sudden or unexpected
change in financial circumstances,
relating to short or long-term illness
or injury. There is a reasonably
foreseeable possibility that anyone
CRAIG HALL
is director, strategic
partnerships, financial services
at LSL Property Services
taking a mortgage, employed or
self-employed, could be forced to stop
working due to illness or injury. No
one is invincible.
Not raising this with clients is not
just failing them, it’s also not going to
cut it from a regulatory perspective
either. This is true even where advisers
lack the permissions to advise on
protection – the potential that a client
could find themselves in a situation
where they may not be able to meet
their mortgage payments is still
something that’s materially relevant
to the mortgage advice.
Where advisers don’t have
protection advice permissions
themselves, it’s not just past time
to get a formal and robust referral
structure in place to plug that gap – it’s
now a duty.
Supporting clients
It’s also a no-brainer when it comes
to running a business. Diversifying
your income streams doesn’t only
protect your client, it protects your
business from fluctuations in the
housing market. When app volumes
are abundant, the case for upping your
focus on income protection advice
should also be up – not down.
Doing right by clients means
showing them how big a commitment
a mortgage is, and helping them
minimise the risks they’re taking on as
a result. Aer all, it’s that which will
keep them in their homes.
Everybody wants a mortgage when
buying a home, but when things go
wrong, the mortgage becomes a debt
and very quickly becomes a source of
stress and anxiety. This is why income
protection is so important. ●
