Cost of living and mortgage rates rank as top concerns for adviser clients

58% of advisers say that the cost-of-living crisis is their clients’ number one worry, followed by mortgage interest rate rises at 23%, according to a new survey by Guardian.

The research collates the views of 701 advisers and was conducted between 11 August and 3 September 2022.

Losing their income, being diagnosed with a critical illness, and inflation eroding the value of their assets were also ranked among the top client worries.

Covid-19 still appeared as the top concern for a minority, with 8% ranking it as their clients’ number one worry.

The impact on protection conversations

When asked if there was still an increased client willingness to talk about protection as a result of the pandemic, 62% of advisers said yes. 24% disagreed and thought there was not, and a minority of 14% said they didn’t believe that the pandemic had ever had an impact on client willingness to talk about protection. When asked about whether they think the rising cost-of living will reverse the trend of increased client willingness to talk about protection, over half (56%) of advisers thought it would.

Cancelling policies or reducing cover

82% of advisers said that, to date, they were not seeing clients actively contacting them to reduce their premiums or cancel their cover. However, 18% said they were starting to be contacted. 62% said they were actively reviewing their clients’ outgoings due to the rising cost-of-living, while 38% said they weren’t.

Retention

Advisers were also asked about their approach to retention. When faced with a client who is struggling with the rising cost of living and wants to review their protection policy, 44% of advisers said they would not recommend that a client cancels their cover. 16% said they’d considering reducing their cover (to reduce premiums) and 13% said they’d look at changing their mix of covers (if they had more than one policy). 8% said they’d advise skipping inflation increases associated with their increasing policy, and just 3% said they’d look to replace their existing cover with a cheaper type of policy.

When asked about retention strategies, the result was mixed. 30% of advisers said their firms has a strategy to convince existing clients not to cancel or reduce their premiums and that they had adapted it in line with the cost-of-living crisis. 23% said they had a strategy but had not adapted it. Worryingly, 47% of advisers said they did not have a strategy to deal with clients wanting to cancel cover or reduce premiums.

Advisers were also asked what they say to clients who are struggling financially and talking to them about reducing or cancelling cover. Advisers pointed to a range of talking points that they used to convince clients not to cancel their cover, including:

• It could cost them more if they cancel now and take out a new policy in the future (66%)
• It leaves them and their family unprotected (60%)
• Protection can make sure you can pay your mortgage if things go wrong (57%)
• There’s other discretionary spend and even insurance options (e.g. phone insurance) which can be cancelled first (52%)
• Cancelling protection can undermine a carefully constructed financial plan (34%)
• Another third said that a time of high prices isn’t when to cancel protection.
• 18% said their client messages would include that inflation was only likely to be a temporary problem.

Cover breaks

Advisers were asked about whether they were likely to recommend that clients pause their cover (and pause their monthly premiums) if the provider offered this as an option. During this pause, the client wouldn’t be covered and wouldn’t be able to claim. The response to this question was mixed. The majority said no (46%), followed by 34% who were unsure. Only 20% said yes.

New clients

When advisers were asked how difficult they were finding it to convince new clients of the need for protection, the results were mixed. Some said they found it either ‘easy’ (21%) or ‘very easy’ (2%). 47% were ‘neutral’ and 28% said they found it ‘difficult’ or ‘very difficult’ (2%). When asked what is the biggest concern clients have about their protection needs, the messages advisers said resonated the most with new clients were that ‘they want peace of mind that their family is protected' (31%) and that they want to ‘make sure their mortgage/their biggest debt was covered’ (23%). 20% said their clients still wanted the ‘cheapest cover they can find’ and 17% said their clients wanted ‘the best cover they can afford’. 6% said their clients wanted the maximum amount of cover they can afford.

Jacqui Gillies, marketing and proposition director at Guardian, commented: “Our job, as an industry, is to get clients the protection they need and keep them protected. This is more important than ever in uncertain times, when there are so many different areas of financial challenge happening simultaneously. Cost-of-living, mortgage interest rate rises and high energy prices, will each have varying degrees of impact for different clients. That’s on top of Covid-19 remaining a concern for a small proportion of people. For advisers, if that wasn’t enough, there’s the additional pressure rate rises and lenders withdrawing products puts on the mortgage application process; as well as the implications of the Consumer Duty regulation.

“This complexity is highlighted in our research, which indicates there is no ‘one’ agreed direction in terms of how advisers think these economic challenges will play out for protection. Different clients will each be navigating their own individual financial circumstances in this new economic context. Advice firms will be looking at their own client base, business model, approach to protection, and processes, to understand how best to support their clients at this time. What’s clear is that it is certainly not a time to shrink away from protection conversations – clients need good advice now more than ever!”