Everyone's talking about the latest round of mystery shopping results from the Consumers Association, obviously us too! Their latest exercise concerned banks, building societies and estate agencies recommendations on protection products for clients. Apparently only 1 out of 39 recommended the correct type and amount of cover. 11 did recommend the correct type but not sufficient amount. The editor of Which? said: "We think the FSA needs to do its own mystery shopping and fine any company that breaks the rules".
Our View
Whilst true independent advisers, such as ourselves were left out of this year-long survey, there does seem to be a few flaws in the research. The amount of insurance cover that people need is generally not affordable, especially to first-time buyers who were the subject of this investigation. The amount of cover that people want is usually very different to what they need. There is no set formula for insurance and variations will always appear from adviser to adviser. Many people do not know what they are covered for from work and what existing cover they already have. This is where an adviser needs to take time with the client and establish the true facts and needs.
Which? had a dig at the high levels of commissions that were paid on protection policies. But, the truth is that if a job has to be done well, it will take time. Whether the client agrees to pay a fee for the advice or for the adviser to take commission is a matter of choice. The only time commission is bad is where the client would be happy to pay a fee and it would leave them better off. Commission-hungry advisers that do not do their job properly would get overpaid in commission by just selling a policy, without giving the correct, in-depth advice.