Consumer Duty: How Protection Can Cover Your Business As Well As Your Clients

Alun Beynon Protection Distribution, Scottish Widows Protect

Start planning now to make sure you’re ready for the new regulations

Brokers are well versed in adapting to new rules – it’s an ongoing part of your work. The Consumer Duty is the next big regulatory change and, while it shouldn’t unduly concern you, it does require some thought and preparation.

But don’t worry. It doesn’t need to be burdensome and it will ultimately benefit your clients and your business. What is the Consumer Duty?

The Consumer Duty has been introduced to improve how firms serve consumers. It will set higher and clearer standards of consumer protection across financial services. The three overarching rules are to: • Act in good faith

• Avoid causing foreseeable harm

• Enable/support retail customers to pursue financial objectives More specifically, advisers must consider the needs, characteristics and objectives of their customers – including those with characteristics of vulnerability – at every stage of the journey.

As well as acting to deliver good outcomes, you’ll need to understand and evidence whether those outcomes are being met. Consumer Duty is set to come into place from 31st July 2023 but there have been rumours of an extension to the timeline for advisers.

However, now is the time to consider how this legislation will impact the services and support that you offer your clients, along with how you can ensure (and document) better outcomes for them. One way could be by providing protection advice to mortgage clients or referring them to a trusted specialist.

The role of protection

The regulator isn’t prescriptive about how you meet its Consumer Duty rules, so it isn’t the case that protection advice must become part of every mortgage broker’s toolkit. However, it’s clearly one way to ensure clients have good outcomes and make risk-based financial decisions.

A mortgage is the biggest debt they’re likely to take on, so protecting that debt is one way to avoid causing foreseeable harm. Talking to them about the likelihood of not being able to meet their mortgage repayments in the event of illness, job loss or an accident ensures they have a good understanding of potential risks.

Ongoing support

Regular protection reviews with your client are another way to meet the Consumer Duty rules. Our income, family circumstances and health change as we move through life, so it makes sense to regularly check if your client’s cover remains suitable. Regular reviews also mean you can remind them to make the most of any wider benefits included in their policies, from access to private GPs to mental health support. Importantly, you’re also able to assess your client’s vulnerability if you check in with them annually, for example. A client who wasn’t vulnerable when they took out their mortgage and protection could become so for a wide number of reasons, from health issues to bereavement.

Access to advice

The Consumer Duty doesn’t require mortgage brokers to give protection advice. Although bringing protection into your client conversation could demonstrate you’re working within the new rules. But you don’t have to go it alone. There are plenty of reasons why mortgage brokers may not want to make the leap into protection advice. It’s your business and your choice. If that’s the case, consider a referral arrangement. Not only are you able to raise protection with your clients, and document it, you can signpost them to a trusted specialist to help them with their protection needs.

A referral arrangement shows you’re acting in good faith to ensure good customer outcomes, avoiding foreseeable harm and helping your client make informed, risk-based, financial decisions. It will also boost your income without you having to become an expert in a new area. And, with Sesame, advisers have access to nine trusted protection partners.

It’s time to rethink protection. Not only can it help you fulfil your Consumer Duty obligations, it’s good for your business and even better for your clients.