REGULATORY OUTLOOK: CONSUMER DUTY — PAST, PRESENT AND FUTURE
Much of the planned regulatory focus for 2025 is part of initiatives that have started in years gone by, none more so than Consumer Duty.
WHAT TO EXPECT FROM AI IN FINANCIAL ADVICE IN 2025
AI has already taken root in many of our daily lives, powering everything from weather updates and entertainment recommendations to health tracking and device security. However, in our sector, AI tools have so far been largely focused on supporting a few small areas of the advice process.
WHY SELLING PROTECTION IS JUST THE START
Protection makes a real difference to people’s lives. in 2023, Legal & General supported nearly 18,700 clients and their families who made Claims, with benefits totalling £921 million.
ADVISERS MOST ASKED QUESTIONS ON CHILDREN’S CRITICAL ILLNESS COVER
The average family with young children in the UK has seen their expenses rise by over £1,000 a month since February 2023. During the same period, Royal London paid out over £25 million in children’s critical illness claims supporting over 160 families.
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Filled with the latest news, Viewpoint offers in-depth insight and analysis on some of the most pressing issues currently facing the market.
In this edition, our Bankhall Policy team delves into the regulatory outlook for 2025, exploring the past, present and future of Consumer Duty.
Plus, our partners cover all the latest market analysis across financial services, touching on compliance, regulation, protection and the investments and pensions markets.
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The Bankhall PMS team
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ADVISERS MOST ASKED QUESTIONS ON CHILDREN’S CRITICAL ILLNESS COVER Royal London
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12 OVERCOMING “UNQUALIFIED OBJECTIONS” TO PROTECTION LV= 14
OPPORTUNITY KNOCKS: WHY NOW’S THE TIME TO BREAK INTO NEW BUILD Virgin Money 06 WHAT TO EXPECT FROM AI IN FINANCIAL ADVICE IN 2025 Intelliflo 08 WHY SELLING PROTECTION IS JUST THE START Legal and General
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REGULATORY OUTLOOK: CONSUMER DUTY — PAST, PRESENT AND FUTURE
Daniel Owen Bankhall Policy team
Much of the planned regulatory focus for 2025 is part of initiatives that have started in years gone by, none more so than Consumer Duty.
In the 2022-25 ‘Our Strategy’ paper, the Financial Conduct Authority (FCA) stress the importance of Consumer Duty, describing it as the centrepiece of their outcomes-focused approach to regulation in the years ahead.
Whilst this three-year strategy document is due to be replaced in 2025, it is clear that this outcomes-focused approach will continue to be a significant driving factor for future regulatory initiatives.
In the early stages of Consumer Duty, the FCA acknowledged that firms would need time to adjust their processes and procedures to align with the new regime.
In July 2024 we saw the final implementation date for closed products and services, following on from the July 2023 date
for everything else, so we are now firmly into the “business as usual” phase, with the FCA casting their eyes over the success of the implementation of Consumer Duty.
In December 2024, the FCA issued the results of their good and poor practice review, looking at their Consumer Board Reports and Complaints and Root Cause Analysis – but what we have seen so far can only be viewed as the beginning of their ongoing supervision.
In 2025 we expect the FCA to publish the outputs from a review looking at how you support your customers across the customer journey, and how you are using communications to support informed consumer decision-making.
Sector specific initiatives also include an update on ongoing investment services from early 2024, and further commentary on the retirement income advice market after the results of initial field work were published last year.
Meanwhile, in the protection sector, the FCA plan to review fair value in the pure protection market and premium finance arrangements for motor and home insurance.
Another Consumer Duty related initiative which pre-dates the Duty concerns vulnerable customers. The FCA plans to provide feedback in the first half of 2025 covering the results of reviews of firms work in this area. The FCA will be asking you to demonstrate that vulnerable customers are receiving
good outcomes that are on a par with other customers. Your handling and management of information is expected to be a key focus, as it will be generally for all aspects of Consumer Duty.
As we move further into 2025, we expect the FCA to become less tolerant of poor practices arising from Consumer Duty requirements. We would urge you to take notice of the messages arising from their prior regulatory outputs which can be viewed via Bankhall Online
Want to know more about the regulatory outlook for 2025? Join us at our upcoming Compliance Series webinar! On 26 February 2025, your Bankhall Compliance team will explore some of the big impact regulatory developments expected in 2025 — secure your free place now
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WHAT TO EXPECT FROM AI IN FINANCIAL ADVICE IN 2025
Nick Eatock CEO
Generative AI exploded into our collective consciousness in 2023 with the launch of tools like ChatGPT. In 2024, major tech firms sought to leverage its benefits, embedding artificial intelligence functionality into our laptops and smartphones with the expansion of tools like Google Gemini, Microsoft Copilot and Apple Intelligence. Within the advice profession too, several new technology suppliers have launched sector-specific services that help firms capitalise on AI to improve financial advice processes. Given the significant steps taken in the last two years, what does 2025 hold for AI?
The rise of generative AI in financial advice
AI has already taken root in many of our daily lives, powering everything from weather updates and entertainment recommendations to health tracking and device security. However, in our sector, AI tools have so far been largely focused on supporting a few small areas of the advice process. According to Platforum’s latest adviser research, 20% of firms are now using AI to transcribe client meetings, but how many firms are using its potential beyond replacing manual note-taking?
I believe in the next twelve months, we’ll see the list of use cases within the advice journey grow significantly to help firms seize the opportunities offered by AI. We’ll see it used in a range of areas to not only drive adviser efficiency but also enhance the client experience and improve outcomes through greater personalisation and more consistency of advice.
And this is really good news for the profession. The advice sector has always prided itself on the strength of its client relationships, but it also has to deal with enormous amounts of red tape, compliance and process. If AI can reduce complexities and give human advice professionals more time to develop a deeper understanding of their clients, that’s a win for everyone.
Overcoming barriers to AI implementation
Undertaking proper due diligence on the provider is also important: what is their reputation and do they work with similar firms to yours? How do they manage your data and who owns the rights to it? Is the data shared with any third parties? How often is the tool updated to ensure it remains up to date with changing regulations or technology upgrades? Remember, you’re still responsible for all the information used within the advice process, even if it is supported by AI.
The future of AI in financial advice
Over the next 12 months, I think we’ll see an increase in these specialist tools from smaller vendors available to support different parts of the advice journey. But I also expect we’ll start to see more larger providers, like platforms and investment managers, making use of AI functionality to improve their offering.
AI CAN REDUCE COMPLEXITIES AND GIVE HUMAN ADVICE
PROFESSIONALS
MORE TIME TO DEVELOP A DEEPER UNDERSTANDING OF THEIR CLIENTS PROFESSIONALS
Although AI technology still feels relatively new, it is moving at speed. It offers huge potential to improve the advice journey and unless firms embrace the opportunity, they risk losing out to competitors who do. At intelliflo, we’re trying to help firms capitalise on AI by working with a selection of specialist vendors to provide integrations with AI-driven tools. We’re also adding AI functionality within our own solutions to support different parts of the advice process. And we’re working on using AI to help firms make more of their data to add value to their services.
MORE TIME TO DEVELOP A DEEPER
UNDERSTANDING OF THEIR CLIENTS
However, we know that one of the barriers to embracing AI is that firms are concerned about how best to implement it. Our marketwide advice efficiency research last year found that nearly three-quarters of firms believe integrating AI into the advice journey is important, but 95% feel they don’t have the required skills within their business to do it effectively. Although most of us are familiar with tools like Alexa, Siri, Copilot and ChatGPT, moving from a mainstream consumer offering to something suitable for a highly regulated advice business can be daunting.
Choosing the right AI tools for your firm
In the advice sector today, there are six or seven relatively small vendors providing AI-driven services. When considering if these specialist tools are right for your firm, as with any third-party supplier, you should have a clear understanding of what the solution will do and how it will fit with your advice process. If you’re using AI to deliver efficiencies, making sure that the chosen solution integrates with your other core systems is vital.
This year we’ll really see AI take hold in financial advice, with widespread use throughout the advice journey. By working with the right partners, AI can support human advisers to deliver better outcomes for both clients and firms. I think the next 12 months are going to be very exciting.
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WHY SELLING PROTECTION IS JUST THE START
Dave Butler Market Development Manager
Protection makes a real difference to people’s lives. Just in 2023, we supported nearly 18,700 clients and their families who made claims. Their benefits totalled £921 million.
Yet, these customers are a minority compared to the many who didn’t claim or, probably, even think about their cover that year.
No more gathering dust
But policies don’t have to sit in a drawer until the day they’re eligible. This is a missed opportunity to offer long-term value and build meaningful, trusted relationships with clients. Without ongoing post-sale support, some might never recognise the full value of their products or their benefits.
From day one, many policies actually offer value-added benefits that can be easily overlooked. They’re sometimes even available to the life assured’s spouse or children. For example, they might be able to access support from a dedicated nurse or assistance with later life care. And though some claims aren’t often made until years after a policy is secured, keeping in contact makes sure clients know who to contact and what to do. So just by helping clients feel more confident and connected with their provider, makes it easier for them to manage if the worst happens.
Continuing support after the sale
I was recently listening to Reassured previous Director of Corporate Strategy, Phil Jeynes, talking on our Just Covered podcast. When, suddenly diagnosed with cancer in 2023, he needed to make a claim:
“My insurer had never written to me in the two plus decades I’d been paying my direct debit. Were I not quite organised and in the industry, it’s unlikely I’d have been able to put my hands on the paperwork. And it would have been difficult to know where to contact. At the very least, brokers should contact customers annually to remind them of their cover and benefits and to ensure their needs haven’t changed.”
Phil’s right. As an industry, we should all be going one step further than the ‘contact us, when you’re eligible’ approach. So, what steps can we take to actively maintain relationships, keeping clients engaged and updated years after getting them on risk?
Meaningful relationships start with a simple call
Some advisers still like to deliver policy documents in person. But even a simple welcome call can be enough to spark a connection. You can start building a rapport by calling about:
1. A follow-up check-in or recap, covering their plan and its importance for them. Such as, if they’ve got their first or dream home, how the policy keeps them in it, whatever happens.
2. When important payments are made.
3. When they’re eligible for a claim, or not, to manage expectations.
4. Any additional benefits and how to access them.
5. Key dates their plan is reviewed. Like if circumstances change or their employee benefits and earnings change.
6. Finally, and most importantly, agreeing on regular reviews. So that every year or two, you can check through all the above and make sure everything’s still fit for purpose or whether updated cover is needed.
Ongoing
communication benefits both parties
These are really just a starting point. But no doubt, both parties benefit when advisers recognise that selling protection is just the start of the journey.
Taking this long-term view of protection and seeking to nurture customer relationships will lead to improved loyalty, retention and satisfaction. In turn, this will likely convert into referrals. What’s more, regular communication about your client’s situation will help you tailor advice as their situation evolves and meet their needs more effectively.
If you’d like to find out more, you can listen to Phil’s fascinating story and advice on post-sale communications here
Plus, we have a number of retention sales aids for helping improve your post-sales communications. Take a look here
ADVISERS MOST ASKED QUESTIONS ON CHILDREN’S CRITICAL ILLNESS COVER
Greg Sked Senior Protection Technical Manager
The average family with young children in the UK has seen their expenses rise by over £1,000 a month since February 2023.
During the same period, Royal London paid out over £25 million in children’s critical illness claims supporting over 160 families.
As these types of insurance contracts become more popular, we’re seeing more advisers reaching out to our protection technical team for support. Here are some of the most asked questions from advisers regarding children’s critical illness cover at Royal London.
Can children’s cover be added to an existing policy?
Children’s critical illness cover isn’t automatically included with an adult critical illness contract, instead there are three options available:
1. Not to include children’s cover
2. Standard children’s cover
3. Enhanced children’s cover
If no children’s cover is selected, it can be added later without any medical underwriting required. If children’s cover is no longer required, it can be removed from the adult’s policy in the future.
Can foster children be covered?
With almost 70,000 children living with foster families across the country, it’s no surprise that one of the most common questions our protection technical team receive relates to whether foster children can be covered by a children’s critical illness policy. At Royal London, our children’s cover provides cover to children as long as they are resident with and financially dependent on the life assured.
How many times can children claim on the child CI element?
There is no limit on the number of children that can claim on children’s cover, how many claims depends on what the nature of the claim is.
There can be a claim for pregnancy complications, followed by a claim for critical illness, additional conditions, Total Permanent Disability (TPD) or Terminal Illness and death of a child.
Can a male life make a claim for pregnancy complications?
If a male life takes out a plan which includes critical illness cover and he selects enhanced children’s cover because he and his wife/partner are planning to start a family, he'll have access to cover for eight pregnancy complications. If his wife/partner becomes pregnant but suffers a complication that meets our definition under pregnancy complications, he can claim even when his wife/partner is not covered under the contract.
Can a child access the same ancillary benefits that the life assured can?
All Royal London protection policies sold through an adviser give policy owners access to a range of physical and mental wellbeing services, even if they never have to make a claim. These services extend to the partner and children of the plan owner. In 2023 over 1000 customers and their families used Helping Hand for recovery. 101 cases that used Helping Hand involved children with the average age of the child just 10 years old.
Can a family income benefit policy include children’s critical illness cover?
Since 2020 sales of Family income benefit policies have fallen across the industry, which is concerning given the versatility and cost effectiveness these types of contracts offer. Whilst the majority of family income benefit contracts are written on a life only basis, but they can often be written on a life or earlier critical illness basis and at we allow for children’s cover to be included within the contract.
If a child claim is being made on a family income benefit policy, the benefit is paid out as a lump sum. The calculation used to determine this lump sum will depend on whether standard or enhanced children’s cover is selected, and the reason for the claim.
Do Royal London allow for the child to turn their child policy into an adult policy?
If enhanced children’s cover is added onto an adult critical illness contract the plan owner can arrange for the child cover to be converted to an adult policy when the child turns 22 or 23 if they’re in full time education.
OVERCOMING “UNQUALIFIED OBJECTIONS” TO PROTECTION
Marcus Primhak National Account Manager
When it comes to approaching the subject of protection with clients, it’s important to consider the perception your client holds over their level of financial resilience and how this might impact the conversation. Financial resilience is a concept we explore closely within our Reaching Resilience report, our consumer research into the protection needs of the working population.
In our survey, we saw that 7 in 10 workers would rank themselves to be “financially resilient” or “very financially resilient”. In the rest of our report, we very quickly uncovered this theme of an optimism bias which plays throughout the research.
So, if your client holds these assumptions about their financial security, how can you be prepared to handle what I call “unqualified objections”?
“I would be able to rely on other sources to get by.”
When asked what they’d rely on if they couldn’t work because of illness or injury, the top three responses were savings (47%), occupational sick pay (32%) and partner’s income and savings (19%). As part of a good fact-find, you might already have a lot of the information at hand to encounter these objections.
You can open the conversation up to handle these objections face on by asking: What would you turn to if you couldn’t work because of illness or injury?
Our research revealed:
• A third of workers have less than £5,000 in savings.
• 1 in 5 employed workers don’t know what their sick pay arrangements are.
• 45% of working couples need both incomes to meet their monthly living costs.
When you breakdown how these options might realistically look for your clients, you can quickly see how this might not be the long-term option they think it would be. Many underestimate how long illness or injury might last. At LV=, our average Income Protection claim lasted for almost 6 years in 2023.
When you consider your client’s financial objectives, even if this was something they could turn to, it might have considerable impact to their future goals. Using your fact find, you can delve into these assumptions and be equipped to challenge this viewpoint.
“It would only impact me.”
Your client might not explicitly hold this assumption, but another insight from our Reaching Resilience research demonstrates the wider impact a loss in income has that many might not consider.
The average UK worker has 3 people who rely on their income. In this year’s research, we included pets into the fold, and found that an additional 29% also have a pet that depends on them for food, shelter, and general wellbeing.
It’s likely something that crops up organically in your conversations when talking protection, but expanding the scope of what we typically define as a dependent can get your clients to consider who their income supports. Responses from our survey included children, grown up children, stepchildren, parents, and even housemates.
This could be something as simple as paying a monthly phone bill for their grown-up child through to paying care home costs for aging parents. Nearly half of parents with older children told us they support more than 3 people with their income.
Consider asking clients: Who does your income support? This opens the discussion for what the impact would be for them.
“It won’t happen to me.”
We asked workers what they consider their chances of suffering a serious illness, being off work for 2 months or more due to illness or injury or passing away within the next ten years.
Nearly half of the working population don’t believe that any of the listed events will happen in the next decade. We also saw that people were slightly less likely to consider themselves to be at risk of being off work due to illness or injury compared to suffering a serious illness.
These options mirror the outputs of our LV= Risk Reality Calculator, a great tool that puts into perspective the individual protection risks your client faces before retirement. It’s been used to fuel thousands of adviser conversations and can be a great opener into protection if it’s something you prepare before your client meeting.
When it comes to overcoming objections or other protection sales skills, we’re here to support you. Our latest Reaching Resilience report presents protection insights to help power more impactful conversations with your clients. You can explore our Reaching Resilience hub and download the full report and some supporting sales aids to help you position protection.
Unless stated otherwise, the data used in this report comes from a survey of 2,720 nationally representative UK workers conducted for LV= by Opinium between 15 – 25 October 2024.
OPPORTUNITY KNOCKS: WHY NOW’S THE TIME TO BREAK INTO NEW BUILD
There’s an opportunity for brokers to broaden their client base as the new build sector is set for growth, says Matt Martin, Head of National Accounts at Virgin Money.
The government has made significant promises regarding homebuilding in its initial months in power. It has committed to constructing 1.5 million new homes during this parliamentary term and aims to deliver the “biggest increase in social and affordable housebuilding in a generation”.
The government plans to update the National Planning Policy Framework, reintroduce mandatory housing targets, and initiate a programme of building new towns. These initiatives are part of a broader array of announcements and funding pledges made in the recent Budget.
That’s great news for the new-build sector.
But the government faces some challenges with housebuilding numbers in previous years nowhere near the level required to hit the new targets.
Mountain to climb
The latest quarterly homebuilding figures show that, between 1 July and 30 September 2024, the number of new starts was 29,310. This is up 17% compared with the previous quarter and 38% year on year, but still a long way from where we need to be.
On an annual basis, there were 221,070 net additional dwellings in England in 2023-24, a 6% decrease on 2022-23, and 11% down on the most recent peak in 2019/2020.
It’s an understatement to say that rapidly increasing the construction of 300,000 new homes per year will be challenging. However, the fact that the government has made housing a central pillar of its growth strategy and is committed to reforming the UK’s planning process as part of this effort is a positive move.
Setting this ambitious target has already galvanised the sector and set the tone for a renewed focus on building.
Overcoming barriers
No one is under any illusion about the scale of the challenges ahead, but work is already being done to overcome them.
There are supply chain problems and significant skills shortages in the construction sector that need addressing.
Ongoing planning constraints are one of the biggest barriers to building, alongside nutrient neutrality rules, both of which are already being tackled as part of the government’s planning reforms and work to unlock stalled sites, with the Local Nutrient Mitigation Fund.
House price inflation and high rates continue to squeeze affordability, making it harder for many first-time buyers without parental or government support to purchase a home. However, the government has committed to working with the mortgage industry to make the Mortgage Guarantee Scheme (which is set to end this June) a permanent feature under a new name, Freedom to Buy.
Sustainable revolution
New build homes are also at the forefront of the sustainable housing revolution and are already highly energy efficient, with most having an A or B EPC-rating.
The Future Homes Standard is also set to come into force this year and goes even further. It will ensure that all new homes are built to produce 75%-80% less carbon emissions than under the current Building Regulations.
Alongside the growth of sustainable homebuilding is the increase in the green finance sector to support energy-efficient homebuying choices, which has been slowly but steadily gaining pace over the past five years.
What it means for brokers
The new-build sector is poised for growth, offering substantial opportunities for mortgage brokers. By expanding your market coverage, you can maximise your client base and establish yourself as an expert in this burgeoning field.
New-build mortgage borrowing demands a specialised understanding of its unique nuances, from tight timescales to the complexities of various home ownership schemes. Shared ownership, for instance, is on the rise alongside a range of other government and private homeownership initiatives.
Mortgage brokers are ideally positioned to help clients navigate and benefit from the mortgage products available to support these purchases.
By becoming more knowledgeable about the new build market, you can make the most of the potential growth of this sector while helping your clients get the right product for their needs.
How Virgin Money can help
Virgin Money can help you do this. We have a depth of knowledge in the new build sector including the differences in time constraints, incentives and documentation involved. We’re experts in this market and have strong relationships with the major developers as well as smaller builders.
We’ve also designed lending products to meet the specific needs of borrowers in this sector, from high LTV mortgages to longer terms of up to 40 years to boost affordability.
We support buyers using the Shared Ownership scheme, enabling your client to borrow up to 95% of the share purchased for properties including new-build houses and flats, and choose from two- and five-year fixed rate mortgages, with fee-free and cashback deals available.
And we offer the innovative Own New Rate Reducer mortgage, which enables new-build buyers to use a 5% developer
incentive budget to reduce their monthly mortgage payments over the fixed term of the product selected.
Our Greener mortgages support energy-efficient buying choices, which are often part of new-build homes. It means your client can access a lower rate than with our core range for buying an A- or B-rated new build.
Ensuring you understand all of the buying and borrowing options available to your clients can mean you are on the front foot and are ready to support them into a brand-new home of their own.
To find out more about our new build lending products from Virgin Money and Clydesdale Bank, get in touch with your dedicated Business Development Manager and they’ll do everything they can to help.
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