Opportunity
Research carried out by Legal & General into small to medium-sized enterprises and business protection, underscored what Mr Kateley has described as an “opportunity” for advisers.
Key findings from the research found:
- Some 95 per cent of the 5.4m private companies in the UK have fewer than 10 employees.
- Less than half of these currently have a financial adviser.
- Some 89 per cent of SMEs taking out business protection did so because they were advised to.
- The main reason they never took it out was because they had ‘never considered it’.
Mr Kateley comments: “From our visits to advisers across the UK, some lack the confidence or experience of business protection to enter this market.
“One of the biggest barriers is that they think they have no corporate clients, but are we really talking about corporations?
“There is clearly a huge opportunity for intermediaries in this market, so why aren’t more of them entering it?”
Practicing what you preach
During a meeting with protection advisers, carried out a few years ago by one product provider, the head of intermediary distribution at that company asked how many of them recommended business protection products to their clients.
According to him, nearly 60 per cent of those attending (roughly 70 people in total) put their hands up. Then he asked how many of them had taken out business protection for their own firms, on top of any professional indemnity insurance.
Three put up their hands, a few others said their network was covering them, and about 10 said they had income protection, but not business protection.
This isn’t confined to one providers’ experience, however. Johnny Timpson, protection specialist for Scottish Widows, comments: “In my experience, few advisers have protected their own business.
“In looking to tackle the significant protection gap we have in the UK, adviser firms looking at auditing their own business risks is perhaps a good place to start.”
He highlighted Paul Pickford’s video diary, which can be viewed on the Seven Families Project www.7families.co.uk which explored the issues he faced after suffering a life-changing stroke at just 42 years old.
For Paul Moulton, small-medium enterprise director for Axa PPP Healthcare, however, most advisers are practicing what they preach.
He comments: “In our experience, many advisers walk the talk and provide healthcare cover for themselves and for their employees.”
This gives a very good foundation on which to build a conversation with a potential client about their protection needs.
Relevance to the adviser’s business
This does not mean advisers are unaware of the potential risks. As Emma Thomson, life office relationship director for Lifesearch explains, it may not always be completely relevant for them.
Ms Thomson says: “For many advisers, whether they have business protection as well as other cover depends on the business size, and if they feel it is relevant as far as business protection is concerned.
“The main questions they need to ask is about cashflow – this is king in business. Is this strong enough? Can they cover the debt, replace the key person or buy out another owner?”
