It probably will come as no surprise to intermediaries that a recent study published in the USA shows that people with poor maths skills are more likely to be behind with their mortgage payments and have their home repossessed. I’d be happy to venture that you would find exactly the same pattern in the UK.
The study also showed that people with worse numerical abilities appeared to have chosen worse than average mortgage deals, and that an overall lack of understanding about the mortgage they had taken out, combined with general problems budgeting, also played a significant role.
If nothing else, these unsurprising facts highlight the value that an intermediary brings to the table for their less able clients. This is especially true these days, in light of the very real risk that people run of opting for the wrong choice of insurance cover or mortgage when buying online – whether direct from the provider or via a comparison website – simply because they don’t really understand what they’re doing.
Intermediaries have a duty of care to their clients to find the best product for their individual needs – whether a mortgage, insurance, investment or savings vehicle. That duty of care stretches to ensuring that they fully understand what they are buying. However, I believe that duty of care also goes beyond the point of sale. Intermediaries in my view should – and many do – carry out regular financial health checks for their clients.
This can be just as important for the financially sophisticated as it is for those who just don’t get numbers. Ongoing contact is not only great for building and maintaining the relationship, but it also means that the intermediary is fully aware of what is happening in the lives of their clients. The result? They can quickly identify if something is going wrong and intervene, hopefully in time to avert a potential crisis, thereby both retaining the business and building trust and goodwill.
Intermediaries can also educate the less financially aware by ‘translating’ scaremongering headlines in the personal finance pages into plain, sensible English, and putting the risks of the issue in their true proportion.
For example, thousands of people will have read about the mis-selling of Payment Protection Insurance by the banks and assumed that the accident, sickness and unemployment cover for their mortgage is equally dubious.
Intermediaries are ideally placed to make clear to their clients the difference between what the banks did and the cover that the intermediary suggests appropriate for their client. I think it is really important to point out that the regulator at the time did not criticise what was then generally referred to as mortgage payment protection insurance. Rather it made it clear that if sold properly by an intermediary, it could prove to be a valuable financial tool. And of course intermediaries can also make the point that this type of product shouldn’t really be bought through a comparison site as they rarely fully consider individual circumstances.
While the economic recovery may be stuttering along, people can’t afford to take their eye off the ball when it comes to their financial protection. An intermediary is the natural choice for people to seek both impartial advice and to source the right financial products at the right price… even if the right product is one that has been unfairly tarred with the brush of a scandal.
That’s much easier to achieve of course, if there is already a regular dialogue with the client and a sense of genuine collaboration and trust in your relationship.
Kevin Paterson is managing director of Source Insurance