Buying a home will always carry a significant degree of uncertainty, but mortgage advisers should be making their clients aware of the options they have for mitigating potential risks. In other words, making resilience an integral part of their financial
What are the potential financial vulnerabilities?
No matter how cautious a household may be, there will always be the possibility of events or situations that can negatively impact their finances.
The most obvious example would be someone losing their means of income, whether through redundancy, serious accident, or chronic illness. The ramifications of this should be obvious. Losing your means of income means not being able to pay the bills, including your mortgage.
Of course, these events are usually beyond our control, but there are things that can be done to mitigate their impact. Mortgage advisers need to ensure their clients have access to products that can help them survive difficult times and it should be their responsibility to effectively stress test a client’s financial situation and highlight any potential vulnerabilities.
The challenges of planning for financial resilience
There are several challenges facing advisers when helping clients plan resilience.
Firstly, people may balk at the idea of increasing their monthly outgoings for something that might happen in the future. Protection may even seem unaffordable. Advisers will therefore need to discuss these costs as part of initial budget discussions.
“It’s essential that the costs of any protection are considered to be an integral part of your customer’s overall budget, and not an expense which they have to find additional funds for,” comments Gordon Reid, Business Development Manager and Learning and Development Specialist for Financial Services and Professional Education at LIBF.
Customers may also fail to appreciate the potential risks if they perceive themselves to be in a financially secure position when taking out a mortgage, so advisers will need to highlight what these potential risks to financial wellbeing are and how they can quickly spiral out of control if there is no protection in place.
How to find the right protection for every client
Another problem facing advisers is that every client will have different circumstances. For example, a single parent with little by way of savings faces different challenges to a professional couple with no dependents. Put simply, there is no one-size-fits-all solution.
Advisers need to be able to listen to clients, appraise their individual situations and recommend the protection products that best suit them. To do this, the adviser needs to know what products are available.
“A comprehensive understanding of your customer’s potential needs, and the protection products to meet them, is fundamental to the development of any financial or mortgage adviser,” says Gordon, adding that “unless you have knowledge of the financial risks your customer might face, and all the options for mitigating these, you could be leaving them open to serious financial detriment and be failing in your duty of care to them”.
How to look after clients’ financial future, now
By ensuring clients know about the various protection options available, you can give them the best chance of getting through difficult times with minimal impact on their finances.
“You can’t predict what’s around the corner but having the right protection in place can make a big difference to your customer’s capacity to cope with whatever life throws at them,” adds Gordon.
Being able to outline appropriate protection options is a fundamental skill for both mortgage advisers and financial advisers. As the industry shifts to a more customer-focused approach, the ability to understand clients’ individual circumstances and provide a tailored package of protection could prove an invaluable addition to your skillset.
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Check out our Certificate in Protection for advisers