Just under half of 205 financial advisers questioned by Royal London are struggling to attract clients under the age of 35.
Commenting on why advisers are struggling to attract clients under the age of 35, Daniel Elkington, chartered financial planner at Lincolnshire- based MT Financial Management, said: “I think that advisers don’t normally consider them to be clients. I’m 33 and my generation cannot yet afford advice and the advice gap is evidence of this. This used to be the job of the banks and building societies but they cut all their positions because they couldn’t afford to pay a full peg adviser to process £2,000 investment ISA contributions all day.
“It’s a real challenge for my generation to solve. How do I manage to provide a service for my generation at a level of profit that means my business is sustainable – whilst maintaining compliant processes and a high level of service as my chartered firm status demands. It is one heck of a pickle.”
The analysis also showed that almost three-quarters of those advisers questioned by Royal London believed that under 35s “are leaving it too late” to deal with their protection needs.
Jennifer Gilchrist, protection specialist at Royal London, said: “It’s clear from the research that we need to raise awareness of the benefits of income protection, especially amongst younger consumers. As part of this, we need to tackle the perception of protection being expensive.
“There is a whole range of options that can be personalised to individual budgets and customers often tell us they are pleasantly surprised when they find protection isn’t as costly as they anticipated. Customers are at the heart of what we do, so any insight into their needs is valuable in helping us to provide better outcomes for them which will help to bridge the protection gap.”
The analysis found that nearly nine in 10 IFAs agreed that income protection (IP) is undersold in the industry, with 52% adding that the main barriers to selling or recommending the product is a lack of awareness of IP among clients. Affordability was another obstacle for selling IP according to 51% of advisers.
The research also found that seven in 10 advisers agreed that the protection gap is increasing, while six in 10 feel that protection products need to be tailored to fit the needs of the changing lifestyles of consumers.
IFAs were divided on the likelihood of providing protection to those working in the “gig economy”.
In fact, three in 10 believe the gig economy presents an opportunity to the IP market, with some advisers seeing it as a chance to engage with a market that is typically underinsured.
Commenting on the analysis, Keith Churchouse, director and chartered financial planner at Chapters Financial, said: “Invariably, I think there is an important financial balancing act for those below the age of 35 to negotiate. I believe financial education is improving in our schools to help consider future money planning, but this may be too little, too late for those in work now. This in itself might be one of the reasons why this generation may not seek advice that they never knew they needed. I think social media will help this over time.
“There are the general costs of living, such as rent, mortgage, university loans,and children, that need to be budgeted for, and then any surplus that might be used for add-ons might be used in part towards income protection. Income protection has always been perceived as expensive when compared to other protection covers that may be being considered, such as life cover. And in this comparison, on the face of it, it is, but the likelihood of occurrence and claim is statistically higher.”
Aamina Zafar is one of the UK’s leading financial journalists. She has previously worked as a senior reporter at FT’s Financial Adviser. The award-winning journalist writes regularly on the IFA community, mortgages, pensions and financial regulation.
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