It is regularly cited that around 50 per cent of all protection sales are linked in one way or another to a property transaction. With this in mind, you would be forgiven for expecting the recently announced stamp duty increases for buy-to-let properties, coupled with the cuts to landlords tax relief being phased in, to put not only the dampeners on this burgeoning sector of the mortgage market but, in turn, to have a big impact on the protection space too.
But this news was presented alongside a whole host of measures designed to assist first-time buyers onto the property ladder. The Chancellor clearly has a strategy: to take from those looking to buy a second home or investment property and give to those looking to buy their first home. And the protection conversation for these two distinct client types could not be more polarised.
Protection and mortgage advisers alike know all too well the challenges of discussing issues of protection with a client purchasing an investment property versus the relative ease when talking to someone purchasing their first home. Perhaps the Chancellor’s announcements signal a positive change for the protection market?
As the percentage of mortgage transactions from the buy-to-let market has grown over the years, we have been mindful of the impact this has had on our protection penetration. While it is important not to give up on how we can better engage property investors to consider protection, would it be more prudent perhaps to target where the need is likely to be greatest?
As part of this categorisation process, we have taken the analysis a stage further and segmented our entire client database using Experian’s customer profiling tool. As a result, our clients have been placed into one of 14 key financial categories, ranging from “bright futures” to “traditional thrift”. Each category has its own individual “portrait” that details certain key traits, characteristics and goals the group share. The information from this allows us to better align products and services with a client’s needs.
So rather than provide a blanket, and indeed crude, one-size-fits-all solution, it is important mortgage and protection advisers use appropriate insight to achieve a more targeted approach. This will result in delivering the right content to the right individuals, essentially expending all of our protection energies in a much more focused and intelligent way.
Bearing in mind that many first-time buyers previously will not have been made aware of why they need to protect their income and debt, never mind what options are available by way of policies, it goes without saying they should be our obvious priority.
We believe that this analysis and the more granular understanding of client segments, coupled with the Chancellor’s hoped-for changes in homeownership, should result in a positive impact on protection in 2016.
Mike Aldridge is sales director at London & Country