Modernising advice standards for a contemporary market

Compliance processes and advice guidelines exist in various networks and firms across our industry. These guidelines map out the parameters for financial advice given by their advisers, and it’s fair to say they do differ between different firms.

Having worked as an adviser myself, I appreciate how compliance guidance operates across different networks, as a result. I’ve always thought of advice guidelines like a pair of scales. The solution recommended should balance to the need and objective of the customer. If the solution delivers cover above or below the customer objective – compliance teams need the adviser to clearly explain why that recommendation is suitable. There are certain long-standing defaults that lay out what a suitable advice recommendation should look like.

But there’s a strong case to say compliance teams should now be considering other basic default positions of good practice advice based on modern life. After all, we’re now operating in the context of Consumer Duty, which includes the cross-cutting rule “A firm must act to avoid harm to retail customers”.

The recent CIExpert campaign “Single is Best” describes the recommendation of 2 single policies to a couple (as opposed to a joint life policy) as ‘superior cover’ and they urge the industry to open the door to allowing advisers to recommend single covers to couples.

For some, this runs against the default compliance position they’re used to, where advisers are required to recommend joint life policies to couples, specifically when the customer need is mortgage repayment. The reason for this logic is the mortgage is jointly held. A joint life policy pays out once and when it does, the funds are there to repay the mortgage. So, there’s no further need for cover.

But is that always true, and is that always the best advice?

Let’s consider the cross-cutting rule again. “A firm must act to avoid harm to retail customers” and “act in good faith”. Also, Consumer Duty principle 12 – “A firm must act to deliver good outcomes for retail customers”. These considerations are worthy of a more detailed look.

These examples are just some of the situations where joint life cover can unwittingly mean customers don’t go on to receive the best outcomes.

SO, DO WE NEED A RETHINK? DO WE NEED TO PUT A GREATER EMPHASIS ON FUTURE PROOFING A RECOMMENDATION?

At Guardian, we’re supporters of the “Single is Best” campaign, which aligns fully with our own dual life approach. We came to market to innovate and design protection solutions which deliver better outcomes to customers and ‘make life better’. For the reasons listed in this article, we made a deliberate decision not to offer joint life cover. Instead, we offer a dual life approach where both partners’ cover is kept separate. That way, if either partner makes a claim, the other partner’s cover remains in place.

I’ll end this article by referencing the golden rule; the principle of treating others as you yourself would want to be treated by them. I’d urge everyone to consider which approach you would want for yourself? Based on that, there’s certainly a robust compliance justification for cases where an adviser thinks their customer would benefit from 2 single lives rather than joint.

Vincent’s article was published in Health and Protection on 18 December 2024

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