09 Mar 2015

Analysis: Protecting clients mortgage and associated bills

Analysis: Protecting clients mortgage and associated bills


Allan Stewart, Independent Financial Adviser, looks at protecting client’s mortgages.

Protecting client’s mortgage and associated bills is a top priority for financial advisers. Arranging the finance to allow clients to buy their dream home is always the first step, but it is equally important that measures are put in place, that should they fall into financial difficulty through health or employment problems, they get to keep their home and do not run the risk of losing it. The market is constantly changing in this area and advisers have to keep themselves up to date with all the protection schemes available on the market.

Advising Clients

Pink Home Loans now insists its advisers have documentary evidence that they have discussed protection with their clients in every mortgage they arrange.

From this week the network’s brokers must ask clients to bring in their employment contract to illustrate what benefits they will be entitled to if they become too ill to work. The borrower will be asked to sign a declaration if they do not wish to take the advice.

The move is designed to encourage more clients to take out income protection so they can meet their mortgage payments if they are off ill from work.

Statutory Sick Pay rules mean employers must pay claimants at least £87.55 per week if they are ill, although many homeowners would struggle to meet their mortgage obligations on this.

Professional Comment

Pink director Mark Graves says: “Customers are at the heart of every decision an adviser makes, so asking a client to provide a copy of their employment contract or policy documents is a natural progression to make”.   

“An adviser should, in every situation, be able to point out how long the client could maintain the mortgage and put food on the table if they suffered a long term illness or lost their job. In my experience very few consumers will be familiar with just how little they are likely to receive from their employer in the event that they are no longer able to work.”

Rival networks have no plans to follow the move, however, Homeloan Partnership commercial director Neil Hoare says members of his network are expected to discuss protection with each client but are not formally required to do so.

He says: “Any move that improves the consumer outcome is a welcome change but we believe our advisers are already aware of the need to do this”. 

“I don’t think we would introduce a formal policy whereby a protection chat is required, but brokers know that any poor outcomes experienced by their clients will lead to a review of the advice process and as a result, we expect them all to be taking the necessary actions to make sure this doesn’t happen.”

L&G Mortgage Club managing director Stephen Smith says: “A protection discussion is prudent and proper in any advice process but I would imagine many networks already recommend their members should do this. We certainly have no plans to introduce a formal policy like this but it certainly cannot be a bad thing to do so.”

 Concluding Comment

PTFS marketing director David Carrington adds: “It’s great to see more distributors placing a focus on the need to protect your mortgage. That can only be commended.

“I would, however, agree with the view that most brokers, and certainly we would like to think our members, are already engaging in these conversations to make sure their clients are in the best position in terms of managing their finances. The proper approach to advising clients should mean you are discussing their entire situation, and that definitely means making sure they are able to meet their mortgage payments in the event of long-term illness.”

Your home may be repossessed if you do not keep up repayments on your mortgage.


Allan Stewart, Independent Mortgage Adviser

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