When Legislation Restricts Access to Important Advice
Irish people have long held a reputation for being generous to those less well off. The number of charitable donations made in Ireland each year have secured us a place at the top of the World Giving Index year after year. Historically, we have come from a place where hunger and poverty were the norm. As a result, communities often banded together to help one another in times of crisis. Luckily, our little country has come a long way since famine times, yet the drive to help and support each other when things go bad remains.
A recent example of this was seen in the media following the tragic death of a Dublin City Council worker while on holidays on the Spanish island of Majorca with his family. In the aftermath of his death, the man’s colleagues got together to support his partner and children when they did not receive the benefits of the pension arrangement. This need not have happened in Dublin in 2016.
How did we end up here? The population of Ireland today is comprised of a diverse group of people living in many different family situations. When I started in the business 40 years ago there were two types of people, those who were married and those who were single. Variations on those two situations were as rare as hen’s teeth. Today, while family life carries on, day in, day out for those who are separated, divorced, remarried, cohabiting, in a range of gender combinations, the legal ramifications for these diverse families are very complicated and need to be considered. Simply put, the legislation has not kept up with our changing social landscape. It is a fact of life that people don’t often think of their legal situation until something happens that forces them to deal with it.
Professional financial advisers deal with clients in a range of family situations every day of the week. What happened to the family mentioned above could have been avoided with a simple declaration of wishes being signed. But without someone to tell them what to do in order to protect their family in the event of death, how would they know what to do? If things do not change, these cases will arise time and time again.
When, in 2001, legislation was introduced in this country with the aim of protecting the public, a set of circumstances has arisen whereby we, as professionals, can no longer make contact with ordinary folk unless they are referred to us first. The unfortunate result of this is that they can no longer access the advice that they need. This results in the situation mentioned above.
The financial regulator is currently undertaking a review of the remuneration packages available to intermediaries. A similar review was carried out in the U.K. in 2012 by the FSA’s RDR which eliminated the remuneration packages available to intermediaries. As a direct consequence of this, and the reduced profitability in the industry, vast numbers of people left the industry. The banks exited the life insurance and advice market with the result that whole swathes of British people can no longer access advice from financial professionals except at very high costs.
Once the review is completed in Ireland there may well be negative consequences for ordinary people here. And this is something we ought to be seriously concerned about as a State. As the level of uninsured people increases (beyond the statutory mortgage protection policy) there will be a demand for more financial supports for widowed people and their dependent children, a demand which will ultimately fall to the State.
The law of unforeseen consequences comes into play when we start fiddling about with the market. The consequences of our well-meaning decisions have long reaching effects. The legislative changes implemented in 2001 have brought about consequences which have still not been ironed out fifteen years later.
Everybody in this industry knows that life insurance is sold, not bought. People don’t come looking for it early in their lives as they, understandably, have other priorities. This goes back to the time of Julius Caesar, when soldiers had to be forced to sign the forms which would deduct funds from their wages to provide for their families in the event of their death in battle; funds which would mean the difference between a life of relative comfort or one of abject poverty.
If we in the industry are not allowed to contact people to help them navigate the difficult terrain that comes with diverse family situations, then who will do it? All of the stakeholders have a responsibility to ensure that we avoid these kinds of traps. Our businesses need to be viable so that they can continue, and be accessible to all, so that we all have the opportunity to provide for our loved ones when the unforeseen arises.