In a statement, Pink stated that stress testing should not just be about whether someone can afford their mortgage were interest rates to rise, but whether someone could continue to live in their home were they to lose their job or become ill. Therefore every mortgage conversation with a Pink adviser will include a discussion about how a borrower would meet their financial commitments whatever may happen to them.
Pink advisers will now ask every mortgage applicant to bring in their work contract detailing their employer’s sickness and absence policy, or bring in details of any existing income protection policy, along with the usual bank statements and pay slips. With statutory sick pay currently just £87.55 per week, Pink’s director Mark Graves believes that this will lead to a very different conversation than if they hadn’t asked for this information up front.
Mark 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.”
Pink firmly believes that there should be no issues with affordability if the amount for income protection, life policy and mortgage comes in under the customer’s stated monthly budget for the mortgage.
Pink says that while clients will not be required to take out a policy, that they need to be given the advice which will enable them to make an informed decision. Every Pink adviser will be expected to document the conversation and the client will need to sign an insurance declaration if they have decided not to take any advice given. This will be to protect the adviser as well as to remind the client and make sure there is no misunderstanding in the event that the worst does happen and the client comes knocking on the door asking why their adviser didn’t sell them the protection they need.
Mark Graves, head of Pink Network, said:
“This isn’t about making more sales, this is about a moral obligation to make sure that every client can make an informed choice about taking on the largest financial commitment of their lives and understand the full implications of what will happen if they lose their job or are off sick from work for any length of time.
“We have presented this idea to brokers across the country over the past three weeks and asked our members what they thought. We could have made it a fundamental requirement of taking out a mortgage with Pink network, instead we explained the rationale and asked brokers if they would buy into the concept. We received a unanimous yes, so what we have now is a network of advisers who have made a commitment to do the right thing for their clients every time.
“Why it is left for a network and its members to make this stance, rather than it being articulated in the MMR is totally beyond me. My ideal would be for every network and every broker to follow in our footsteps and do the right thing.”
Gary Little, Head of Operations & Membership at the Society of Mortgage Professionals, added:
“This move is long overdue and full credit goes to everyone at Pink for introducing what has long been the only right advice for the customer. This protection advice, arguably, should have been introduced by the FCA under the MMR as part of its stress testing proposals. We are supportive of Pink’s move to have this conversation with every customer which will help to make sure that significantly fewer people have to deal with the double whammy of losing their home as well as losing their house or their job.”
Dougy Grant, Protection Director at Aegon, commented:
“For too long income protection has been the poor relation to other forms of family protection, in most cases a client’s income is the foundation of everything they do, but too often it’s ignored or skipped over during the financial planning process.
Here at Aegon we applaud this new approach by the Pink Network and urge other financial advisers to adopt this refreshing and necessary approach, not just at the mortgage event, but at every financial review that is undertaken and other significant life events.”
“We see income protection as a core part of the advice journey which is why we have also put our support behind initiatives such as Seven Families to raise awareness of the growing role income protection plays in protecting families in the UK.”
