Ben Wright is director of strategic development at Tenet
The pandemic has led to a surge in young people taking a closer look at their financial situations, with members of Generation Z increasingly investing in property to secure their future.
Consequently, changes in financial sentiment, together with the potential for inflation and rate rises to cool soaring house prices, are transforming ‘Generation Rent’ into ‘Generation Buy’.
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Further supporting this point are the recent signs that the UK housing market will remain hot, even without the stamp duty holiday that has sustained the property market during the past year.
Such changes in sentiment include growing demand for life assurance, with many younger people recently considering investing in income protection.
But despite the high interest in mortgages, there remains a considerable shortfall in the number of people taking out mortgage protection insurance – even amid the current volatile and inflationary post-pandemic landscape.
To some extent, this can be traced to the fallout from the PPI mis-selling scandal, which has tarnished many people’s view of protection for the worse.
Clearly, an advice gap still exists, with many young people still wrongly believing financial advice to be expensive, difficult to access and often not applicable to their smaller budgets.
Closing the protection gap
The pandemic has laid bare how financially vulnerable many of us are. This has the potential to generate a new appreciation for the value of quality financial advice, its holistic role across all aspects of financial planning, the emotional support advisers can provide through thick and thin, and achieving financial peace of mind.
Even with such marked interest in mortgages, around half of all UK mortgages have no protection insurance. While part of this problem is people wanting to minimise expenses, there is also a need for advisers to better explain the benefits of mortgage insurance and reach out more to younger people.
Bricks and mortar is just as important a part of the financial planning puzzle as ISAs, asset allocations and tax arrangements. A mortgage is typically people’s largest monthly expense, so improving outreach to younger people and closing the protection gap is paramount to true financial wellbeing.
Confusion and uncertainty surrounding protection insurance remains one of the biggest issues. Entering the mortgage market can be daunting for first timers.
This, combined with uncertainty as to who to ask and the growing acceptance of online comparison sites, means it’s perhaps no surprise that many young people simply ignore mortgage protection. Therefore, advisers need to be more proactive in how they are explaining the benefits of such protection for young people taking out mortgages.
Reaching Generation Z
While many younger generations view financial advice as expensive, complicated and often unavailable, none of this is true, and the industry can be more proactive in dispelling such myths.
Reaching this audience is becoming much easier because many are actively seeking financial advice – often only requiring a little bit of effort on the part of advisers. To take advantage of this, advisers should think about making some simple changes to their outreach approach.
Creating short, practical and visual guides that are easily read on computers and mobile devices is a good way to reach a younger audience, given the digitally focused nature of Generation Z members.
In the same vein, expanding the use of video calls to provide young clients with the convenience and reassurance they seek has the added benefit of reducing the time taken for both advisers and their clients to travel for meetings.
Finally, advisers should also put an emphasis on becoming better at highlighting the benefits advice affords clients when addressing current concerns, whether that’s salary protection, or financial independence.
The road ahead
As most of us learnt from the pandemic, advances in technology are making such changes much easier and present a great opportunity to reach a growing and important sector.
Promoting the benefits of protection to young people should no longer be deemed difficult, or a waste of time. Not only is there growing appetite for such protection, but such conversations also give advisers long-term dividends in terms of sustainability and nurturing client relations.