Cover Magazine recently reported that a small but respected medical insurer has ambitions for its franchisees to establish referral networks of IFAs. Without wishing to rain on that insurer’s parade, it strikes me as unlikely that many IFAs—who tend to value independence above all else—would be willing to refer their clients to a tied agent.

Few IFAs advise on private medical insurance, and those that do tend to dabble rather than specialise. It would therefore seem sensible for IFAs to partner with PMI brokers, in order to provide their clients with access to specialist advice on a product that will often form part of a financial review. PMI brokers are aware of this opportunity and are often keen to establish introducer relationships with IFAs.

The mistake that PMI brokers invariably make is viewing this as a straightforward business arrangement, where the IFA will be motivated to refer clients for financial reward. In my experience, IFAs are primarily motivated to add value for their clients, to be seen as a hub for all matters financial, and to ring-fence their core business in the process. The commission share, whilst gratefully received, is almost incidental.

This puts a different complexion on the IFA-PMI broker relationship and makes cultural compatibility more important than financial reward. Professional standards are far higher in the IFA sector, with the minimum qualification requirement due to be raised further as part of the Retail Distribution Review (RDR). By contrast, there is no qualification requirement for PMI brokers, and, as a result, most do without.

Leaving aside the issues with the RDR, it has arguably prompted the IFA community to re-define itself. A transparent charging structure puts IFAs above the fray and the old-fashioned approach of selling products—still so prevalent in the PMI broking sector—is increasingly frowned upon. IFAs will therefore be naturally cautious about referring if there is a danger that their clients will be sold to, rather than advised.

The biggest challenge to the relationship between IFAs and PMI brokers, however, is that many brokers are now selling life cover and other pure protection products, thus encroaching on traditional IFA territory. This is a legitimate growth strategy for health insurance intermediaries, but it undermines the notion that IFAs and PMI brokers are natural bedfellows. PMI brokers cannot have their cake and eat it.