Bankhall Conference 2009 - Friends Provident
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Tackling protection shortfalls
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Bankhall Conference 2009 - Friends Provident
- 1. Bankhall Conference 5 Issues For Tackling Protection Shortfalls Tim Williams National Accounts L&D Manager October 2009 UK Sales Learning & Development For professional advisers only, not intended for customers
- 4. A Thought To Ponder £12,000 £300,000 £1.8 Million
- 5. Why Millions? A 25 year old, earning £25,000 a year, and getting a 3% pay rise each year will, by the time they are 65, have earned… £1,885,031 Source: Tim Williams and his CASIO calculator 2009 These figures are gross
- 6. 2. Back To Basics Protection Mortgage Pension Savings Inv
- 7. Back To Basics Protection Mortgage Pension Savings Inv
- 9. Creating A Budget Now Off Sick £368.74pw* £350.00pw **Long term incapacity benefit / Employment support allowance as at April 6 th 2009 *Take home pay on earnings of £25,000 per annum – 09/10 tax rates ***Maximum benefit on FP rates £89.80pw** £307pw*** Budget: £81.20 pm
- 12. Protection Sales In The UK Source – (Graph) Swiss Re Term & Health Watch 2008 Source – (Statistics) Department of Work & Pensions 2007 1 in 13 1 in 5 1 in 8 IP Sales Up 17% In 2008!
Editor's Notes
- Once again the issue of protection shortfalls is raised – and with many members suffering from the downturn in the mortgage market, and with investment clients still somewhat reluctant to dip their toes back into the water, it is the good old standby of protection that many will turn to. With this in mind we want to offer up 5 thoughts in respect of the protection market – and if only one idea strikes a member as useful, then the time will have been well spent.
- On a global scale the size of the shortfalls, and therefore the size of the market! We will address this issues of individual shortfalls in a moment. For the moment focus on the Business Protection Shortfalls – 1 of the most surprising areas uncovered by the L&G survey, is the lack of cover in place for loans to businesses. Never assume that these have been covered by the bank – it may not be the case! Make sure that all areas of debt, or potential debt are covered, including capital accounts, directors loan accounts and overdrafts.
- And yet, if most people are approached the right way, they buy into the concept of protection, and indeed many people already subscribe to protection in some shape, size or form. Go through the 3 boxes.
- Refer back to the 3 boxes that we talked about at the start. It is worth emphasising to clients exactly what is at risk, quantifying life and CIC is relatively straightforward, people who are paid monthly or weekly do not relate to lifetime earnings, and yet this is what is potentially at risk. Worth remembering too, that although we cannot cover the full amount – we would draw the line at around the £1.2 million mark – this also explains why the product is more expensive, and why underwriting may be more problematic!
- Go through the build to emphasise that the most fundamental need for clients will be protection – it may take different forms for different people, for example, for a single person, employed with a mortgage it will revolve around PHI and CIC life cover becomes an option according to wishes and circumstances.. For a parent we can add life cover into the mix, for an older client the main protection need may be for long term care – all protection needs but all requiring different solutions. Only once the fundamentals have been addressed do the others make any sort of sense – pensions without waiver would have been a no – no in days gone by, and it is the protection portfolio that can provide that waiver. Likewise for savings, because without protection in place, anything that we do further up the pyramid will come crashing down in the event of financial challenge, it simply becomes unsustainable for the client, and that will of course be reflected in our ongoing earnings from that client.
- Go through the build to emphasise that the most fundamental need for clients will be protection – it may take different forms for different people, for example, for a single person, employed with a mortgage it will revolve around PHI and CIC life cover becomes an option according to wishes and circumstances.. For a parent we can add life cover into the mix, for an older client the main protection need may be for long term care – all protection needs but all requiring different solutions. Only once the fundamentals have been addressed do the others make any sort of sense – pensions without waiver would have been a no – no in days gone by, and it is the protection portfolio that can provide that waiver. Likewise for savings, because without protection in place, anything that we do further up the pyramid will come crashing down in the event of financial challenge, it simply becomes unsustainable for the client, and that will of course be reflected in our ongoing earnings from that client.
- Many clients will decline a full protection portfolio on the grounds of cost – we have to challenge them to determine that this is affordable. One example would be the use of the Bright Grey “Trivial Spend” spreadsheet. Identifies where the budget can be created.
- Go through the build – the budget there would be £81.20 per month
- As can be seen from the above, Life cover tops the list – perhaps because we all accept that death is inevitable – it is just a question of when! MPPI takes a big chunk of the money, and for most people, the mortgage payment is the largest single outgoing – but it will not be as great as the sum total of all the others, and, in their own way, they are just as important – you cannot manage without paying the council tax, the utilities, the car loan etc – right down to the mundane level of the Sky subscription – believe you me you are going to need Sky if you are stuck at home on the sick all day long – watching endless deal or no deal with Noel Edmonds is, frankly, not an option! Scary that people equate Dental Insurance as being as important as IP! I have yet to hear of a dental job that will cost £1.8 million!
- Consider the competition in the market – the internet and supermarkets! Many clients / prospects may take your advice and look to source the solution themselves, hoping to save money. Make use of mechanisms like trusts to demonstrate that you are adding value – as well as ring fencing the client to your advice proposition.