The foundation of all financial advice is built on protection. There is little sense in building a great wealth portfolio on shaky ground. The fuel that powers our ability to build up our investments is often reliant on our ability to generate an income. If the fuel runs out, the vehicle stops moving. Therefore, it is logical to ensure (or should that be insure?) that our client’s income continues to flow, even in the event of them being unable to continue working due to ill health, or as the result of an accident.
How well we cement our client’s ‘foundations’ is dependent on what protection is available to them. Appropriate advice obviously relies upon needs and risks being identified and discussed. However, it is also vital that an in-depth conversation about a client’s health is conducted at an early stage. There is no point in discussing a solution with a client, if the product in question would ultimately be unavailable to them, due to their medical history, or even that of their family.
Conducting detailed research before making a recommendation to a client is extremely important. It ensures that expectations are managed, and this can come in many forms:
- The premium – will a loading be applied, and, if so, what will the final premium look like?
- Exclusions – will any be applied to the final underwritten offer issued by the insurer? If so, they need to be discussed with the client before an application is made, to avoid any unwelcome surprises once the underwriting has been completed.
- Declined applications – can lead to awkward conversations with a client. Adverse and unwelcome decisions can often be avoided if the fact finding and research process is thorough at the outset. In other words, by not applying for cover that was always going to be declined.
Protection isn’t complicated, but sometimes it can be. There are a lot of moving parts to stay on top of. Insurance providers regularly update their policies, particularly critical illness and income protection cover.
They also regularly update their underwriting policies – just because a particular insurer previously accepted someone with an above average BMI on standard terms, it doesn’t mean they are going to offer the same terms again.
Unless you advise and arrange protection on a very regular basis, it is easy for knowledge to slip. In our experience, many clients in the ‘wealth management space’ tend to be in their 50’s and 60’s where it’s unusual to find a client with a clean bill of health. We also find that due to their age and the sum assured required, medicals and GP reports are frequently requested. Helping a client navigate safely and efficiently through this process can also take a considerable amount of time and effort.
Broadly, we find that clients are all too ready to insure their lives and maybe even protect themselves against critical illness, but income protection often lags behind as it isn’t deemed to be a priority.
In a year when Swiss Re reported a 10% reduction in income protection policies sold, we all know that the risk of becoming too ill to work is greater than the risk of suffering a critical illness or even dying.
Yet so much is reliant upon income, such as our:
- Mental wellbeing.
- Pension contributions.
- Bank of Mum and Dad.
- Payment for health/household insurances.
Often the person who stays at home to raise the family can be completely overlooked. If that person had an accident or was too ill to be able to run the house, raise the children, cook the meals, taxi drive the children, then who would do it? And how would that be financed?
Why liquidate hard-earned savings and assets, or be forced to downsize, when they can all be protected by arranging a suitable policy whilst paying an affordable monthly premium?
What matters is your duty of care to your client and that protection is considered at the forefront of financial planning.