In the case of intergenerational planning, if upon death there is no life cover including the inheritance tax bill, the family may have to apply for a bridging loan to pay the tax. These loans routinely come with higher interest rates.
FTA: What are the main barriers around discussing and implementing protection policies, and how can advisers overcome these?
RSL: The run to asset gathering and ‘wealth management’ post-RDR has arguably left many clients in a position where they are creating a nest egg through their Isas, pensions, GIAs and discretionary portfolios but unprotected from a health perspective and therefore potentially vulnerable.
I receive feedback from some advisers saying their client doesn’t need protection as they have so much money that they can effectively self-insure.
My question back to them is whether the client fully understands the implications of self insuring?
Advisers have a duty of care to their customers so if they are tabling a conversation about investing, they should do the same for protection.
If an adviser doesn't have the experience to discuss or recommend protection, then they should refer the client either to an adviser in the firm who does, or create a partnership with a firm who can provide this advice.
Clients' needs are relatively easy to identify once you’ve totalled up a client’s estate and calculated the inheritance tax figure.
However, this is more challenging for some advisers who don't table a conversation that starts to explore what will happen to you and your family should you become seriously ill or die.
As we emerge from the pandemic, research suggests clients are more aware of their physical and mental health and want to build resilience in this area. They would probably welcome a conversation around protection.
FTA: What protection policies would you advise as a must-have?
RSL: If you have a family, dependents, liabilities or want to leave a legacy you should be looking at life insurance, as well as ‘living benefits’ which include critical illness cover and income protection.
This means you or your family will directly benefit from a lump sum or regular income to ensure you can maintain your standard of living.
Wills and powers of attorney are also important; while they are not specific protection policies they can be instrumental in ensuring upon your death that your assets are directed and your wishes are carried out as intended.
sally.hickey@ft.com
