Case Study: The Value of Financial Advice For Our Clients

Background

Our clients, a husband and wife, operate a successful business and are the sole directors of the business using Armstrong Watson accounting services. They were initially introduced to our Financial Planning Consultant to explore the benefit of each of them making employer based pension contributions.  In our first meeting with the clients, it was identified that the business relied significantly on the direct input and involvement of our clients and to replace them would potentially mean hiring at least four or possibly more staff. Their personal financial position was also obviously intrinsically linked to the fortunes of the business.

Financial Planning Review 

Whilst not initially wishing to discuss their protection position in great detail, they were happy to disclose that they had recently applied for a level of life cover via a local mortgage broker. We suggested that we explored this further to ensure the arrangements were appropriate to their circumstances and upon further investigation identified the current arrangement had not been placed in trust, it was important for this to be the case and the level and term of the cover was also inappropriate. In addition whilst they had thought the advice was free, the paperwork indicated that upwards of £4,000 had been paid in commission to the person or business arranging the policy.

As a result, we recommended that the clients consider a more tailored protection plan and we discussed the different payment options available to them for taking advice and arranging such cover. They were unaware this type of advice could be paid for by a fee rather than paying for it out of their premiums over the term of the policy through commission. At Armstrong Watson we have the ability to work on a fixed fee basis rather than commission for protection advice which can help to reduce the monthly premiums over the term of the policy.

The clients were interested in exploring this further and also receive advice on the suitability, or otherwise, of their existing pension provision, and how best to place their intended contributions.

Our Solution

Following further research by our adviser, it was confirmed the existing protection cover in place would pay off the mortgage, however, on further investigation, the policy only covered one of the clients. Following a thorough discussion of all aspects of their protection needs, they raised concern about suffering a critical illness. Currently, they had no cover in place to protect them against this.  

In their circumstances, our adviser recommended the clients take out two plans, one of which would replace the existing plan they had in place. Due to their level of borrowing in total, £390,000 worth of life insurance was recommended, sufficient to repay their mortgage in the event either party should die prematurely, but also enough cover to financially compensate against the loss of income that would occur between the time of taking the cover, and their intended retirement as a company benefit. Both policies included critical illness cover, with the view that should either party be diagnosed with a critical illness, they would want to focus on their health and not the business. This would also of course likely impact on the longer term plans for the business.

Options for payment for the cover were discussed and provided to the clients, who ultimately decided to pay by way of a fee rather than commission, thereby saving themselves in excess of £18,000 in premiums over the lifetime of the two policies.

Both of the policies were also placed in Trust, so as to ensure that should anything happen to them both, the policies would not enter their estate, could be distributed in a timely manner and avoid any concerns from an Inheritance Tax perspective.

The Here and Now

11 months after their cover was accepted the clients contacted our adviser to inform us that one of them had been diagnosed with a form of cancer. The adviser instigated a claim on the policy, which required the client to give the insurer permission to speak with their GP and Consultant. With our advisers support, the claims process then progressed which ultimately led to the sum assured, as a result of the critical illness claim due to cancer, being paid out to the clients within a matter of weeks.

We are proud to be able to make such a tangible difference to our clients' lives, even in such difficult circumstances. Our advice allowed them to focus their minds on health, rather than financial matters. More so, whilst it is early days with regards to treatment, the client has thus far responded well to treatment and is optimistic about the future.

At Armstrong Watson, our quest is to help our clients achieve prosperity, a secure future and peace of mind. We take this responsibility seriously and are proud of the service, guidance and advice we provide to our clients. Protection advice is often overlooked, however, we believe it is the foundation on which good financial planning is based. Our advisers are Chartered Independent Financial Advisers with access to the whole of the market to help identify the best solutions and providers to fit a client’s circumstances. This also allows us the flexibility to work with clients on a fixed fee basis, should they prefer, for protection advice.