Parental protection
Holistic
protection
advice
Needs
Treating the
customer
fairly
Budget
Review
Value of
Advice
Learning objectives
• Constructing a protection portfolio for a modern family
• Interaction of mortgage, personal and business needs
• Importance of trusts
Agenda
• “A modern family”
• Client scenario
• Additional needs
•Calculating covers required
• Financial planning outcome
Agenda
• “A
modern family”
• Client scenario
• Additional needs
•Calculating covers required
• Financial planning outcome
A modern family’s protection needs
A modern family's relationship
In first 10 yrs
Divorces
Average age
50%
118,140
45 m
42 f
42%
Current divorce rate in UK
Source: http://www.ons.gov.uk/ons/search/index.html?newquery=divorce Apr 2014
48%
1 child < 16 yrs
A modern family’s business
Source: www.ons.gov.uk/ons/rel/regional-trends/area-based-analysis/births-and-deaths-of-enterprises-in-local-enterprisepartnerships--2004-11/sty-business-enterprise-closure-rates.html
FOS-protecting a modern family’s needs
906 critical illness complaints
1439 income protection
Source: Annual Review of customer complaints – Financial Year 2013 / 2014 Pages 47 /
48 Financial Ombudsman Service Limited, May 2014
Agenda
• “A modern family”
• Client
scenario
• Calculating covers required
• Additional needs
• Financial planning outcome
Client scenario
The name: MED.net is used here as a purely
fictional UK based company as part of a case study
example. It is not to be confused with any other
company, organisation or legal entity.
Immediate protection needs
• Mortgage protection cover of say life, critical illness, income
protection etc-but do they have any other needs?
Agenda
• “A modern family”
•Client scenario
• Additional needs
•Calculating covers required
• Financial planning outcome
Fact find qualification
Qualify
Family protection:(i) Covers required/existing
(ii) Married/common law relationship?
Impact
(iii) Previous relationships?
(i) Implement/complement
(ii) Not married/no wills...direction of benefits,
potential IHT & guardianship
(iii) Paul has a son, James, & pays maintenance
Employee benefits:Paul has none & Linda has some
Factor Linda’s into the protection portfolio
Paul’s business:(i)There is a loan for £60,000
(ii)Is there shareholder protection?
(iii)Any development plans?
(i)Personal g/tee secured on his house
(ii)No cover-continuity of business & fair value to his
dependants
(iii)No plans to sell or buy out-so annually review
Health status?
Impact on protection terms, but both are fully fit.
Agenda
• “A modern family”
•Client scenario
• Additional needs
•Calculating covers required
• Financial planning outcome
Calculating covers required
• Qualify target sums for all the required areas
• Review existing plans & employee benefits ...fit for purpose?
• Net off as appropriate
• Resulting covers required
• Subject to Paul & Linda’s budget and priorities
Mortgage payments or Rent
Entertainment - Movies / DVD’s Video Games
Budget/ Concerts
planner
/ Shows / Lottery / Days out
Utility Bills – Gas / Electricity / Water /
Fuel / Rates / Council Tax / Shared
Maintenance / Alimony – Maintenance /
Student fees / Private school
Clothing - Everyday / school – shoes - P.E.
kit, trainers, football shirts / School Trips /
Child Care / After School Clubs / Music
Lessons / Pocket Money / Sports etc.
Smoking
Dinner money / Packed Lunch / Snacks /
sweets
Food / Sundry Food / Take Away
Medical Treatment / Medicines / Special Diet
Household / Appliances / Credit cards /
Loans / Store Cards - Sofa / Furniture /
Catalogue
Hobbies / Golf / Football / Dancing / Pub /
Socialising / Parking / Permits / Travel /
Railcards / Oyster / Gym membership
Insurances - Pet / Life / Medical / Mobile
Phone / ASU / PPI / PMI / Dental
Eating out / Restaurant - Family Roast /
Renè’s / Burgers / Pizza / Coffee
Car costs – road fund / fuel / Insurance /
Servicing / Leasing / Maintenance /
Parking
Broadband / Line Rental / Satellite / Media /
Cable / Mobile Phone / TV Licence
Subscriptions / Cubs / Guides / Clubs /
Magazines / Associations / Charities /
Sports etc.
Pension / Savings / Investments / Holidays /
Birthdays / Christmas / celebrations / School
fees / University / Wedding / Rainy Day etc.
Mortgage protection options
Paul & Linda’s
mortgage requirements
Structure options
Rationale
£160,000 22 years
repayment mortgage
Life &/or CIC
Ideally inclusion of both.
Joint or single life
Joint life-cheaper, simple-default.
Single-more costly but increased cover and
more flexible.
Family protection
Insuring Paul
Structure options
Rationale
Replacement of Paul’s income
for Linda and family, plus, son
from previous relationship.
Life or Life and CIC?.
Include both if budget permits
Lump sum or FIB?
FIB logical, simple clean, tax free
income.
Written under trust?
(i) Linda and children
Yes written under flexible trust.
No employee benefits
(ii)Son from previous relationship
Yes written under fixed trust
Income protection
Income protectionyes..executive...group... individual
Family protection
Insuring Linda
Structure options
Rationale
Replacement of Linda’s income
for Paul & the boys.
Life or Life & CIC
Include both if budget permits
Employee benefits:(i)2 times DIS
(ii) 1 years CIC
(iii)group income protection
Lump sum or FIB
FIB logical, simple clean, tax free income
(deduct £28,000 DIS?)
Written under trust?
FIB life written under flexible trust(split
version if CIC included) to aid any future
adjustments as may be required,
Income protection
Income protection-cover under the group
scheme negates the need for cover.
What is a trust?
A trust is a way of holding property for the benefit of another without giving
them full and immediate control over it
Life Policy
Who is to benefit?
Rules and regulations
Who is to look after the trust?
MED.net business protection
Paul’s needs
Structure options
Rationale
Business loan
protection
Life of another (Mednet on both
directors)
Business continuity & remove exposure to personal
estate
Shareholder
protection
Both shareholders on own life
under trust with double option
agreements.
Continuity of ownership for surviving shareholder,
and recompense to Linda for commercial value of
Paul’s holding.
Agenda
• “A modern family”
• Client scenario
• Additional needs
•Calculating covers required
•Financial planning outcome
Financial planning outcome
• Mortgage Protection - repayment of mortgage
• Personal protection - continuity of income
•Personal protection - continuity of income for son from previous marriage
• Business protection
• Removal of potential claim on family home
• Sole control for surviving shareholder/fair value for share of business.
Learning objectives
• Constructing a protection portfolio for a modern family
• Interaction of mortgage, personal and business needs
• Importance of trusts
“Knowledge is of no value unless you put it into
practice.”
Anton Chekhov
Thank you for your time
Handset questions
Question 1:
What is the main type of protection business you are engaged in?
(i) Family & mortgage
(ii) Business
(iii) IHT
(iv) All of the above
Handset questions
Question 2:
Would you like a Friends Life Account Manager to contact you regarding
the support available?
(i) Yes
(ii) No
Handset questions
Question 3 – Please rate the:
Quality of presentation 1-9
Handset questions
Question 4 – Please rate the:
Value to your business 1-9