Phil Jeynes: The importance of trusts
It is a constant source of surprise to me that the majority of protection products sold are not placed into trust. It seems impossible to obtain any reliable industry data on this matter, but the best guesses of the selection of life insurance aficionados I consulted, placed the percentage of policies not written in trust at circa 90 per cent.
The topic has been on my mind recently for two reasons; first we recently revamped our trust forms and processes to make them easier to access and simpler to implement. Delivering this news to a room full of IFAs gives you some brief notion of how it might feel to be Ed Miliband giving a speech – the disinterest is palpable.
Second, I have attended several events where success stories have been shared among peers and the use of trusts has been a key component in more than one scenario.
A common misconception is that trusts are only used for the mitigation of inheritance tax and they are certainly vital in this endeavour. However, for those policy holders for whom IHT is not a realistic concern, trusts are still of utmost importance.
Anyone who has been involved in handling the affairs of a deceased family member or friend, will recognise that the seemingly simple process of getting the funds from that person’s estate to those that need them, can be incredibly tortuous with weeks, months and even years elapsing while those left behind can only wait and worry.
For those wise enough to have taken life cover, the intention would doubtless have been to make their loved ones’ lives that bit less difficult in the event of the worst befalling them. Had they known that, without a trust, this basic wish would not be fulfilled without lengthy delays, they would perhaps have been surprised not to have had this concept tackled as part of the advice process (assuming they underwent such a thing).
Aside from these obvious and compelling reasons for the use of trusts, there remains a bigger picture; the success stories I referred to earlier were from different brokers with diverse client bases and product offerings. What many had in common, however, was their evangelical zeal concerning trusts. Not only, they testified, does it cement your standing as a protection adviser, it leads to rock solid, personally recommended leads, in the shape of the two or three trustees nominated (usually a brother, sister or close friend of the same or similar age as the client).
On top of this, it creates a natural segue into a discussion on Wills, which can either be drawn up by the adviser or, more often, referred to a third party for a set fee.
I hesitate to refer to pyramids when talking about sales tactics, but one can see how such a process would lead to an ever-expanding base of new, viable, free protection customers. And all simply by doing the right thing.
Phil Jeynes is head of account development at PruProtect