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Tony Mudd: Get parents to pay children’s protection policies

Instead of looking for innovations, we should seek to create new meanings for new audiences, based on used ideas

My last article for Money Marketing appeared to accuse advisers of stifling innovation and, as you can imagine, comments were made. In my defence, I was doing so less by way of criticism and more by way of encouragement.

I was suggesting advisers would benefit from taking the time to look at new concepts, at new ways of applying protection, and maximising the opportunities that exist within most client banks. Failure to do so has a broader implication than just lost sales.

I would now like to continue this theme, but perhaps look at it in another way. The flipside of the same coin, so to speak.

It is often said there are no new ideas. Case in point: around three years ago, I pitched an innovative idea to add a long-term care option to a whole of life policy, such that the sum would be pre-paid in the event of a care need arising.

I was grateful the idea was picked up by two providers and, indeed, these policies are still available.

I am only sorry that the business volumes I intimated have yet to be seen. Worse than that – at least for my ego – I am now aware similar arrangements have been commonly advised on in the US for many years.

Reviving old ideas

It was poet Audre Lorde who said there are no new ideas; there are only new ways of making them felt. If we accept this, instead of looking for innovations, we should seek to create new meanings for a new audience based on old, tired or used ideas.

When it comes to new audiences, one area that has perhaps occupied more column inches in the financial press than any other is intergenerational planning. Much has been written on the practical difficulties of gifting wealth too soon, and the plethora of technical issues, from pensions and spousal bypass trusts, to the bank of mum and dad and estate planning. Rarely does protection get a look in though.

So this is for all the wealth advisers out there that do not write as much protection as they should (you know who you are).

When next reviewing the accumulated funds of your clients while considering the options for wealth transfer, how about suggesting they pay for their children’s protection needs?

Be it life cover because they have a dependent of their own, critical illness because they have a mortgage, or income replacement because they are renting. Or, indeed, any variation thereof.

Passing on protection

The point is this generation will all too often not appreciate the need for protection, and those that do will rarely be able to afford it or, more likely, not prioritise the expense.

Your clients, on the other hand, can afford it, do appreciate the need for it and understand too the potential financial implications of their children being under-insured. More specifically, they understand the financial implications for them, as well as their children. After all, moral support only goes so far.

Is parents paying the premiums of their children’s protection policies a new idea? Certainly not. An old, used or tired idea? Maybe. However, sometimes it is how an idea, however originated, is perceived by a new audience that is really important.

That and advisers recognising it is through understanding, awareness and activity that you create a new experience for your clients.

Tony Mudd is the divisional director for development and technical consultancy at St James’s Place

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There is one comment at the moment, we would love to hear your opinion too.

  1. Either way, the Bank of Mum & Dad often picks up the cost of adult offspring hitting hard times. So paying for protection (regular gifts out of income, so IHT efficient) is a much lower risk option than effectively self-insuring when number one son/daughter becomes too ill to work and pay the rent. And of course the cover is much cheaper if taken out when said offspring is young, but still can’t afford it themselves – they can take over premium later as their fortunes improve.

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