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Independent view

It has been said that financial advice concerns protecting and enhancing the financial position of a client.

You could be forgiven for thinking with all the column inches devoted to the pension time bomb, the 27bn savings gap, the failed stakeholder pension concept and the threeyear bear market, that protection is seen as being of less importance. I do not believe for one minute that is so.

Certainly, the importance of insurance contracts has been underlined recently within our office and sadly I am certain that our experiences are repeated in financial advisory firms throughout the UK on a daily basis.

Somebody once said that an insurance contract is a drop of ink and a promise to pay. Perhaps this is why protection products are invariably sold rather than bought as it is an intangible product. Perhaps more likely is that the purchase of a protection product involves confronting a future that is not what we dream of.

As advisers we know that death or serious illness, if not properly provided for, can quickly undo all the positive steps taken to enhance a client’s financial position.

Recently, Warwick Butchart has had experience of assisting with claims for several types of insurance contract.

With certain illnesses and accidents there is a clear timescale to recovery but these do not allow for added complications. A member of staff of one of our corporate clients had such a “minor” ailment that she did not initially feel was worthy of a visit to her GP. This ailment developed into something much more serious, resulting in a major operation.

Fortunately, her employer provides many benefits, including an income-replacement scheme to provide a significant ongoing income as well as assistance with a return to work programme with support for the employer and employee. The prospect of statutory sick pay is a frightening thought for most people and this practical example of the value of this employee benefit will be a relief to the employee concerned as well as comforting to colleagues.

As we all know, stress is one of the main causes of claims for income protection and waiver of premium. Rec-ently, a client of ours was signed off work for such a reason. Thankfully, despite some initial reluctance, we had been successful several years ago in convincing our client of the value of waiver of premium on several of his contracts.

To the client and his family, the knowledge that they could cope financially at this difficult time was a real bonus and certainly helped them to view tth future more positively.

One of our clients recently suffered a heart attack. Maybe, his highly paid but stressful job with long working hours was a contributory factor. Fortunately, the significant payout from the critical-illness policy he bought from us several years ago will provide him with the ability, if he chooses, to reduce his workload or as a financial buffer if he decides that he wants to take early retirement.

Finally, an active and sporty client in his 50s died suddenly. The benefits from his private and employer-sponsored schemes will ensure that for his widow and family, finances will be one area they will not have to worry about.

The challenge that we all face as advisers is in striking a balance between planning for client aspirations while financially protecting them from catastrophes.

We all know that for most people the prospect of premature death or serious illness is something that they do not want to confront.

We all know that in the vast majority of cases, protection products are sold, not bought.

We can all think of cases where, despite our best and repeated efforts to encourage clients to consider their protection requirements, no action has been taken.

However, that should not stop us from endeavouring to ensure that all those who have a requirement for protection products should be persuaded of the need to buy them.

Sadly, we see on an all too regular basis the real value of such products.

Tom Warwick is a consultant at Warwick Butchart Associates

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