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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


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There are 5 comments at the moment, we would love to hear your opinion too.

  1. The only Life policies I would ever leave outside of a trust are joint policies (obviously) and I believe there lies a large part of the issue, life policy “salesmen” look for the cheapest option rather than the right option (2 individual policies are slightly more expensive but you effectively get double the cover). the second part of the issue is the paperwork involved, most decent IFA’s complete the paperwork as part of the process but those “salesmen” (and that may include bank advisers too) get the same fee for less paperwork if they dont talk about trust
    it all come back to doing whats right for the customer, thankfully there are many decent advisers out there, and we will complete trust paperwork for poorly treated clients and take the business away from the rogues

  2. Gary – couldn’t have put it better myself – all aspects (including the “rogues” part) – plus don’t forget Split Trusts for combined Life and CIC too. All my recommendations include the trusts aspect as part of the package.
    Let’s face it, some just don’t care and I am sometims apalled at what some mortgage advisers in particular dress up as protection.

  3. I agree with your comments Gary & Steve. The challenge can come when clients are seeking an adviser. How do they know a rogue from an adviser who puts their interests first? Its obvious to us but are genuine firms clearly showing how and why they are different? Another challenge is that clients are often ‘on their guard’ when meeting a new adviser for the first time (not a bad thing) and an air of distrust is sometimes the default setting. This is quickly overcome by a genuine adviser, but clients have to come through the door first for that to happen.

  4. You can write joint policies into trust with BG for certian scenarios. You could also charge for putting policies into trust to cover extra admin

  5. Most companies offer a joint life trust not just BG.
    Gary your comments are spot on and thats where we differentiate ourselves proper advise leads to less cancelations and actually the rouge salesmen run frightened when they see a policy is in trust not just because of the paper work but also because they do not understand how a trust works.

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