Winston Churchill once said: “I always avoid prophesying beforehand because it is much better to prophesy after the event has already taken place.” This knowingly oxymoronic gem rather highlights the less knowing contradictions rife in the high-net-worth and business protection markets.
The past five years or so have seen innumerable pension, investment and tax changes that have fundamentally impacted financial planning decision-making.
But there has been little in any of these changes that has affected the need for different types of business protection, as outlined in the chart opposite. What these many changes have clearly done, though, is to increase further the distraction from consideration of protection and, therefore, reduce its perceived importance as part of a financial plan.
The complexity of many of the changes and the resulting need among advisers and clients to devote even more time and effort to understanding them, and what to do about them, has not helped protection to secure any further airtime.
As the chart shows, for each of the different forms of protection, there is a significant gap between the proportion of clients for whom it should be relevant and the proportion with relevant cover actually in place.
That gap is most pronounced in terms of providing for the liability of inheritance tax on death.
The contradictions we see within the industry with regards to protection are nothing but consistent: it is undoubtedly viewed as a cornerstone of financial
planning, but business levels are way below where they should be.
While somewhat understandable, the resulting lack of “protection action” is not acceptable when looking to ensure that clients receive the best possible outcome in their financial planning.
For all of the markets considered (wealth protection, IHT protection, business assurance and employee cover) – subject to the product being economically acceptable and the process to completion being smooth – there is a real opportunity for advisers and providers to more proactively engage with each other to helpdevelop the market through effective disturbance and solution creation.
Phil Wickenden is a consultant