Business protection represents a huge opportunity for financial advisers.
Common sense would dictate that for small and medium-sized risk-averse companies, relying on a handful of key individuals to keep the business trading, this type of cover is essential. The figures indicate otherwise.
It is estimated that only 5-10 per cent of companies in the UK have keyperson cover and the business protection gap is reported to be around £1.1trn.
There are more than 4.7 million private sector businesses in the UK, with 99 per cent of these businesses classed as small and mediumsized enterprises and it is these businesses that are more vulnerable in the current climate.
For many financial advisers, selling business protection creates a fear of the unknown and there is a perception that it is particularly technical and complicated. Perhaps this is what keeps many from talking to clients about business protection. However, if you are already writing personal protection such as critical illness, life cover and income protection, you probably have all the skills and most of the knowledge needed for writing business protection too.
Business protection is similar to personal protection, in that it insures against the unexpected happening, and effective planning makes sure money is in the right hands at the right time to enable continuity and succession of the business.
A common misconception in writing business protection is that it is a laborious exercise, with excessive underwriting requirements due to the large sums assured. This need not be the case. Some providers have excellent underwriting limits, stretching up to £3m on life insurance before any financial evidence is required. Providers may only ask for company accounts and further financial evidence to be completed if life cover over £3m is needed so the underwriting requirements may actually be a lot less than you think.
By looking at your existing client bank in a different way, you could grow your business and take advantage of the rewarding opportunities in the business protection market. Whether you advise clients on a personal financial planning basis or on a corporate level, you are already likely to be speaking to the decision-makers in a business.
If you do not already have these clients, you may need to attract new ones. Professional connections can generate a great deal of mutual business, for example, through solicitors’ partnerships, shareholder agreements and accountants’ company valuations.
With over 30,000 firms of solicitors and accountants in the UK, the potential for you to tap into this market is substantial.
People rely on accountants and solicitors to help them make crucial decisions throughout their lives, such as moving house, setting up a business, getting divorced or making a will. They trust their judgement and, for that reason, if accountants or solicitors recommend an adviser’s services, then the client is more likely to follow up and seek financial advice.
Solicitors and accountants are not allowed to give their clients financial advice so they may well be looking to refer their clients on to an external financial adviser who can give them the advice they need. It makes sense for a solicitor or accountant to establish a strong relationship with a local adviser who they feel comfortable about referring clients to. As with any relationship, this takes time to build but can be rewarding for all concerned.
Aegon’s recent Building Professional Connections research highlighted that accountants are optimistic about the possibility of working more collaboratively with advisers in the future, with 63 per cent definitely seeing an opportunity and 47 per cent of solicitors also recognising an opportunity in collaboration with advisers.
Only firms authorised by the FSA can conduct regulated activity. This means that solicitors and accountants who may previously have given financial advice are now no longer authorised to do so, and many do not want to take the step of becoming regulated, especially when their core competencies lie in other areas. This creates an ideal opportunity for independent financial advisers.
According to the research, knowledge is a major barrier here, with the majority of solicitors saying they would need to know more about business continuity and business succession before they would feel comfortable enough to get involved.
These barriers do not detract from the fact that accountants and solicitors recognise there is a definite need to offer business protection to many of their customers. These are big opportunities for advisers that need to be seized sooner rather than later. Making professional connections can lead to improved client experience, client retention and repeat business, including extra income from referrals. Successful business relationships between advisers and professionals are a two-way street – everyone can win.
You have a trillion-pound opportunity here, so it would be shame to miss out.