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Tony Wickenden: Put life assurance back at the heart of planning

Supercharge clients’ invested funds by building life assurance in to the core of a financial plan

Tony WickendenWealth creation, wealth management and wealth preservation are at the heart of giving financial advice. That’s what clients are interested in, right? The true test of good advice is a client being net better off with you than without you. ‘You’ being the adviser.

Just think of the movie Jerry Maguire where Rod Tidwell, Jerry’s US football client, implores him: “Show me the money!” In other words: make me net better off. Jerry screams it back at him… and the rest is cinematic history.

Wealth creation, management and preservation is what the adviser does to help achieve the aspired–to ‘net better off’ state.

What role does life assurance have in all of this? Well, take it back, way back, and you’ll find life assurance in its original form was the mainstay of a financial plan – the first thing you did; the thing on which everything else rested. For some it still has this role but anecdotal evidence would seem to indicate this is not the case for many advisers.

Wealth management has become more sophisticated, for sure. Wealth solutions and propositions have proliferated – both pensions and non-pension solutions.

Tax continues to be complex. Making the right wrapper choices during the accumulation period and the right drawdown choices when money is needed (together with all-important behavioural coaching) will be strong contributors to the delivery of advice alpha, gamma or delta – basically, the measure of the value that advice brings.

So where does protection fit in? Right in the middle of the process, I say, or right at the beginning. In other words, baked in.

Perhaps the easiest starting point for wealth managers who have let their protection muscles atrophy is to think of protection as a gap filler for when a catastrophe blows the plan off course. The catastrophes I have in mind are death or serious illness.

In either case, if the wealth creation plan relies on continuous investment, death or serious illness would likely bring to a halt the ability to continue investing.

In the case of death, it’s the investor’s family who will not get to see the realisation of the ultimate investment goals of the investor. And, in the case of serious illness, this applies to the investor as well as their family.

Think of protection as a gap filler for when a catastrophe blows the plan off course

To the extent funds have already been built up, they can continue to be managed to deliver a ‘risk appropriate’ return, but drawdown may need to start earlier.

In all cases where the investor doesn’t already have sufficient personal or employer-funded life cover, the supercharge of the invested funds through life assurance held subject to an appropriate trust and critical illness insurance – on a standalone or carved-out basis ­– would be invaluable.

Of course, the premiums would represent a cost, but the benefit (evident in the removal of financial risk to the achievement of overall investment objectives) may well result in the cost being justified by the peace of mind generated. It is a simple cost/benefit equation. Appropriate flexible-term assurance could work to deliver this ‘investment gap’ solution.

In an ideal world, the life cover sum assured would be assessed and adjusted on a daily basis, dependent on the investment fund value. Smart technology can implement this with funding being taken from the wealth account. Investment platform facilitation is essential to making this work smoothly. As the fund value reaches the target, the need for gap cover diminishes.

Tony Wickenden: Planning points for limited company clients

Where the investment wrapper is an investment bond then, if needed, the bond – being a whole-of-life single-premium life assurance policy – can provide some ‘baked in’ cover. This can be funded by internal deduction from the units without the need for the trustees to trigger withdrawals to meet premiums under a separate life policy in trust.

You would need to be smart about the kind of trust you used to ensure that the investment (or as much of it as required) was available to and accessible for the investor but with the death benefits being held for beneficiaries.

If the underlying investment is a unit trust or other collective, this would tend not to be in trust, but the back-up life cover should be because it is a separate contract.

All or any of the above relatively simple ways to bake in protection to the wealth management process deserve consideration.

Simple, but not necessarily easy, of course.

Tony Wickenden is joint managing director of Technical Connection (a St James’s Place Wealth Management group company).

You can find him tweeting @tecconn



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  1. Indeed the Zurich Intermediary Platform offers optional Investment Life Cover, which protects the clients original investment for the first 5 years. If they die within 5 years, it pays back the greater of the portfolio value or the original investment less all withdrawals. Clients have to be aged 18 to 64 to take out, but there is no restriction on tax wrappers or funds held, and no medical evidence or underwriting is required.

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