Hands up who likes looking stupid? No, me neither, although the sub-text of my wife’s eyebrow, raised archly in my direction, is unquestionably “You could have fooled me.” She may have a point but I would argue there is a difference in the kind of stupidity that causes others a modicum of discomfort and the kind of foolishness that forces a client to seriously reconsider their relationship with you. The latter most certainly sits in my dislike box, as it does for all financial advisers, I would wager.
Here’ is why this is relevant. The role of protection in inheritance tax mitigation is considered “important” by nearly three-quarters of advisers, although the majority believe protection has been vastly underused as an IHT planning strategy.
Responses vary in terms of how and why insurance operates in this area but there is a degree of consensus from advisers that it can certainly:
– Enable deferment of decisions and provide short-term cover to allow planning.
– Be a less expensive solution than gifting.
– Simply protect that which is not manageable any other way.
Yet, advisers agree there has been an overconcentration on lump sum solutions, with protection relegated to a minor (and sometimes a non-existent) role.
What is causing this disconnect may have something to do with the fear of foolishness (the client relationship-risking type). You cannot master what you do not practise and our research suggests that less than a third of advisers have written more than five IHT protection cases in the last 12 months.
Advisers see big market potential for permanent IHT protection, regarding it as a secure policy for high-net-worth clients that, if dealt with early enough, can be a very cost- effective way to increase the net amount estates receive. But there are some important barriers to overcome first.
As for most protection business, the first critical step in increasing business levels is to raise awareness and anxiety in an effective and professional way. With the market focus having been almost exclusively on investment/trust-based solutions, there is the opportunity to re-present the protection solution as a refreshingly simple alternative. Providers with both protection and investment-based IHT solutions have the opportunity to articulate a clearly joined-up strategy, enabling advisers to confidently and legitimately put forward the case for protection, along with gifting options, in a far more compelling and holistic way.
Phil Wickenden is founder of So Here’s The Plan