Financial advisers who own their own firm have a lot on their plate.
On top of serving customers, running their team and fulfilling the day-to-day requirements of running a business; they have to contend with regulation, qualifications, professional indeminty insurance, levies, fees, Brexit, covid… the list goes on.
It takes a lot to build up a company, so many advice firm owners will have taken steps to protect their businesses.
And Scott Hood, a consultant for QB Partners, believes this is another business line that advice firms could add to their offering in 2021.
Business protection advice can offer significant value to your business-owner clients and strengthen your client relationships.
It might be that you have clients who are business owners, but you have not yet explored what their businesses would need in the event of the death or illness of an individual within their business.
When looking to protect a business in the event of the death or serious illness of one of the team it is important to consider:
- (a) how profits will be impacted
- (b) what debt will need to be repaid
- (c) what will happen to the ownership of the business.
If the death or illness of a person within your client’s business would cause your client’s financial plans to be disrupted there is an opportunity to offer business protection support.
How you go about including business protection within your advice offering will largely be determined by your starting point.
If you are a mortgage or family protection specialist, you will know the providers and products in your market and be fluent in protection requirements, such as medical underwriting.
Your focus to expand into business protection might be on the differences between family protection and business covers.
For example, some business protection policies are better owned by a business entity (eg a limited company) rather than by an individual or trust, as is often the case with family protection.
There are usually additional tax and legal points to discuss with your business clients too.
In-house test subject
For wealth specialist advisers, however, you might already have a comprehensive understanding of your client’s business structure and tax position.
Instead, your focus could be on developing your research capability in the applicable life assurance market and deciding how you approach gathering underwriting information from your clients.
The latter is a vitally important task which can require a sensitive and empathetic approach.
Advice firms looking to move into business protection should review their own needs first and, if new protection policies are required, the exercise will provide the opportunity to learn about the market through a real-life example.
The financial stakes are high for business clients.
According to research conducted by Legal & General for the UK, only 18% of businesses had any insurance in place to cover key people, and nearly 50% of businesses had no specific arrangements for their shares if a shareholder died.
Consider putting business protection in your firm’s growth plans and your clients’ financial plans in 2021.
This article was written for International Adviser by Scott Hood, a consultant at QB Partners.