Income Protection Awareness Week - Wealth Wednesday

Income Protection Awareness Week

Wealth Wednesday

With this week being the income protection awareness week, the Income Protection Taskforce brought a number of sessions, of course talking about all things income protection. Hopefully you have had a chance to catch some of the sessions, but we have decided to have a round-up so that you don’t miss out.

Setul Mehta started off this session with a discussion about how income protection is overlooked by many people, thankful not all though! And why income protection has a place within wealth planning, it all comes down to the fact that planning for the future is completely underpinned by the income that a person brings home, so protecting this is crucial. 

Often, when planning for the future, we plan for the financial needs of partner’s and children, but what is sometimes not an initial thought is parents who are now living longer and would potentially need care or financial support. It’s not just thinking about your own and the immediate financial needs of your family, it is also now taking care of our parents that we need to plan for.

Another thing mentioned is that 1 in 8 people are forced to stop working due to ill health, which is just another of many reasons why income protection can be beneficial. Is it that much more difficult to add income protection to the advice that you’re already giving? As advisers, we have a duty of care to our clients, and there is a duty of care to keep the income going if a client is to fall ill.

Many advisers start off working in the industry by learning and doing protection and then move towards wealth, so there is a lot of knowledge already there. However, protection insurance may not be where an adviser finds themself now, or it may be something that is avoided, which is why signposting is so brilliant. If for whatever reason you don’t advise on protection insurance, there is no harm in referring to a person who specialises in this, to ensure your clients are protected fully.

Income protection can be valuable to all people who are in work, and it is found that 1 in 3 clients do not stay with their parents adviser, so starting to chat with your clients children once they start working can end up securing them as clients when the time comes to arrange protection.

Setul then focused by bringing Matt Chapman’s work into the conversation, who is a huge advocate of income protection. He highlighted that Matt talks about his concept that income protection is split into three parts: when you’re alive, retired and dead. Wealth advisers plan for the retired and dead parts, but income protection is often overlooked and it is a fundamental part of making sure that the financial plan actually happens. 

Taking us to another key adviser, Setul brought up Roy McLoughlin’s very clear fact that on average income protection costs a client £1 a day, which seems like such a small amount considering it’s protecting a person’s whole monthly income. Setul then expertly brought the conversation around to Johnny Timpson and his notion that wealth advisers should treat protection as an assess class. It’s not something over there that’s done by others, it should form the basis of all financial advice.

Setul came back to discuss how Sarah Hogan uses cashflow forecasting to highlight to clients the financial risks that they’re taking when they don’t have an income protection policy, this is possibly something that many advisers can take on board. An adviser can give all the advice they like, but if there’s no income protection and your client falls ill, it will have a direct impact on the plan in place. Cashflow modelling is used by our director Kathryn Knowles, in her Protection Insurance in Practice course, to demonstrate just how powerful the visualisation of a cashflow can be.

Gemma Darcy of Darcy Financial Planning then took over our screens with her visual and eye grabbing explanation of income protection and cashflow modelling. Gemma has worked in the industry for 18 years, and shared that during this time she has seen the impact that inability to work has on a person, the emotional and psychological impact as well as the impact on a person’s finances.

Gemma moved on to share a case study of a client with a new child, a promotion that doubled the salary to a good amount, but they didn’t like protection, they loved pensions. 

Cashflow modeling showed what would happen if they were to fall ill and become unable to work. The nice new salary is good, but it doesn’t mean anything if they aren’t earning it. The beautiful financial plan turns to red, way before retirement. The cashflow model now full of red is a shock, but there’s also the reality that this red could be caused by them having cancer or falling quite ill with a condition like Parkinson’s. It’s more than just money

Being off work due to illness can be a very stressful time, emotionally draining and mentally devastating. The last thing that we want is their essential financial needs and lifestyle goals to be crushed.

It’s important to follow-up with visuals that show what happens if income protection is in place. Turn that red chart, green. In Gemma’s example it was £40 per month for £3k of monthly income protection benefit. £1.32 per day has saved this person’s long-term financial security.

To draw the session to an end, there was a panel senate with Victor Sacks of VS Associates, Mike Allison from Paradigm, and Daniel Weaver of Middleton Wealth Management.

Victor mentioned his talks with corporates and business owners, and the importance of saying ‘what if?’. Considering all aspects of the picture is also key, as it’s important to not forget other people such as partners/caregivers, if they were to fall ill, a person may need to reduce their hours or hire help, which would have a big effect on the financial plan in place.

Mike spoke about how we’re expecting some Treating Customers Fairly on steroids coming through, with protection playing a big part going forward, well in the FCA’s eyesight. Daniel added that this is about education, advisers shouldn’t think about this as selling. You are informing your clients of what they need, just as any good adviser should.

Victor then talked about how many advisers see protection as something that needs to be sold, and some think of selling as ‘dirty’. Well as Victor puts it we’re all sales people. The adviser who sold themself the best will win the clients, and you may not want to be seen as a sales person but it doesn’t have to be a bad thing, it’s a part of many aspects of life. He also raised the suggestion that advisers should bring income protection up in annual review conversations. Your might not convince someone of their need for the cover right now, but it doesn’t mean you should stop trying.

Daniel rounded off the chat by bringing in the role of signposting and the fact that it isn’t just one way. He shared that if he sends a client to a protection specialist, they can send people his way too. You are not losing your clients, you are doing the best for them and you are building a business relationship that could be fruitful to you. But absolutely remember to do your due diligence on any firm that you suggest that your client’s use!

Some income protection pledges were shared, with Mike’s income protection pledge being to concentrate on education and motivation, and Victor’s pledge being to do one of his infamous Fridge Talk videos on income protection, sharing it across his social channels and reaching about 4000 people. Daniel talked about his income protection pledge of education not just with clients, but also by making himself available to people within our sector to chat about how to bring income protection into their advice more.

I hope you have found this overview helpful. You can catch the full thing on replay here.