A new client who owns a very successful firm of Engineers was recently referred to us as he was concerned about the management of his investments. Lets call them Robert and Janice to avoid real names.

We transferred their existing investments and pensions across to our management under a Wrap platform and created immediate value by avoiding the drop in markets in July and August 2012 by being largely in cash. However, that is not the main purpose of this article.

During the discovery process it seems Janice had recently given birth to their third child. I suggested that we should look in depth at the foundation of their financial planning – their risk avoidance plans. I stated there is no point in building assets for the future only to have the “unforeseen” drive a huge hole in their financial plans.

The basic question raised was – What is the impact on the family and what would you like to happen in the following events:

1. Death, disability or serious illness of Robert
2. Death, disability or serious illness of Janice.

Although they already had a significant amount of protection planning most of it had been set up “piecemeal” over the years on marriage, birth of their children and increase in profitability of the firm. Some of the plans were also set up on a joint life basis which we pointed out is usually not the most suitable advice.  In addition commission had been paid and was continuing to be paid to their old advisers.

What did they want to achieve?

1. Janice and the children had enough money to maintain their lifestyle in the event of Roberts death or serious illness
2. Robert had sufficent extra income to pay the cost of childcare and running the home in the  event of Janice dying or becoming seriously ill so he could continue with running his business.

Action taken

We replaced many of the existing plans as their terms did not suit the family now and added income protection for Robert to replace his earnings at the highest level possible. The life cover premiums were also kept down by using Family income benefit plans rather than level term plans. The life and illness cover for Janice was reduced significantly as she was not working and the cover for Robert increased as he was now the sole breadwinner.

The fees payable to Bluebond were around £2500 to set up the plans but to Robert’s surprise and delight were the savings they made.

We calculated ( and showed them the calculations) that over the 20 year term of the plans until Robert was 65 that the savings made by the reduced premiums because Bluebond did not take any commission (either initial or ongoing) was over £21,000. 

We were not surprised as we had been working this way for over 6 years. However for a client used to his adviser taking commissions and never paying fees before it came as something of a revelation.

Result

Two happy clients who went on to becoming Clear future clients and have since recommended several more clients