Professional Adviser: The Domino Effect

Jeff Smith, commercial director of The Asset Protection Strategy, says by adding an asset protection element to their services, advisers can broaden their product offering, giving them the opportunity to revisit existing clients and attract new ones.

One of the key lessons IFAs and brokers have been dealt by the recession is the more varied their product offering, the more consistent their incomes will be. Put simply, in this day and age it is best not to put all your eggs in one basket.

Mortgage brokers – heavily geared to the whims of lenders and fluctuations in the base rate – are a case in point. Their bottom lines have been decimated over the past 18 months and many have gone out of business because they had no contingency plan.

In response to the recession, many IFA and broker firms that have survived have taken, or are currently taking, decisive action. They have been broadening their services they provide to be able to generate revenue through multiple channels, rather than, as has been the case for too long, relying on just one or two.

The holistic approach to planning, where advisers cover all bases, internally or by outsourcing to partner firms, is widely accepted as the new paradigm for financial advice; the framework for a better business moving forward.

Increasingly, modern professional advisers are positioning themselves at the centre of a circle, surrounded by a full range of products, from investments, personal protection and pensions through to business protection, property finance and asset protection via wills and trusts.

Whatever curve balls the economy throws at them, and whatever solutions their clients are looking for, the diversification at the heart of their services will ensure they can react positively and monetise opportunities they may previously have missed.

Protecting their assets

One financial planning solution that a growing number of IFAs and brokers, from Lansdown Place to Coreco Group, are introducing, to diversify their offering and unlock new revenue from their existing client bases, is asset protection.

Asset protection is the process of protecting an individual or family’s wealth across generations, not only legally but from HM Revenue & Customs, using wills and trusts.

It certainly makes sense for advisers and wealth managers to offer a product that focuses on wealth protection, because it perfectly complements the flip side of their business that focuses on wealth creation.

So why does asset protection offer such an opportunity for IFAs? Simple. According to various independent surveys, just less than 70% of people in the UK – your clients – do not have a will at present, and a large proportion of those who do have an out-of-date or incorrectly drafted will. The result of this can be disastrous, both financially and personally.

For instance, are you aware that if both parents die without a valid will in place that outlines their preferred childcare wishes, under UK law the courts will decide on the future care of their children, irrespective of what the parents might have really wanted? On a number of occasions in the past this has resulted in children going into care because relatives have not been considered suitable.

Likewise, a large percentage of the life insurance policies your clients hold will not be written in trust, which can not only result in assets falling into the wrong hands but may mean unnecessary inheritance taxation.

Of course, a large number of your clients have no life insurance policies in place at all, which can leave family members severely exposed upon death.

And do you think your clients are aware that if they have more than £23,000 in assets in the current tax year (2009/10), their home may have to be sold to pay for long-term care should they need it? Careful trust planning would remove this threat altogether.

There are many more examples of how people have fallen, or can fall foul of poor, or absent, estate planning. What is clear, though, is that there is a huge potential market for advisers to move into. Best of all, it is a soft sell, because most people are highly amenable to a product that protects their assets and, more important still, their families. Also, because wills and trusts are not regulated by the FSA, advisers need have no formal qualifications in this area.

Opening new doors

Putting in place a comprehensive will and trust package for your clients is not only a differentiator for your business and a door-opener to revisit your existing clients, it is also a highly effective way to acquire new clients.

The reason for this is that creating wills requires the appointment of trustees, executors and guardians, who become involved in the process and will then often realise they also need better estate planning themselves.

And because those individuals will generally be more successful or professional friends or family members, it leads to better-quality clients. In this sense, it is one of the most viral products an adviser can offer, often triggering a domino effect of new business. When people learn how vulnerable they are due to absent or improper wills and trusts planning, news travels fast.

Overall, by adding an asset protection element to their range of services, IFAs are not just casting their own net wider and affording themselves new income opportunities but, most important, are offering a service most of their clients will need. A wealth protection product that sits alongside a wealth creation proposition is surely the missing piece of the puzzle?

To see the original article, go to http://www.theassetprotectionstrategy.com/pr/ProfessionalAdviser.pdf