Simon Goldthorpe: How to get in the best shape for your PII renewal
Simon Goldthorpe: How to get in the best shape for your PII renewal
3rd July 2020
This article first appeared in Professional Adviser.
Renewing PI insurance is one of the biggest challenges financial advisers currently face, writes Simon Goldthorpe, who outlines a few ways advisers can potentially save on their yearly renewal…
Insurers have become increasingly nervous in the past few years about services such as DB transfers, thanks to high-profile mis-selling scandals.
Other factors such as the Financial Ombudsman Service increased limit for advice-related complaints compound matters and mean advisers have been grappling with higher premiums, soaring excesses and tighter restrictions.
The difficulties have been highly documented and the FCA recently announcing its latest measures to protect consumers means the process of securing cover is unlikely to ease any time soon.
But it’s not all doom and gloom. There are several things advisers can do to help strengthen their position and increase their chances of getting cover at a rate and terms that work for them.
Detail, detail, detail
The proposal form is the minimum amount of information to be provided on your firm, but also an ideal place to promote your business. Set out all the relevant information in a clear and easy-to-understand way that creates a narrative around your work – soft facts are critical.
In a separate document, provide notes, commentary, graphs and calculations around cases that you‘ve worked on. Start with the bigger cases, as these represent a higher risk to you and an insurer.
Show where your business is strong and where you’ve minimised risk, but be upfront and honest in highlighting the risks that remain.
An underwriter will consider your renewal against similar firms, so giving them a wealth of useful information will make their life easier and also build a better case for your business. It may also help you to reduce the cost of your cover.
Start early
Set aside a good amount of time to collate the above information so that it doesn’t become a last-minute burden.
If, for example, you have hundreds of files to review, work on a few each month. Identify some of your riskier cases and pull out the relevant facts as you go, rather than trying to do it all in the last few weeks before your renewal date.
For DB transfers, it might make sense to start with the cases that resulted in the largest fees, or a review of your biggest clients. Whatever your preference, starting early will put you in far better stead by the time that the renewal comes around.
Focus on ongoing service
Positive ongoing relationships, rather than one-off transactions, are much less likely to result in costly complaints. Highlight these to show why your business should be viewed as less of a risk.
Small things to suggest how you are doing things right and why your clients trust you, can go a long way. Bring in concrete examples of where you undertake regular review meetings or issue monthly newsletters and investment bulletins. Having a lot of clients who are family members also makes complaints less likely.
Finally, showing that clients have not lost out is a powerful sign of lower risk and therefore chances of a complaint, so look at bringing this to the fore.
Demonstrate quality control
If you’re concerned about your chances of securing cover it may be worth considering appointing a quality control specialist.
As an example, having all advice pre-approved to our own standards has enabled us at Beaufort Financial to demonstrate oversight of practices across the firm, something which has become integral to our ongoing cover as a result.
Having an independent expert in place to ensure all advice meets requirements will tell an underwriter than your firm takes compliance seriously and that you are doing what you can to get things right.
In this increasingly challenging market, following these steps will help you formulate a careful submission that gives you the best chance of securing competitive PI insurance for your firm.
The Quick Guide To Bonds
When it comes to investing, it’s probably stock markets and shares that come to mind. Yet the average investment portfolio uses various asset classes to deliver returns and manage risk. One important part of your portfolio may be bonds.
Bonds can also be known as gilts, coupons and yields, which, along with other financial jargon, can make it difficult to understand how they fit into your financial plan. This quick guide can help get you up to speed.
What is a bond?
In simple terms, a bond can be thought of like an IOU that can be traded in the financial market.
Bonds are issued by governments and corporations when they want to raise money. When you purchase a bond you effectively become the issuer of a loan, receiving payments for the loan in the future. There are typically two ways that a bond pays out:
- A lump sum when the bond reaches maturity
- Smaller payments over the term, this is often a fixed percentage of the final maturity payment
If you’re viewing a bond as a loan, the lump sum at maturity would be like receiving your initial investment back whilst the small payments are equivalent to interest incurred. Bonds can be a useful asset to invest in if you’re focused on creating an income rather than growth.
Unlike stocks, you don’t have any ownership rights when you purchase a bond. As a result, you won’t benefit if a company performs well and you’ll be somewhat shielded from short-term stock market volatility too. Whilst all investments carry some risk, bonds are usually classed as a lower-risk asset than traditional stocks and shares.
That being said, it is possible to lose money when investing in bonds. This may occur if the issuer defaults on payments or you sell a bond for less than you paid. You should consider investment time frames, goals and risk before you decide to purchase government or corporate bonds.
Buying and selling bonds
Individual investors can purchase bonds, usually through a broker, as can professional investors, such as pension funds, banks and insurance companies. Initially, government bonds are often sold at auctions to financial institutions with bonds then being resold on the markets.
If you buy a bond, you have two options: hold or trade.
If you choose to hold a bond, you simply collect the regular repayments and wait until it reaches maturity, when you’ll receive a lump sum.
However, there is also a secondary market for selling bonds to other investors. If this is your plan, the fluctuations in price are important to consider as well as the value the bonds offer other investors. If you intend to sell, it’s important to understand the maturity and duration of the bond, as well as understanding the demand in the secondary market.
Whilst we’ve mentioned above that bonds can shield you from some of the stock market volatility, that doesn’t mean bond prices don’t change. Numerous factors can affect the value of bonds, from the interest rate and other Government policies to the demand for bonds. These movements can affect the expected yield, which can end up negative meaning the repayments add up to less than what you paid.
How do bonds fit into your investment portfolio?
Bonds are just one of the assets that are used to create an investment portfolio that suits you.
If you’re investing for income, rather than growth, choosing bonds to make up a portion of your portfolio can deliver a relatively reliable income stream.
One of the key things to consider when investing is your risk profile. Typically, bonds are considered less risky and experience less volatility when compared to traditional stocks. As a result, they can be used effectively to help manage investment risk. The lower your risk profile, the more likely it is that your portfolio will include a higher portion of bonds. Of course, other assets can be used to adjust and manage your risk profile too and not all bonds have the same level of risk.
The most important factor when creating an investment portfolio is that it matches your risk profile and goals. If you’d like to chat to us about how bonds are used to balance your portfolio, please get in touch.
Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
The Danger Of Holding Too Much Cash
How much of your wealth do you hold in cash? Whilst it’s often viewed as the ‘safe’ option, there is a danger of your assets losing value in the long term and holding too much in cash too.
It’s easy to see why people choose to hold large sums in cash. As it’s something we handle every day, whether physically or digitally, it can seem more tangible than other assets. The Financial Services Compensation Scheme (FSCS) also protects up to £85,000 should a bank or building society fail per individual. The combination of these factors may mean you view cash as the most appropriate way to hold wealth.
However, cash does lose value and this is particularly true in the current low-interest climate.
Interest rates have been at an historic low for more than a decade following the 2008 financial crisis. The Bank of England has recently cut rates even further. In March, as it became apparent Covid-19 would have an economic impact, the central bank slashed the base interest rate to just 0.1%, the lowest level on record.
Whilst potentially good news for borrowers, the rate cut isn’t positive for savers. It means your savings aren’t likely going to deliver the returns they once were, especially if you compare the current rates to the pre-2008 ones. Before the financial crisis, you could expect to enjoy interest rates of around 5%.
At first glance, lower interest rates can seem frustrating but don’t mean there’s any need to change how you hold assets. After all, your money is secure and whilst it might not be growing very fast, it’s not going down, right? This is true if you’re just looking at the amount that’s in your account. However, in real terms, the value of your savings will be falling.
Inflation: Affecting the value of savings
The reason the value of cash savings falls in real terms is inflation. Each year the cost of living rises and if interest rates fail to keep pace with this, your savings are gradually able to purchase less and less.
The Consumer Price Inflation (CPI), one of the measures for calculating inflation, for April 2020 suggests the inflation rate was 0.9%. This figure was down on long-term averages due to coronavirus restrictions, however, it’s still higher than the base interest rate. As a result, the spending power of cash savings will have fallen.
Year-to-year, the impact of inflation can seem relatively small. Yet, when you look at the impact over a longer period, it highlights the danger of holding too much in cash.
Let’s say you placed £30,000 in a savings account in 2000. Following almost two decades of average inflation of 2.8% a year, your savings in 2019 would need to be £50,876.75 to boast the same spending power. With low-interest rates for more than half of this period, it’s unlikely a typical savings account would help you bridge this gap.
When is cash right?
Whilst inflation does affect the spending power of cash savings, there are times when it’s appropriate.
If you need ready access to savings cash accounts are often suitable, for example, if you have an emergency fund. When you’re saving for short-term goals (those less than five years), a savings account should also be considered. Over short saving periods, inflation won’t have as much of an impact and can preserve your wealth for when you need it.
However, when setting money aside for long-term goals, investing may be a better option that’s worth considering.
Investing: When should it be considered?
Investing savings means you have an opportunity to beat the pace of inflation with returns, therefore, preserving or growing your spending power.
However, investment returns can’t be guaranteed and short-term volatility can reduce values. For this reason, investing as an alternative to cash should only be considered if your goals are more than five years away. This provides an opportunity for investments to recover from potential dips in the market.
If you’d like to talk to one of our financial planners about the balance of your assets, please contact us. Our goal is to align aspirations with financial decisions, helping you to strike the right balance.
Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Cashflow Planning: Helping To Answer ‘What if…’ Questions
When you begin making a financial plan, you could be looking several decades ahead, and we all know the unexpected can derail even the best-laid plans. So, as you’re setting out goals, it’s not uncommon to wonder if you’d still be able to meet them if things outside of your control have an impact.
When you start putting together a financial plan one of the valuable tools that can put your mind at ease is cashflow planning.
What is cashflow planning?
Cashflow planning is a tool that helps forecast how your wealth will change over time. We can use this to show how your assets will change in value in a range of circumstances, such as average investment performance or income withdrawn from a pension. It’s a step that can help you have confidence in the lifestyle and financial decisions you make.
However, the variables can be changed to highlight the impact of what would happen if things don’t quite go according to plan. Whether it’s down to a decision you make or something out of your control, cashflow planning can highlight the short, medium and long-term consequences on your finances and goals. As a result, it can be a useful way of answering ‘what if’ questions that may be causing concern.
Answering ‘what if’ questions
If you’re asking ‘what if’ questions relating to your financial plan, they can be split into two categories: the ones you have control over and those that you don’t.
Those that you do have control over often stem from wanting to take a certain action but being unsure if your finances match your plans. These types of questions could include:
- What if I retire 10 years early?
- What if I provide a financial gift to children or grandchildren?
- What if I take a lump sum from investments to fund a once in a lifetime experience?
Often with these questions, there’s something you want to do, or at least thinking about, but you’re hesitant to do so because you’re worried about the long-term impact. You may need to consider the effects decades from now, which can be challenging. Cashflow planning can help provide a visual representation of the impact a decision would have.
We often find that clients’ finances are in better shape than they believe, allowing them to move forward with plans with confidence.
The second type of ‘what if’ questions, those you don’t have control over, often stem from worries about the future. These could include:
- What if investments returns are lower than expected?
- What if I passed away, would my partner be financially secure?
- What if I needed care in my later years?
Cashflow modelling can help you understand how these scenarios would have an impact on your short, medium and long-term goals. It can highlight that you already have the necessary measures in place, allowing you to focus on meeting goals.
Alternatively, you may find there’s a ‘gap’ in your financial plan. However, by identifying this, you’re in a position to take steps to put a safety net in place. If you’re worried about the financial security of loved ones if you were to pass away, for example, this could include purchasing a joint Annuity, providing a partner with a guaranteed income for life, or taking out a life insurance policy.
Confronting concerns about your future can be difficult, but it’s a step that can lead to a more robust financial plan that you have complete confidence in.
The limitations of cashflow planning
Whilst cashflow planning can be incredibly useful, there are limitations to weigh up too.
First of all, how useful the forecasts are will be dependent on the data that’s input. This is why it’s important to consider assets and goals when gathering information, as well as keeping the data up to date.
Second, cashflow planning will have to make certain assumptions. This may include your income over an extended period or investment performance, which can’t be guaranteed. This is combatted by modelling different scenarios and stress testing plans, helping to give you an idea of how your financial plan would perform under different conditions.
Cashflow modelling is just one of the tools that can support your financial plans and it can be an incredibly useful way of giving you a potential snapshot of the future and easing concerns. If you’d like to discuss your aspirations and the steps you could take to ensure you’re on the right track, please get in touch.
Accessing Your pension: Annuity vs Flexi-Access Drawdown
In the past, the majority of people saved for retirement over their working life, gave up work on a set date and used their pension savings to purchase an Annuity. However, as retirement lifestyles have changed, so too have the options you’re faced with as you approach the milestone. If you’re nearing retirement, you may be wondering if an Annuity or Flexi-Access Drawdown is the right option for you.
Since 2015, retirees have had more choice in how they access a Defined Contribution pension. If you want your pension to deliver a regular income, there are two main options – an Annuity or Flexi-Access Drawdown – to weigh up. So, what are they?
Annuity: An Annuity is a product you purchase using your pension savings. In return for the lump sum, you’ll receive a regular income that is guaranteed for life. In some cases, this can be linked to inflation, helping to maintain your spending power throughout retirement. As the income is guaranteed, an Annuity provides a sense of financial security but doesn’t offer flexibility.
Flexi-Access Drawdown: With this option, your pension savings will usually remain invested and you’re able to take a flexible income, increasing, decreasing or pausing withdrawals as needed. Flexi-Access Drawdown provides the flexibility that many modern retirees want. However, as savings remain invested they can be exposed to short-term volatility and individuals have to take responsibility for ensuring savings last for the rest of their life.
There are pros and cons to both options, and there’s no solution that suits everyone when considering which option should be used. It’s essential to think about your situation and goals at retirement and beyond when deciding.
It’s worth noting, that pension holders can choose both an Annuity and Flexi-Access Drawdown when accessing their pension. For example, you may decide to purchase an Annuity to create a base income that covers essential outgoings, then using Flexi-Access Drawdown to supplement it when needed. It’s important to strike the right balance and other options could affect your decision too, such as the ability to take a 25% tax-free lump sum.
5 questions to ask before accessing your pension
- What reliable income will you have in retirement?
Having some guaranteed income in retirement can provide peace of mind and ensure essential outgoings are covered. But this doesn’t have to come from an Annuity. Other options may include the State Pension or a Defined Benefit pension.
Calculating your guaranteed income can help you decide if you need to build a reliable income stream or are in a position to invest your Defined Contribution pension savings throughout retirement. If you decide Flexi-Access Drawdown is an appropriate option for you, it’s a calculation that can also inform your investment risk profile.
- What lifestyle do you want in retirement?
When we think of retirement planning, it’s often pensions and savings that spring to mind. However, the lifestyle you hope to achieve is just as important. Do you hope to spend more time on hobbies, with grandchildren or exploring new destinations, for instance? Thinking about where your income will go, from the big-ticket items to the day-to-day costs, can help you understand what income level you need.
- Do you expect income needs to change throughout retirement?
This question should give you an idea of how your income will change throughout retirement. Traditionally, retirees see higher levels of spending during the first few years before outgoings settled, with spending rising in later years again if care or support was needed.
However, your retirement goals may mean your retirement outgoings don’t follow this route. If you decide to take a phased approach to retirement, gradually reducing working hours, you may find that a lower income from pensions is required initially. Considering income needs at different points of retirement can help you see where flexibility can be useful.
- Are you comfortable with investing?
Flexi-Access Drawdown has become a popular way for retirees to access their savings. There are benefits to the option but you should keep in mind that savings are invested. As a result, they will be exposed to some level of investment risk and may experience short-term volatility. Before choosing Flexi-Access Drawdown, it’s important to understand and be comfortable with the basics of investing.
Investment performance should also play a role in your withdrawal rate. During a period of downturn, it may be wise to reduce withdrawals to preserve long-term sustainability, for instance. This is an area financial advice can help with.
- Do you have other assets to use in retirement?
Whilst pensions are probably among the most important retirement asset you have, other assets can be used to create an income too. Reviewing these, from investments to property, and understanding if they could provide an income too can help you decide how to access your pension.
We know that retirement planning involves many decisions that can have a long-term impact. We’re here to offer you support throughout, including assessing your options when accessing a pension. If you have any questions, please get in touch.
Please note: A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.
The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.
How advisers can best leverage professional connections
This article first appeared in Professional Adviser.
As professionals in a client-facing industry we all know the importance of building fruitful relationships, writes Simon Goldthorpe, who emphasises the benefits of professional connections and sets out how best to go about establishing and maintaining them...
There are countless professionals who can act as introducers to your services, but we'll focus on solicitors and accountants here, as they're often the natural partners for financial advisers.
For example, someone going through a divorce is likely to want both legal guidance and a service to help them plan for their financial future. If they're a business owner, they're probably going to need an accountant's tax advice as well.
Working with other trusted professionals enables you to offer the all-encompassing, holistic service that clients really value.
And finding the right type of professional to complement your business is a three-step process:
- Understanding your firm's strengths
Consider your proposition and what you can genuinely offer connections. What are your areas of specialist expertise? Exactly what type of business are you looking to attract? - Research
Look for people with specialisms who are compatible with your offering. Read up on the firms that you're considering in order to ensure that they're a good fit for your business and will add value to your service. - Make contact
There's no substitute for a personal contact, so reach out to your local business community and see if anyone can make an introduction for you. Sometimes the old-fashioned ways work best; the golf club, local business groups or even the school gates can be a great place to make initial contact.
Next, you want to showcase your services and establish a relationship. Some good ways to do this include:
- Finding an opportunity for a ‘practice' meeting
Most professional firms hold regular planning or team meetings. Offer to present at one to explain the benefits of a reciprocal arrangement. Remember that this is not a pitch. Present the facts, be clear on how an agreement benefits them - and their clients - and be prepared to answer any questions. - Presenting for local bodies
Many professional organisations have local subgroups which hold regional meetings during the year. The organisers of these events typically welcome external speakers - provided that you have something relevant to offer.Ask local contacts or research industry-specific journals to find out what is topical and likely to interest the attendees. Such events are an ideal opportunity to demonstrate your professionalism, knowledge and understanding of the solicitor or accountant's point of view.
- Offering seminars for groups of local firms
If you specialise in subjects of interest to local accountancy or solicitor firms - e.g. business protection, pensions and divorce, or employee benefits - you could host educational seminars or webinars for local professionals. Sessions should cover technical issues, compliance requirements and - mostly importantly - how you can help.
- Guest/reciprocal blogging
Many professional services firms have internal newsletters or regular updates that they send to clients. Some even produce monthly or quarterly magazines.
External voices are often welcome in these publications if you have something relevant and interesting to add.
Offering your insights will demonstrate your skills and knowledge. Plus, returning the favour by featuring connections in your own marketing material will highlight your contacts in complementary areas - and could even open up new business opportunities.
Clients rely on solicitors, accountants and financial advisers at crucial points in their life. From having children to starting a business, every major decision comes with overlapping requirements.
It's often said that recommendations are the best form of advertising, so establishing strategic relationships can generate a stream of good quality clients to suit your business.
Now you have the know-how, it's time to formulate a plan of action for using professional connections to further enhance your service.
How Much Capital It Takes To Grow An IFA Business?
This article first appeared in Professional Adviser
We’ve worked with any number of start-ups over the years, writes IFA firm chairman Simon Goldthorpe, and the one question that always crops up is how much capital is needed to establish a business and grow it into a sustainable, profitable practice.
Without stating the obvious, success isn't always measured by the size of your client book, but instead measures such as the turnover or assets under management.
Sustainable and profitable growth comes when you take on clients that can be serviced effectively at an agreed charging structure. This makes getting your proposition, as well as associated budget, right, absolutely essential.
If you're thinking about going it alone, there are five fundamental areas you must factor into your budget and strategy:
Five Areas of Spending
- Office space and technology
Many small IFA practices start at home or in local serviced offices. But if you're looking to grow, you'll need to think about scaling up your premises.
A rule of thumb would be 100-150 square foot per member of staff, so it's worth factoring in any additional employees you'll want to bring on board before reviewing rates in your local area.
Upsizing premises may bring associated technology costs, like upgrading your network, cabling and communication systems. Will you need to invest in landline phones, for example?
- Insurance and Professional Costs
It goes without saying that you'll face additional insurance and professional costs as you expand. For example, taking on new advisers will result in additional FCA costs, as will undertaking new types of work, such as defined benefit transfers.
- Staffing
You'll no doubt need to recruit at some point, be it by hiring new advisers and paraplanners, or taking on support staff to handle the day-to-day running of your business.
Doing it yourself by placing adverts on job boards or in the local media will be cheaper, but first consider if you have the capacity to sift through hundreds of CVs while serving clients.
Using a recruitment agency will save the legwork of finding suitable candidates, but fees will be up to 20% of a candidate's salary.
- Marketing
Marketing and brand awareness are key to attracting clients that are the right fit for your business. Tactics sit at all ends of the scale depending on objectives and budget - from targeted sponsored social posts and branded print collateral, to an overhaul of your referral process and developing a high-quality website.
Costs and work involved with vary from strategy to strategy, from a £100 social media campaign to spending £5,000 or more on a sophisticated website.
- Outsourcing Tasks
Focus is what helps successfully build a business but, as you move into expansion, it's likely you will be pulled into multiple directions at any one time.
As you begin having to tackle areas outside of your prime skillset, it might be beneficial outsourcing functions such as:
- Compliance
- Finance/Accountancy
- HR and Payroll
- IT Management
- Legal
- Marketing
It goes without saying that providers will vary in terms of experience and price, but this makes it all the more important to shop around to find someone who ticks all your boxes.
So, how much capital do you need to grow?
The truth is that I have seen mediocre firms grow on a massive budget, but I've also seen brilliant IFA businesses grown on a shoestring.
Most important of all is setting a strategy before budgeting for anything, and then carefully reviewing over time to ensure everything remains aligned. The time frame for this will vary from business to business, but 12-18 months would be a good amount of time to understand how well this is working for you.
Always reach out to others in the industry too - joining networks like The Chambers of Commerce will be a good way of finding other business owners who have faced similar challenges. Talking through growth plans and sharing issues will help you refocus and stop you from feeling alone.
Most organisations know that they have to invest in their infrastructure, people and marketing in order to acquire new and better clients. Just how much you spend on those areas depends on your own business and how quickly you want to grow, but being clear on your long term objectives from the outset will ensure all decisions fit with what's right for your business.
Five fundamentals to make your social media strategy more effective
This article first appeared in Professional Adviser.
Social media can be daunting, especially when starting from zero, says Simon Goldthorpe, but it can be a key tool for advisers to grow their businesses and burnish a good public reputation.
In the 2010 film The Social Network, Sean Parker - played by Justin Timberlake - described the invention of Facebook as a ‘once in a generation holy-s**t idea!'. He wasn't wrong.
In just over 15 years, Facebook has grown from a million to 2.3 billion users. From changing the way we consume news to influencing the choice of people who govern us, it has become an intrinsic part of modern life.
he social media revolution doesn't end there. More than 500 million people are using Instagram every day and three-quarters (77%) of recruiters now use LinkedIn to source candidates. And let's not forget Twitter, where the leader of the free world conducts a significant amount of his international diplomacy.
If you're not already adept at social media, using it to market your firm may feel like venturing into the scary unknown. However, there are a number of straightforward and fool-proof ways financial advisers can use it to attract new business and keep in touch with existing contacts.
Here are the five fundamentals:
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Positioning yourself as a go-to expert
Social media is the perfect shop window, particularly if you have a specific niche.
If, for example, you help first-time buyers, business owners or members of a certain profession (such as teachers or doctors), be sure to have this listed on your LinkedIn profile. Not only will this help people see where your areas of expertise lie more clearly, it will ensure you are flagged up to anyone searching for these terms.
Aim to keep all profiles professional, using a business head shot for your picture and avoiding any photos that are overly staged, filtered or low resolution.
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Post useful content
Sharing useful, good-quality thought-leadership content is a great way to showcase intellectual capital and help burnish a reputation in areas of your expertise.
Content should seek to help people increase their knowledge on a given subject, or understand how they can solve problems. If writing isn't something you enjoy - think about videos, case studies or even podcasts as an alternative to help bring your skillset to life.
- Post regularly… but not too regularly
Social media is about quality, not quantity. Aim to post something a couple of times a week and engage with anyone interacting with you.
Creating a high-level content plan will help you stay on track and ensure content is varied for those following you on different platforms. Rather than simply posting a link to one blog on your Facebook, Twitter and LinkedIn profile at the same time, alternate what you are posting to encourage people to keep engaging with each of your different channels.
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Engage with followers
Since there's never a time where social media is really ‘off', posting once a month is unlikely to be enough to drive engagement. As such, it's important you're looking to log on frequently and get involved.
Aside from posting regular content, make sure you're keeping track of the responses given by other social media users. This feedback opens up opportunities for interaction and can provide useful insights on your audience too.
You should like other posts, reply to messages, and engage in conversations about subjects in which you're an expert. By doing this, you will build genuine, long-lasting relationships.
This may seem onerous in the beginning, but it's worth getting into the habit to generate genuine engagement with your audience.
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Be proactive with prospects
If the aim is to generate business leads, you want to move prospects into your database so that you can cultivate a relationship.
Building a social media presence and increasing your online influence will take prospects on a journey to a point where they are comfortable interacting with you. Once people are ready to interact, your website can be used to facilitate further opt-in opportunities - creating guides, newsletters and invitations to seminars or events are good places to start.
Social media can be an excellent way of cultivating relationships you may not have had the opportunity to make in person. Once that's been achieved, you can look to nurture them offline.
Understanding Your Final Salary Income: What Income Will It Provide?
A Final Salary pension can provide security in retirement but it’s still important to know what your income will be and how it’ll help you achieve retirement goals.
If you have a Final Salary pension, retirement planning can seem more straightforward. However, there are still important decisions that need to be made and it’s crucial that you understand the income it will provide. Whether retirement is just around the corner or some years away, reviewing your pension arrangements can provide confidence.
First, what is a Final Salary pension?
Final Salary pensions, also known as Defined Benefit pensions, are often referred to as ‘gold plated’. This is because your income in retirement is defined, protected and the benefits are typically competitive when compared to the alternative.
With the alternative pension scheme, a Defined Contribution pension, employees and employers make contributions, which benefit from tax relief and is invested. At retirement, pension savers have a lump sum of pension saving that will be dictated by how much they’ve contributed and investment performance. At retirement, they will have to decide how to access the pension and ensure it lasts for the rest of their lives.
In contrast, with a Final Salary pension, the pension scheme takes responsibility for how investments perform, which don’t have an impact on your retirement income. Instead, future pension income is defined from the outset. This is usually linked to how many years you’ve been a member of the scheme and either your final or average salary. At retirement, a Final Salary pension will pay out a regular income for the rest of your life.
Among the benefits of a Final Salary pension are:
- You don’t take responsibility for investments: You don’t need to decide where to place your pension contributions, this is in the hands of the pension scheme trustees. The performance of investments won’t affect your retirement income.
- It provides an income for life: Life expectancy can make planning for retirement challenging, as you don’t know how long pension savings need to last for. With a Final Salary pension, your income is guaranteed for life, taking away this element of uncertainty.
- The income is usually linked to inflation: In addition to a lifelong income, Final Salary pensions are usually linked to inflation. This means your income will rise in line with the cost of living, preserving your spending power in real terms.
- Many Final Salary pensions come with additional benefits: Your Final Salary pension may offer auxiliary benefits that provide peace of mind, such as a pension for your spouse, civil partner or children if something were to happen to you.
As a result, Final Salary pensions can be incredibly valuable for providing certainty and security in retirement.
Calculating your retirement income
The good news is that understanding the income you can expect to receive when you retire is usually straightforward.
How the income delivered from a Final Salary pension is calculated varies between scheme. .However, this will already be defined. If you can’t find the paperwork detailing this, contact your pension scheme. There will typically be three factors used to define your Final Salary income:
- How long you’ve been a member of the scheme
- Your final salary or a career average
- The accrual rate, this is the fraction of your salary that’s multiplied by the years you’ve been a member of the scheme.
Let’s say you earned £60,000 at retirement and it was your final salary that was taken into consideration. You worked at the company for 40 years and the accrual rate was 1/60. Your income in retirement would be £40,000 annually using the below formula.
Years as a member (40) x accrual rate (1/60) x salary (£60,000)
You should receive an annual statement from your pension scheme, which will include providing a value of your pension at retirement.
Creating flexibility with a Final Salary pension
A Final Salary pension can provide you with security throughout retirement. Yet, you may still want a flexible income to meet your retirement goals. This may be because you plan to spend more in early retirement or at other points. For example, you may have mortgage debt remaining, plan to travel or want to financially support loved ones.
There are ways that you can achieve the best of both worlds.
Many Final Salary pension schemes will allow you to take a one-off lump sum from your pension to kick-start retirement. This will reduce your income during retirement but does provide the capital for flexibility if needed.
Other options include using a Defined Contribution pension to fund a one-off expense if you have one and using your other assets, such as investments, to create a flexible income. It can be difficult to understand how your different assets fit together to help you reach retirement goals. This is an area we can help you with.
Transferring out of a Final Salary pension
If you have a Final Salary pension, you may be considering transferring out.
At retirement, you do have the option to give up the benefits of a Final Salary pension and receive a lump sum instead, which must be transferred to a Defined Contribution pension. There may be some benefits to doing this, such as providing greater income flexibility, but for most people transferring out isn’t the most appropriate option for them.
Receiving a lump sum can seem attractive. However, what you’re giving up, a guaranteed income for life is often more valuable. It’s important to weigh up your financial security and retirement goals before making a decision. If your Final Salary pension is worth more than £30,000, you must take regulated financial advice first.
Please contact us to discuss your Final Salary pension and what it means for your retirement lifestyle. Usually, there are ways to create a flexible income stream that will suit your goals whilst retaining the security one offers.
Please note: Transferring out of a Defined Benefit pension is not in the interest of the majority of people.
How Using A Trust Could Save UK Families £300 Million Each Year
In 2017, almost 8,000 life insurance policy payouts triggered an Inheritance Tax bill. Find out how easy it is to avoid being caught by the tax trap on your life insurance as well as the other advantages of using a trust.
Back in 2017, more than 35,000 term life insurance policies paid out an average of more than £78,000. Nearly every claim was paid (98%) and tens of thousands of families/beneficiaries were supported following an unexpected bereavement, to the tune of £2.79 billion.
However, HM Revenue and Customs figures from the same tax year (2016/17) show that almost 8,000 life insurance policies with payouts worth £774 million fell into the Inheritance Tax net, triggering the 40% tax and an average bill of £37,500.
The number of life insurance policies which are subject to Inheritance Tax has risen in recent years yet avoiding thousands of pounds of potential tax can be done simply through the completion of a form.
Families paying £300 million in unnecessary Inheritance Tax (IHT)
In 2016/17, families paid more than £300 million in Inheritance Tax on the proceeds of life insurance payouts.
This represents an 11% increase compared to the previous tax year, when more than 7,000 policies with payouts totalling more than £700 million resulted in £280m ending up in the hands of the Treasury.
If these policies had passed into a trust on the death of the policyholder, HM Revenue and Customs would not have been able to make a claim if they pushed an estate above the IHT threshold of £325,000.
Sean McCann of insurers NFU Mutual says: “The prospect of paying IHT on a life insurance policy that is supposed to protect your family should the worst happen is all too frequently a nasty surprise for thousands of bereaved families, and the latest numbers show more and more people are being caught out.
“However, by contacting their provider and completing a trust form, families can potentially remove the threat of their loved ones facing a costly and unexpected bill.”
What does writing life insurance in trust mean?
A trust is a legal arrangement where the trust takes ownership of certain assets, such as the proceeds of a life insurance policy.
When you set up your life insurance, you appoint a trustee or trustees to oversee the trust. Often these are friends or family members, but they could also be someone like a solicitor. The trustees ensure any assets contained within the trust are passed to your named beneficiaries (often your partner or children).
When you place an asset in trust, you cede ownership of the asset to the trustees. The reason this is important is that, when you die, the life insurance policy is handled separately and does not form part of your estate. So, the proceeds of the policy will not be subject to IHT if the value of your estate exceeds the IHT threshold (currently £325,000).
Other benefits of writing life insurance in trust
A key benefit to writing life insurance in trust is that it ensures the proceeds don’t form part of your estate for IHT purposes.
Another reason to consider using a trust is that probate can be a lengthy process. By writing your life insurance in trust, it can reduce delays and ensure your beneficiaries receive the proceeds much more quickly.
This can be a huge benefit if you need to continue to meet commitments such as a mortgage, or to meet funeral or other expenses.
Another advantage of writing your life insurance in trust is that it gives you control over your assets. When you put your policy in trust you can decide who to appoint as both your beneficiaries and your trustees. You can choose trusted people to look after your assets and choose where you want your money to go on your death.
Setting up a trust is particularly important if you’re not married or in a civil partnership. Without one, your assets may not transfer to the intended recipient.
Our financial advisers can also help to put existing life policies into trust as well as writing new policies.
How do you write a life insurance policy in trust?
Writing a life insurance policy in trust is easy. Most insurers give you this option when you take out the protection, and there is usually no charge for doing so. If you’re not sure, speak to your financial adviser or to the insurer and ask them to supply you with a trust form.
In the future, people taking out life insurance might not even have to complete a trust form. A report by the independent Office of Tax Simplification (OTS), commissioned by the former Chancellor Phillip Hammond, said that all life insurance policies should automatically pass into trust.
The OTS argue that this would make the system easier to understand and avoid people being unfairly caught out.
If you’re thinking of taking out life insurance, or you’re looking for advice about trusts, we can help. Please get in touch to find out how.
Please note
This is based on the current legislation (February 2020). Bear in mind, any changes to these rules, or to your personal circumstances could affect what you get in the future.
The Financial Conduct Authority does not regulate estate planning, tax planning or will writing.
3 Things To Consider When Choosing An ISA
If you’re planning to open a new ISA, we take a look at three things to consider to help you choose the right account for you.
ISAs (Individual Savings Accounts) have been around for more than twenty years, but they’re still a key part of financial plans. However, it’s still important to choose the right ISA for you.
The key advantage of saving or investing through an ISA is that they’re tax-efficient. You don’t pay Income or Capital Gains Tax on interest or returns. Each tax year you can place up to £20,000 into ISAs. This sum can either be spread across multiple ISAs or deposited into a single account.
Whilst the Personal Savings Allowance may mean that ISAs aren’t as important as they once were, official figures show they’re still a crucial part of financial planning for millions of people. There are more than ten million Adult ISA accounts.
So, if you’re looking for a new home for your savings, answer these three questions before opening an ISA.
- What are you saving for?
Your goals should define all the financial decisions you make, including what ISA to open.
Saving a nest egg for a child that you hope to give them in two years will require a different approach than if you’re saving for retirement in 20 years’ time. Setting out your goals can help you stay on track on and pick out the right product for you.
Whilst there are two main types of ISA, Cash and Stocks and Shares, there are several other types that may match your needs.
- If you’re between 18 and 40, a Lifetime ISA (LISA) is an option. Each tax year, you can deposit up to £4,000 into a LISA, which can be held either in cash or invested, until you turn 50. The advantage of a LISA is that you’ll receive a 25% bonus, on top of interest or returns. Deposit the maximum each year and that’s £33,000 of free money. The LISA was set up to help people save a deposit for buying their first home and retirement. So, if you withdraw the money before you turn 60 for a reason other than purchasing your first home, you’ll face a penalty. This will mean losing the bonus and a portion of your own deposits.
- Launched in 2016, an Innovative Finance ISA is used to hold peer-to-peer loans and crowdfunding services. They have the potential to deliver higher returns but come with more risk than traditional ISA investments. For some investors, an Innovative Finance ISA is a way to invest in higher-income tax-exempt returns. However, they aren’t suitable for the majority of investors and you should ensure it matches your risk profile. You can deposit the full £20,000 ISA subscription into an Innovative Finance ISA if you choose.
Your savings goal will also help you decide if using a Cash ISA or a Stocks and Shares ISA is more appropriate.
- Would a Cash or Stocks and Shares account be suitable?
Whether a Cash or Stocks and Shares ISA would be more suitable will depend on your goal and the time frame for reaching it. Both have their pros and cons that should be assessed in the context of your financial plans.
Cash ISA: With a Cash ISA, you’ll receive interest on your deposits. Assuming you stay within the limit of the Financial Services Compensation Scheme (FSCS), your money is protected. This can provide you with security. However, interest rates are low at the moment and fail to keep up with inflation. This means, in real terms, the value of your savings is falling slowly each year. Over the long term, this can have a significant impact.
A Cash ISA is often more appropriate for short-term saving goals (those within five years) and if you may need access to the money quickly, for example, if it forms part of your emergency fund.
Stocks and Shares ISA: With a Stocks and Shares ISA, your money will be invested. This provides you with an opportunity to grow your savings at a faster pace than inflation. However, investment values can experience volatility in the short term and it’s an option that comes with risk.
You should only invest if your time frame is a minimum of five years and you can afford to lose money. Investments can be tailored to suit your risk profile, but all investments contain some level of risk. As a result, a Stocks and Shares ISA is often appropriate if you’re planning for the long term and have other provisions in place to act as a safety net if needed.
- Will you be covered by the Financial Services Compensation Scheme?
Finally, it’s important to understand if your money is protected. The FSCS can offer you the reassurance that if something did happen to the bank or building society you’re saving with, your money won’t be lost.
If you’re using a savings account, up to £85,000 per bank, building society or credit union is protected. This includes ISA accounts. The FSCS will also protect qualifying temporary high balances, for example, if you've received an inheritance, for up to six months from when the amount was deposited. As a result, if your ISA exceeds £85,000, it’s worth using several different accounts where possible.
Crucially, the FSCS £85,000 limit is per financial institution. So, if you have several accounts with the same provider or with institutions that act under the same licence, make sure you don’t exceed the limit across these accounts. For example, if you hold two accounts with Halifax and Bank of Scotland, which operate under the same banking licence, only £85,000 would be protected across the two.
Some investments also fall under the FSCS. However, you’d only be covered in the event of a firm failing. If your investment values fall you would not be entitled to compensation. Find out more here.
Is an ISA the right place for your savings?
Whilst ISAs play an important role in many financial plans, that doesn’t mean it’s the right choice for you.
Considering what your goals are may highlight that other products for saving or investing are more appropriate. For instance, if you’re saving for retirement, and have yet to make the most of your Annual Allowance, a pension may be better suited. Contact us today to discuss your life goals and the financial steps you can take to achieve them.
Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Switching Investments From Growth To Income
Are you at a point in your life where you want investments to provide an income? We take a look at how investment strategies differ and what to consider.
Do you want your investments to grow or deliver an income? Defining the goal of your investment portfolio can help you build a strategy that’s right for you.
For many investors, their investment goals start with focusing on growth with a long-term view of aspirations that are some years away. You may have started investing with your retirement in mind several decades away. Eventually, you may decide you want to start receiving an income. So, how should you invest if you’re at a stage in your life where you want investments to deliver income?
When you’re investing for growth, you want to back companies that are expanding. Depending on your risk profile, this may have included firms that are in the early-stage companies to maximise the initial amount you’ve put in. This means short-term investment volatility is to be expected. Investment values can fall, but with a long-term outlook, these dips should smooth out to deliver growth.
When investing for income, those that pay out relatively high dividends are sought after. This will often be companies that are more mature and don’t invest as much of their profits into the business, providing investors with dividends. As a result, these firms typically don’t grow as much and can be seen as less risky. However, all investments involve risk and it’s important to consider this when investing for income as much as when investing for growth.
Investing for income
After years of investing for growth, to grow your pension or investment fund as much as possible, it can be difficult to know what to do.
As a dip in income delivered could affect your lifestyle, it’s important to look at the track record of both delivering income and preserving capital. This includes looking at how investments have performed during a downturn. As you’re accessing income now, rather than in the long term, volatility could impact your immediate and long-term goals. However, it’s impossible to predict how investments will perform in the future, past performance is not a reliable indicator. As a result, you also need to consider what other income streams you have.
You also need to consider when dividends will be paid. Will it be enough for your desired lifestyle and does it fit in with plans? Most dividends pay out twice a year, if you’ll be relying on them to make up the bulk of your income, it can make budgeting more difficult. There are solutions to this, such as choosing investments that pay out at different points in the year, or find that an alternative solution is better suited to you.
If you decide to go ahead with switching investments to an income focus, you have two options: build your own portfolio, selecting which stocks you want to invest in, or use an income fund.
They both have pros and cons that are important to weigh up in relation to your circumstances. However, whichever you decide, diversification remains important, both geographically and in terms of sectors. It’s a step that can offer some protection against sharp market movements and preserve your income.
You don’t have to choose between investment or growth either. You can build a balanced portfolio that contains both elements if it’s in line with your wider plans.
When should you switch to an income strategy?
Traditionally, investors would have moved to an income-based strategy as they reached retirement. It’s an option that can provide additional income that supports your retirement lifestyle.
However, you may not need an income boost. If a Defined Benefit pension, an Annuity or other sources of income are providing what you need for retirement, you may decide that a growth strategy is still right for you. Retirements have also become longer as life expectancy has improved. It’s not unusual for today’s retirees to spend 30 or 40 years enjoying retirement. As a result, you still have time to invest for growth and switch to an income later in life when you need it.
There’s no right time to switch your investment to an income strategy. In fact, it may never fit with your wider financial plans.
What is important, is that you consider your investment goals and aspirations. Your investments should help you achieve your aims, whether this is to retire early or leave a nest egg for loved ones. Please contact us to discuss how your investment can help you move towards goals now and in the future.
Please note: The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Celebrating International Women's Day
International Women’s Day celebrates the social, economic, cultural and political achievements of women across the globe. The day also marks a call to action for accelerating women’s equality.
To honour this event coming up on Sunday, 8th March, we wanted to take this opportunity to highlight all the special women working within our organisation. So, we asked our amazing female colleagues across the Beaufort Group of companies whether they would like to participate by answering a few questions which we are now sharing within this blog.
Kim
Which women are you inspired by and why?
Karen Wood (our Client Support Manager), she has an amazing breadth of knowledge and whilst not a practicing IFA herself anymore, she fully supports both Jon and the team from a technical, compliance, advice and knowledge perspective. She willingly shares her knowledge and experience with us all. We would be lost without her!
Which men do you find inspiring that are doing their part for women’s equality?
Jon Creasey (my boss) who works entirely in a team of women and fully appreciates and acknowledges regularly the value they bring to the business.
If you hosted a dinner party for 6 women, who would you invite and why?
Michelle Obama, Jo Brand, The Queen, Lady Gaga, Stacey Solomon and Davina McCall as they represent a wide spectrum of female diversity, have opinions and values and would be great company with interesting chat.
Olga
Which women are you inspired by and why?
Maya Angelou, for her brave activism and beautiful, inspiring poetry. Deborah Frances-White for how brilliantly she tackles contemporary aspects of feminism, gender inequality, racism and challenges the patriarchy.
What does International Woman’s Day mean to you?
Good opportunity to talk about feminism.
What privileges or challenges do we stereotypically and generically face?
SO MANY! White people to be more educated than people of colour, men to be stronger than women, women to be more emotional, men being better drivers, women being better parents, older = smarter, ergo younger = stupid… I can list for a whole day.
What are the “women’s themes” that still need greater awareness in your opinion?
I’m not really sure what is to be considered as a women’s theme, but period poverty, TAX on period products (tampons and sanitary towels) but not on jaffa cakes, employment inequality and rape culture still need to be strongly addressed.
Which men do you find inspiring that are doing their part for women’s equality?
Justin Trudeau, film stars like Bradley Cooper, William Macy, Benedict Cumberbatch who are actively speaking and fighting the pay-gap.
What women’s themes are impacting you most greatly in your home or work?
Gender disproportion on exec and senior management level in finance; fear of being attacked on the streets if coming home late (when dark), rape culture and Weinstein culture in every possible aspect.
Whose work do you admire in relation to women’s rights and equality?
Huda Sha’arawi – I admire her for her campaigning for how women are portrayed in Egypt, focusing on education, voting rights and marriage laws.
Rosa Parks – I admire her for her efforts as an activist and feminist and standing up to the public transport segregation law.
Simone de Beauvoir – I admire her for pioneering for gender equality.
What role or impact would you like to (or currently do) play in relation to women’s rights today?
I participate in some feministic activism and share awareness and knowledge about what feminism is, what it stands for and why we need it.
If you hosted a dinner party for 6 women, who would you invite and why?
My best friends, because they are very close to my heart and I always want to support them.
Do you think it’s important to continue raising awareness of equality for women in today’s society? If so, why?
ABSOLUTELY!!! In the age of Donald Trump ‘, of Phillip Hammond calling women ‘hysterical’, where both society and courts still don’t believe assaulted women and victim blame them. The #metoo movement only happened 3 years ago and many still don’t understand its gravity and need to take action. As women have only had equal voting rights for less than 100 years, we need feminism to raise the awareness of inequality every day.
Kate
Do you think it’s important to continue raising awareness of equality for women in today’s society? If so, why?
Yes, I do. I think that we still haven’t reached gender equality. The gender pay gap is still a major issue – especially in financial services. I think that a lot of people still do not understand the importance of feminism and what it means (that it means equality, not preference towards women).
In popular culture – celebrities such as Billie Eilish and Sia change their appearances (Billie wears baggy clothes, and Sia covers up her face in all performances) so they are not objectified, and their music is not judged by what they look like. I don’t believe this would be an issue for a male artist in the charts.
What does International Woman’s Day mean to you?
The day is about highlighting the achievements and importance of women in history and the modern day.
Emma
What does International Women’s Day mean to you?
It is a celebration of the amazing things that women have achieved around the world and to emphasis that feminism is about equality.
Which men do you find inspiring that are doing their part for women’s equality?
Andy Murray. He is a champion of women’s rights and regularly speaking up for equal pay and women’s rights in sport, especially tennis. He never set out to be a spokesperson for women’s equality, but it was working with his former coach, Amelie Mauresmo, that gave him a small insight into attitudes towards women. Serena Williams says of Andy Murray ‘He has such a wonderful mother who has been such a strong figure in his life, and he’s done so much for the professional ladies tennis tour’.
If you hosted a dinner party for 6 women, who would you invite and why?
Naga Munchetty, journalist, television presenter and campaigner for equality for women in golf clubs, actors Emma Watson, Meryl Streep, Carey Mulligan, the former first lady Michelle Obama, Malala Yousafzai, Pakistani activist for female education. I’ve chosen these women as they have all spoken out about equality and their views on the subject and campaigned for women’s rights. Also, I think the conversation would be very interesting.
Lyn
What does International Women’s Day mean to you?
Acknowledging women’s strengths, ambitions and achievements, and clearing the way for our right to future successes. Not just for us, but for future generations. No more toxic Mean Girls vibes, no more tearing each other down.
What role or impact would you like to (or currently do) play in relation to women’s rights today?
Every woman with ambition and dreams should be confident in reaching for their goals. I will always be there to support and cheer on my fellow ladies.
The Journey
Our Head of Advice, Niall Humphreys will be retiring in June, after almost 40 years in financial services. It will be a very difficult task recruiting his replacement. The ideal candidate will need significant experience in financial advice, be highly qualified and be able to command the respect of the financial advisers using our services.
We reflected on some of the key developments he observed during his time in the industry, and how they have shaped and improved the advice sector to what it has become today.
To begin, what have been the biggest changes in the industry over the last 40 years?
In some respects the biggest changes over my career have been socio economic, beyond the confines of the industry. I graduated after a free university education, and within nine months I was moving into my first house and embarking upon a career which included membership of various defined benefit pension schemes. Since then making a start in life involves tuition fees, impossibly high property prices, high levels of debt and the need to start pension savings shortly after kindergarten if you want to retire before the age of 75.
It is a much tougher journey now than it was then, but those navigating the financial challenges today are our profession's clients of tomorrow. The challenge will be for an industry that has been very traditional in the way it services its existing clients, to find new ways to engage with the clients of tomorrow, and new services to help them prosper in the financial and economic climate of the future.
What first attracted you to Financial Services as a career?
For many people in the industry it was something that you fell into, rather than aspired to become a member of. It was difficult then to find anyone who had answered a vocational calling to sell life assurance and investment products.
Were there any onerous entry requirements?
I graduated in the middle of a recession, so my first career option was closed to me. I ended up in a commission-only job in direct sales instead. There were no qualification requirements, and my initial training consisted of a four-day residential course in Bristol which concluded with a 30-question multiple choice test. On passing this, I was considered competent to sell life assurance, personal pensions and investment bonds.
What was the industry like in those days?
Financial Services as an industry was very much less developed than it is today. There were few professional financial advisers, and most financial advice was provided by the local accountant or bank manager, back in the days when banks had branches and the managers actually managed them. But it was also the time when direct sales of life assurance and pensions was becoming more prevalent with the arrival of such players as Hambro Life and Abbey Life. There was emphasis upon selling of products rather than the provision of advice, and much of the client prospecting was little more than 'hot knocking on cold doors'.
How did your career develop from your start in Direct Sales?
I became involved in the provision of pre-retirement investment advice by holding presentations to members of a major nationalised employer who were offering early retirement to their staff. This brought me into competition with a recognised independent financial adviser and pensions administration company, who gave me the opportunity to join them. After quite a few years with them, I moved to an Independent Financial Adviser role with a Building Society, and from there I moved to a major High Street Bank, where I was responsible for the training and competence of the IFA business. I spent 20 years with the Bank in the Risk & Compliance function initially for the IFA company, but then the Private Bank, the Wealth Management Division and finally the International Wealth Management Division.
What were the key changes to the provision of financial advice over your career?
To me the most significant development in financial advice has been the raising of standards through the movement away from the selling of products and the greater emphasis upon the delivery of advice-based propositions. The introduction of the Training and Competence Rules by the regulator (PIA) in 1995, and the requirement for all advisers to be qualified to level three standard by 1995 was the beginning of the process, but the big step was the level four Diploma requirement introduced with the implementation of the Retail Distribution Review (RDR) in 2012. There are some who believe that the level 4 qualification requirement should only be seen as part of the journey, and that if the industry wants to be seen as truly professional, the end target should be Level 6 / Chartered Status. As a Chartered Financial Planner, I share that view.
How have industry developments improved client outcomes?
One key change that has made a significant impact upon the client experience is the abolishing of commission payments for investment-based advice. This brought greater transparency to the customer about the costs of advice, although there is perhaps a little way to go before all fee structures have lost any connection with the commissions that were previously charged.
What other significant trends you have witnessed?
In the investment industry there has been a massive proliferation of Fund Management Groups and individual funds to choose from, plus a huge increase in the number of players offering discretionary managed services. While this is great for client choice, there is always the risk that the sheer number of choices available can become overwhelming. It has for many increased the need for ongoing financial advice.
The pensions industry has also undergone massive changes. In the 80s, the Defined Benefit Pension Scheme was still the primary type of pension provision, and even most AVC Schemes were on an added years‚ basis. The cost to the sponsoring employer of maintaining scheme obligations has led to the closure of a large number of these schemes, with the risk transferring from the employer to the employee
Full details of how to apply for our Head of Advice vacancy and view the job description.
World Cancer Day - Sharing Our Stories
It's World Cancer Day today 4th February and we're getting involved by fundraising and sharing stories.
World Cancer Day aims to save millions of preventable deaths each year by raising awareness and education about cancer and pressing governments and individuals across the world to take action against the disease.
It's the one singular initiative led by the Union for International Cancer Control (UICC) under which the entire world can unite together.
- There are 2.5 million people living with cancer in the UK (Macmillan)
- 94% of people that receive an urgent referral from their GP, are seen by a specialist within 2 weeks in the UK (NHS)
Cancer affects many people in many ways, and we wanted to take the opportunity to share our stories.
Our stories
Sharon's Story
My sister-in-law, Alex, was diagnosed with breast cancer at the beginning of 2017, and was treated at East Surrey hospital. She has written some words about her experience in using the East Surrey Macmillan cancer support centre.
Word's from Alex:
When I was first diagnosed, they were a massive support just to go and talk to people that understood. I was able to take the kids there and they helped me explain to the kids that I would be having my treatment there (we didn't tell them it was in a different building). They gave me loads of information about how I might feel during and after the treatment, how Dave might need support and where to go to get wiggie Wanda!
After my treatment I went there to see a counsellor who was amazing. I was so angry that cancer had screwed up so many things, but the counsellor gave me loads of tools to help me get through the anger. She also helped me to realise that it was perfectly normal to be angry and I wasn't going loopy!!
There are tons of activities and courses that you can attend there for all sorts of things. I wasn't able to make the most of them, but I know that a lot of people do and wouldn't be able to without the volunteers and fundraising that everyone does. A VERY worthy cause.
Sharon along with Alex and her other sister-in-law Sue completed the cancer research 'Shine' night marathon walk in London in September 2018 and raised just under £3,000.
From Left to Right : Sharon, Alex, Sue
Fiona's Story
The 'C' word has affected my life in a big way. My reason for this story is I want to urge you all to get yourselves checked, ladies make sure you attend your appointments for cervical and breast screening and gents please get your PSA blood levels tested once you reach the age of 50 for prostate cancer; you will not be offered it, you have to ask for it. That goes for family members and friends.
My personal story
My dear dad died back in 1994 from prostate cancer when I was pregnant with my son. He did not have time to undergo treatment, it was too late. He was just 69. I lost my mum in 2007 to ovarian cancer, again no warning signs, she sadly passed within 3 months to secondary cancer.
Late last year is was my husband's turn. Last October he sent off for a PSA test kit after watching Bill Turnbull's programme 'staying alive' and a week later he received a phone call urging him to go to his doctors. Three months on and he has undergone prostate surgery and is recovering as we speak. I want everyone to be aware of these silent killers and urge you to go to your doctors if either you or your family member have any symptoms they are concerned about.
I will be campaigning to get prostate cancer screened nationally as they do for breast cancer as it is fast becoming the number one killer in men so watch this space on any fund-raising event that I will be taking part in. At some time in our lives we will all be affected by someone we know. Prostate is the number 1 cancer risk for men as well as the number 2 killer. Let's raise as much money as we can today to support World Cancer Day.
Emma's Story
My mother was diagnosed with Myeloma, a bone marrow cancer, in December 2010 at the age of 68. I had never heard of this form of cancer and took steps to learn more through the Myeloma charity, Myeloma.org.uk which I regularly donate to. I took part in a 5K charity run and raised £750 for the charity. My mother manages to carry on with an as normal as possible life whilst taking her weekly dose of 53 pills which includes weekly steroids and monthly check-ups at the Royal Marsden in Sutton, Surrey. She keeps a positive disposition most of the time and has great support from her loving husband, family and friends.
Emma, Emma's Mother, Emma's Father
Millan's Story
"I completed the Birmingham Half-Marathon in September 2017 raising money for Macmillan and Papyrus.
Millan, having completed the Birmingham Half-Marathon
2020 marks the 20th anniversary of World Cancer Day.
In the office today, we have had a cake sale with colleagues either baking or buying cakes and companies on different floors in our office building, Kingsgate, have also sampled the wares and contributed to our chosen local charity, East Surrey MacMillan Cancer Care.
If everyone around the world plays their part in raising awareness and fundraising for this worthy cause, the sooner we can beat cancer.
Four ways embracing fintech can enhance your business
This article first appeared on Professional Adviser
If you grew up on the great sci-fi movies and TV of the 80s and 90s, then you'll know that the future hasn't turned out quite as we were promised.
For instance, Back to the Future: Part II (now five years in the past) promised us flying cars, hover boards and instant rehydrated pizza. Blade Runner (set in November 2019) also suggested we'd be flying to work by now, that we'd have 'replicants' - futuristic androids indistinct from humans - and persistently gloomy weather.
As we move into a new decade, technology continues to advance at pace. Just ten years ago we didn't have smartwatches, virtual assistants, self-driving cars or even Netflix streaming. Who knows what innovations might arrive in the next ten years?
As a financial planner, it's understandable to be wary of the technological advances impacting our profession. However, it's those who embrace change that are likely to be the most successful in the long-term.
How are financial advisers and planners using fintech?
Source: 2019 Independent Adviser Outlook Study from Schwab Advisor Services
A 2019 study of financial advisers found that the most common reason for investing in fintech was to increase the ability to serve more clients, with more than a third (38%) of advisers citing this reason.
One in five (20%) of advisers said they were investing in technology to reduce manual tasks in some areas, while 17% said they wanted to automate certain functions so that their employees could get on with higher-value work.
Though some advisers fear increased competition when it comes to technology - that they might be replaced by automated online platforms offering robo-advice, for example - others have seen the profound impact digital advances can in fact have on their businesses.
So how can fin-tech help you? Below are four key ways it can transform your way of working.
- Improving client service
One of the main benefits of fintech is that it enables certain financial services tasks to be automated. For advisers, this means that software can carry out 'mundane' exercises such as portfolio rebalancing and data aggregation, as well keeping tabs on each client's situation.
As an example, products such as SimplyBiz tech Centra offer financial planning tools, product research, suitability reports and a centralised investment process.
Elsewhere, technology that undertakes functions such as risk profiling, investment analysis and product research now allows advisers to deliver accurate, up-to-date and efficient advice to clients.
Less time crunching numbers and poring over spreadsheets means you have more time to discuss the 'softer' elements of a client's position, from their work/life balance and health, to their family and life goals.
- Easier meetings
In a 2018 survey of US-based financial advisers, 73% of financial planners said they preferred communicating with their clients and prospects on a face-to-face basis.
However, with the same survey finding that planners expect the frequency of communication with clients to increase over the next five to ten years, it's worth considering video options like Skype and FaceTime.
Video meetings help you schedule more reviews with clients and reduces travelling. Not only does this save you time, it also has environmental benefits.
- More efficient business
'Basic' skills such as recording information and 'repetitive skills' such as monitoring and scheduling are all likely be impacted by technology, according to 2018 Vanguard study.
If you want to automate and organise certain aspects of your business, back office systems - such as Intelligent Office - can be a good way of managing client information and income reconciliation, in turn driving business efficiency.
- Meeting regulatory requirements
There are new systems that can help firms to comply with regulatory changes, for example by documenting the advice process in a clearly auditable way. Aside from making it easier to demonstrate compliance, this method can be much less-onerous than a paper-based process.
Elsewhere, there are tools to help with GDPR compliance too. Programmes like Intelligent Office allow you exchange messages with clients in a secure environment, in turn helping you stay on the right side of the law.
Technology is here to stay, so make sure you embrace the potential opportunities and invest appropriately in the systems your business needs to stay ahead of the game.
How Being A SWOT Can Help You Grow Your Business
This article first appeared in Professional Adviser
If you’ve been through the British education system and have been called a swot, the chances are it wasn’t meant in a nice way.
Dating back to the 1860s, the word swot is a derogatory term used to describe people who would rather bury their heads in a maths textbook rather than attend the school disco.
Recently, Supreme Court Judge Lady Hale was criticised for calling herself a ‘girly swot’, an apparent dig at Boris Johnson for referring to former Prime Minister David Cameron in such a way.
But for forward-thinking financial advisers wanting to grow their business, being a SWOT is not such a bad thing.
Fundamentally, SWOT analysis is a business and marketing tool designed to help an organisation identify its strengths, weaknesses, opportunities and threats, which are then used to inform corporate strategy.
Usually undertaken using a ‘four-box template’, a typical example for an IFA firm might look something like this:
| Strengths | Weaknesses |
| Independent/whole of market service
Highly qualified advisers/planners Well-known, established name
|
Company branding
Old website Complacency (“we’ve always done what we’ve always done”) No specific strategy for winning new business
|
| Opportunities | Threats |
| Unhappy clients in the market
Increasing need for financial advice Increased awareness of pensions Qualifications and permissions in specific markets (e.g. DB transfers)
|
Regulatory changes
New business opened in local market Increasing operating costs (e.g. PI insurance) Economic climate
|
Putting it into practice
When pinpointing strengths, think about what you do well and where your business’ unique selling points lie. Look at any internal resource that may set you apart from your competitors too. For example, do you have a colleague specialising in a niche area that’s increasing in demand?
On the contrary, weaknesses can be found by reviewing client feedback and working with the wider team to identify areas for improvement, as well as any other factors that might detract from your ability to maintain a competitive edge.
Keep an eye on market trends and how these compliment your strengths, as that may help inform where your areas of focus should lie. For example, as demand increases, is pension transfer advice an area you specialise in? But be mindful of how your areas of focus will make people perceive your firm.
Look to competition and any particular areas where they appear to be standing out in terms of potential threats. Think about external factors that could put your business at risk too, such as upcoming regulatory developments or a changing economic environment for example.
Furthermore, a strong SWOT analysis will factor in the ‘7 Ps of marketing’. Throughout the process, consider:
- Product/service – What does the current offering look like and how might this be developed?
- Pricing – How do your fees compare with the wider market? Can the pricing model be improved?
- Placing – What distribution options are there to help customers benefit from your service? Could online or mobile be being used better to improve accessibility and engagement?
- Promotion – How could the business be better promoted through paid, owned or earned media?
- Physical evidence – How might material factors, such as offices or website, be enhanced to reassure clients and prospects?
- People – Are the right people filling each role? To what extent are skills gaps being filled?
- Process – How well are current methods performing in terms of website user experience, communication, delivery time and delivery methods and service?
From SWOT to strategy
Once you have completed your SWOT analysis, you can begin developing business strategies.
The aim is to work how strengths can be used to maximise opportunity and mitigate threats, so think about how the ‘SWOTs’ can overlap with each other. For example, if there is a noticeable demand for your particular specialisms in the wider market, bring this to the fore in marketing activity via case studies and testimonials.
When developing strategies, involve everyone in the business. Print the SWOT matrix on a large piece of paper so that employees can add sticky notes to highlight any points they feel directors may have missed. Holding inter-office discussions to bring in different views is a key way of driving progress, and even more an important if complacency and a “we’ve always done it this way” syndrome has been identified as a weakness.
Review, review, review
A SWOT analysis is never the end result, but rather the first step in ensuring strategies are continually aligned with your business’s strengths, weaknesses, opportunities, and threats.
Implementing measures to monitor progress is most important of all, which is why you must make sure to schedule regular review meetings, where you review results to date and why outcomes of strategies may differ from what was originally planned. They often will be, and this is perfectly normal – but understanding this and building on learnings is the only way you will strengthen strategies to keep your business moving forward.
What Dragons' Den Can Teach You About Winning New Clients
Last month, I shared some tips on improving the client experience once they've got in touch and this month, I'm looking at the two key things that successful entrepreneurs and business owners do in winning new clients.
For 14 years, entrepreneurs and business owners from across the country have pitched their ideas on the popular BBC show Dragons' Den.
Hundreds of deals worth millions of pounds have been made, with success stories ranging from Levi Roots' Reggae Reggae Sauce to The Magic Whiteboard which gave investors Deborah Meaden and Theo Paphitis an £800,000 return on their £100,000 investment.
There are two things that successful entrepreneurs have in common when pitching to the Dragons:
- They know their audience - they have done their research and often market their pitch to a specific dragon who they know will be interested
- They have a superb pitch - they tailor their pitch to the audience and have answers to all the questions that they are asked.
As a financial adviser or planner, if you're looking for new clients then you're essentially following the Dragons' Den process.
To be successful, you need to create client personas so that you understand how prospective clients think and what their goals and challenges are.
You then need to have a range of 'elevator pitches' ready so that you can sell yourself and your business to a client when the opportunity arises.
Let's look at these in more detail.
How to create client personas that help you generate new business
Client personas are a fictional collection of characteristics that can be generalised as your ideal type of client. They help you define your ideal customers and understand what type of information is useful to those customers.
Each different persona is based on factors such as:
- Demographics - age, income, gender, location etc.
- Interests - social activities, how they spend their spare time
- Associations - who they follow on social media, where they visit
- Identifiers - demeanour (are they calm or manic), communication preferences (phone, email etc.)
Need help in creating your client personas? Download our useful template
Creating personas is important as it's much easier to target the right people when you understand:
- How they think
- What their goals are
- Know what motivates them
- What their challenges and worries are
- The typical things they say
- Their common objections
The answer to these questions cantell a lot about how your ideal clients behave.
For example, if you realise your ideal client is a Baby Boomer ready to retire, you'll do more prospecting through referrals and phone calls.
If your ideal client is a millennial entrepreneur, you'll connect via social media and other digital communication vehicles.
When creating client personas, it's equally important to know who isn't the right type of client for your business.
Dealing with multiple enquiries from the wrong type of client is a waste of your time and your marketing budget. Furthermore, if they do slip through the net, there's a probability they will drain your time, resources and emotions.
Negative client personas are created using the same methodology as your 'positive' personas, except they describe the types of people that your company doesn't (or can't) work with.
These personas can be used to describe groups of people who:
- Your products and services are not suitable for
- Create more issues for the company than benefits
- Your current skill set, or that of your team, can't effectively accommodate
By doing this, you'll ensure your marketing is targeted toward clients who your services will work for. You'll also gently steer unsuitable clients away from your business and toward a more suitable company or service.
How to use your client personas to improve your marketing
Once you have established your client personas, the next step is using them to inform your marketing strategy.
A prospective client's 'buyer's journey' is described by HubSpot as 'the process buyers go through to become aware of, consider and evaluate, and decide to purchase a new product or service.'
The three stages are:
- Awareness - your potential client becomes aware of a problem they need to fix. They might ask friends or colleagues about their experiences or read blog posts and articles about financial planning.
To reach the client, you might consider publishing useful articles on the benefits of financial planning and the services you can offer.
- Consideration - your potential client defines the problem and researches options that might be able to fix it. They may search for financial advisers/planners in their area and the services they offer.
You can reach the client through a good quality Google My Business listing or website that explains the USPs of your business and why clients should work for you. It will also show positive reviews from clients. You may also outline your fees to show a potential client how your charges work.
- Decision - your potential client chooses the option that will best solve their problem. They may still need a nudge to choose your business.
You can reach them by offering them an initial chat to establish whether you are the right adviser/planner for them (and you can find out if they are the right client for you).
Now you've created the client personas and worked out how to best market to those clients, you'll need to have a pitch ready for them. It's this pitch that separates the Dragons' Den entrepreneurs who walk out with an investment from those that leave empty-handed.
Create some elevator pitches that work to help with winning new clients
Now you have client personas and you know your audience; you should have a range of elevator pitches aimed at different prospective clients.If you don't, you could miss out on an excellent client and a solid sales opportunity.
There are five key elements to include when creating an elevator pitch that works:
- Problem - the issue the client is trying to solve
- Solution - your solution to this problem
- Why You - why you are best placed to provide this solution
- Value - the added value that you can offer the client
- Call to Action - what happens next
If you need help in creating these elevator pitches, download our useful template
So, you now have the know-how and templates to help you create your client personas and prepare effective elevator pitches for winning new clients. If you need any further help, please don't hesitate to get in touch. Look out for future issues of the Chairman's blog for more helpful advice in winning new clients and retaining them.
Regards
Simon Goldthorpe
Executive Chairman, The Beaufort Group
Could Your Property Boost Your Retirement Fund?
Property is increasingly being seen as an asset that's vital for funding retirement. It's no surprise, after all, our homes are often one of the largest assets we have, but what are your options and the drawbacks of doing this?
The value of property has grown enormously over the last few decades. If you're approaching retirement now, you've likely benefited from this at some point. According to figures from Nationwide, the average home cost £59,534 at the beginning of 1989. Over a 30-year period, it increased to £212,694. As a result, property has become an integral asset to consider when planning for retirement or thinking about how you'll pass your estate on to loved ones.
Property and retirement: A growing trend
Some retirees are already exploring how they can use property wealth to enhance their lifestyle and supplement other financial provisions. Research suggests it's a trend that's set to continue. According toanalysis by Canada Lifeyounger generations are three times more likely to plan to use property wealth to fund retirement:
- Almost one in ten (9%) people aged between 16 and 54 expect the wealth stored in their homes to be their main source of income in retirement
- This compared to just 3% of those aged over 55
Alice Watson, Head of Marketing and Communications at Canada Life Home Finance, said: It is good the younger generation recognises that they can unlock wealth from their property in retirement. This openness is likely driven by the reality that many under 50s will receive less generous pensions under the Defined Contribution scheme, compared to the majority of the older generation on the Defined Benefit plan.
Notably, the research also illustrates the evolving profile of retirement income, and lends further weight to the argument that Equity Release is moving into mainstream financial planning.
The findings suggest the majority of over 55s are confident in their financial security. Half believe their State or Workplace Pension will provide sufficient income, whilst one in five are relying on savings. However, with 21% underestimating how long they'll live for, more could be reliant on property wealth than expected in the future.
What are your options?
With a significant portion of your wealth likely locked in property, it's natural to wonder what you can do to access it should you need to.
One of the most obvious answers here is to downsize. Selling your home to purchase a cheaper property to spend retirement in can free up some of the investment you've made in property. This used to be the traditional route retirees went down. But what if you can't or simply don't want to move? Or what if downsizing wouldn't release as much capital as you need?
Equity Release is an option that more retirees are choosing. There are several different types of Equity Release products, but they typically allow you to take either a lump sum or several smaller sums though a loan secured against your property which you pay interest on. This money is then repaid when you die or move into long-term care, as a result, you don't usually make payments to reduce the loan during your lifetime, though some products allow you to pay off the interest.
Equity Release can seem like a fantastic way to fund retirement, but there are some crucial things to consider; it isn't the right option for everyone.
- As you don't usually pay the interest, the amount owed can rise rapidly
- Accessing the equity may mean you're liable for more tax and affect means-tested benefits
- You may not be able to move in the future or face a high cost for doing so
- Equity Release will reduce the inheritance you leave behind for loved ones
- You will not be able to take out other loans that use property as security
Before you look at Equity Release products it's important that you explore the alternatives to ensure it's the right route for you. There may be different options that are better suited to your circumstances and goals.
Building a retirement income that suits you
Whilst property wealth is set to play a growing role in funding retirement, it's important that other sources aren't neglected. Retirement income is typically made up of multiple sources and may include:
- State Pension
- Workplace and/or Personal Pensions
- Investments
- Savings
- Property
Choosing property over contributing to a pension can be tempting if retirement still seems far away, especially when you factor in property growth over the last 30 years. However, once you consider tax relief, employer contributions and investment returns, as well as tax efficiency, pensions should still play an important role in holistic retirement planning.
If you're starting to think about retirement, whether the milestone is close or you want to understand how your current contributions will add up, we're here to help. We'll work with you to help you understand the different income streams that could provide a comfortable, fulfilling retirement that matches your aspirations.