Written by Karl Cameron – Head of Legal at WLI Claims
As with many industries, the IFA sector has seen both huge growth and consolidation over the last few decades. The changes in regulation and technical advances in financial controls have reduced the barriers to becoming an Independent Financial Advisor (IFA) and in turn, building up a solid client base.
One of the biggest challenges for any IFA is how to effectively market their business and build their book of clients. For some, their approach is focused on their local region and personal network. For others, they collaborate with partners to form a business, or partnership of independent advisors, sharing the operational and marketing costs.
Historically, it has been this latter group of IFA businesses that have had the financial strength to buy up the books of those independent IFA’s who are retiring. Therefore, inheriting new clients and growing their businesses.
None of this is a lightning bolt insight it is what has been happening within the industry for years. However, what is becoming clear is that, given all the financial and wealth management products and vehicles available today, IFAs (including wealth management specialists) are having to work harder, and dig deeper to understand the financial history of their clients.
Adding to the historical information needed, the increase in property prices has meant that an ever-growing number of people are sitting on an estate that is going to be subject to IHT. As such, those individuals who are aware of this potential liability, increasingly need advice to help them protect the financial future of their families and stop them being hit by an IHT bill that could potentially cause more upset and angst, at an already stressful time. With this in mind, over the last few decades it has become common place for those in this situation to incept Whole of Life Insurance to cover the estimated IHT liability . However, the situation has not been as clear cut as everyone thought. At WLI Claims, we work with individuals who have had to cancel their whole of life insurance policy because their premiums became too expensive. Often such policies were mis-sold by the insurance company, and by working with us, we are helping these people recover very large sums as compensation, possibly amounting to tens, if not hundreds of thousands of pounds.
The reason I mention this is not to give the “hard sell,” but because so many of our clients had given up on recovering any of this money or have not even mentioned these cancelled wholes of life insurance policies to their existing IFA or Wealth Manager. In their heads, it was money that had gone!
As mentioned above, most of these legacy whole of life policies were sold direct by the insurance companies and not through their IFA or Wealth Manager, so we can understand why the issue is not usually front of mind when talking to their personal advisor unless they are asked about it.
What is worse, is that the woes of these individuals does not end there. Many of these clients who we are engaged with, are now of an age where they are unable to buy affordable life insurance moving forward. They still have a need to protect the financial future of their loved ones and have turned to their trusted IFA or Wealth Manager to help them do this. But the cost of this cover is increasingly prohibitive.
This is where the value of a trusted relationship between the IFA and their client comes to the fore. The best IFAs or Wealth Manager have built a strong and in depth understanding of their clients, asking the right questions about their financial past, family background, retirement, and succession plans, to provide the right service and advice moving forward. As such, IFAs often help with banking, loans, mortgage advice and insurance policies.
However, from our understanding, very few of our clients have been asked in detail about their financial past, especially if they had previous life Insurance policies and if and why they had to cancel it.
This is where a trusted IFA or Wealth Advisor can go above and beyond from their client – not only helping them potentially recoup tens, or thousands of pounds but strengthening their relationship for years to come.
If, as an IFA, your client was on the wrong mortgage or investment strategy you would advise them to change it. Hence, if your client used to have a life insurance policy but had to give it up as the premiums unexpectedly became too expensive – questions should be asked.
Were you told the premiums would increase so dramatically? Were you sold a policy with a fixed premium? Did you buy the premium direct from the insurance company or through a broker? How much did you pay out in premiums before this happened?
Informing your client that they may be eligible for some significant compensation is not only beneficial for them but in the long terms could be beneficial for the IFA. This demonstrates you have their interest at heart. It also means that they may have significant capital to invest and protect in the future – especially when it comes to the potential IHT!
To find out more information about the mis-selling of life insurance or if this has impacted any of your clients go to www.wliclaims.co.uk and one of our experts will get in touch.
