Guide To Start Your Year Issue 1

Guide To Start Your Year Issue 1

ISSUE 1 | WINTER 2018

Discover more about the year ahead

ALSO IN THIS EDITION

Don’t miss our Events Programme for 2019 included with this magazine

Technical Services & Research Review Find out what the team have been working on now and into the year ahead

Plus Get your year off to the best start with our Marketing Toolkit

With over 200 years of combined experience of sector-focused investing in growth businesses, Deepbridge works with clients to design innovative products, inducing direct investment in technology and life sciences innovation as well as asset-backed renewable energy projects.

Deepbridge partners with experienced management teams to help the underlying investee companies realise their potential with the target of building successful leading- edge businesses.

Everything Deepbridge does is underpinned by commercial experience in the sectors in which they operate and a culture of professional excellence and integrity.

Deepbridge Technology Growth EIS* Invests in technology companies with the potential for significant capital growth. Offering a diversified approach across energy and resource innovation, medical technology and specialist IT solutions sectors.

Deepbridge Life Sciences EIS*

Deepbridge Inheritance Tax Service* The Deepbridge Inheritance Tax Service is a discretionary investment management service that invests in asset-backed renewable energy opportunities, targeting a 6% yield p.a. after the second year.

Invests in a portfolio of healthcare innovations, targeting significant capital growth, operating in the biotechnology, pharmaceutical and medical technology industries.

01244 746000 www.deepbridgecapital.com Deepbridge House, Honeycomb East, Chester Business Park, Chester, CH4 9QN

Deepbridge Innovation SEIS*

Deepbridge Life Sciences SEIS* Access to a diversified portfolio of innovative and disruptive early stage companies operating in the biotechnology, pharmaceutical, medical technology and healthcare industries.

Early-stage investment in emerging technology companies in a diversified portfolio taking advantage of the considerable income tax, capital gains tax, and inheritance tax benefits.

Deepbridge Advisers Limited (FRN:609786) is an Appointed

Representative of Enterprise Investment Partners LLP “EIP” (FRN: 604439) which is authorised and regulated by the Financial Conduct Authority.

* Risk warning – Tax treatment depends on the individual circumstances of each Investor and may be subject to change in future. The availability of tax reliefs depends on the Company maintaining its qualifying status. Investments in unquoted companies carries high risks. The underlying investments of these propositions are likely to be both illiquid and high risk, not suitable for all investors and investors should not consider investing unless they can afford the full loss of their investment. No established market exists for the trading of shares in private companies, making it difficult to sell shares. This document is a financial promotion for the purposes of section 21 of the Financial Services and Markets Act 2000 and has been approved by Enterprise Investment Partners LLP. Deepbridge Advisers Limited is a subsidiary of Deepbridge Capital LLP (FRN: 563366). Interested Investors should seek independent advice before considering investing. This document does not constitute financial, tax or investment advice. Applications are only accepted on the basis of suitability and qualification criteria. Please refer to the full disclaimer and risk section in the respective Information Memorandum for further details.

EDITOR’S FOREWORD

By Natalie Yarwood Marketing Consultant

We would like to take this opportunity to welcome you to the first issue of Guide to Start Your Year.

a utomatic enrolment and what these will mean for your clients. Equity Release lender more 2 life, explains how the use of technology can help the growing Equity Release market improve and serve clients better, making the customer journey more efficient and effective in the future. If you have any feedback on this issue, please do let us know if you think we can improve the magazine going forward. Best wishes Natalie Yarwood Marketing Consultant

This new magazine will reflect on what has happened in 2018, as well as look to the New Year to discuss the latest opportunities and developments on the horizon. Our specialist providers will also be offering valuable support, expertise, tools and business development ideas. We open this first edition with: Simon Broadley looks back at what happened during 2018 at Tenet, discussing highlights such as the ‘Compliance Transformation’ project and launching the practice buyout scheme. Followed by his thoughts on what will lie

ahead in the New Year, such as Brexit and changes implemented by the FCA. Also in this issue: We discuss why it is important to assign time to marketing your business and note the options available to help your business prosper in the New Year. Guardian look into how best to help clients think about protection in the New Year and the considerations that should be made to ensure clients are informed, in order to make the right choices for them. Andrew Tully from Canada Life looks into some of the pension changes coming into effect in 2019, focusing on default pathways, lifetime allowance and

In this issue

Industry Update Simon Broadley gives us an industry overview

Royal London Protecting clients against their biggest risks

14-15

4-5

Technical Services & Research Review

Guardian Think long-term when choosing protection providers this year

21

6-7

Discover what the team have been up to and going forward into next year

Canada Life Retirement and pensions outlook for 2019

TOMD How to market your business in 2019

24

8-9

Marketing Support for the New Year Free marketing support to give your business a boost

Age Partnership Equity Release in the New Year

26

10

Plus much more…

EDITOR’S FOREWORD - 3

INDUSTRY UPDATE

By Simon Broadley Adviser Propositions Director

Industry Overview 2018 is likely to be a year that stays in our memories for football almost coming home and having some actual summer weather. It’s less likely enter the annals of time as the year of MiFID2, GDPR and IDD implementation (the industry retains its love of jargon!) but these were nonetheless regulatory evolutions that we all had to come to terms with. At Tenet, 2018 has been a year for our own evolution and I feel really confident that the focus over the past year of putting new team structures and processes in place will really start to deliver positive, tangible benefits over the year ahead. We now have a larger, more agile account management team that can be more responsive to your needs and help enable you to get the most of your membership and your business. This is in tandem with a centralised business development team that can negotiate preferential commercial terms on your behalf with providers and technology suppliers, as well as an in-house recruitment service. We also began the journey of our ‘Compliance Transformation’ project, an internal initiative that plans to review the end-to-end experience for you and your colleagues when dealing with Tenet - be that file checking, audit visits or simply a call into one of our helpdesks. We feel

there is a real opportunity to be more efficient and more responsive to your needs, with some great results already produced. This includes refining our suitability templates so that they are more customer focussed (our investment report pagination for example is now almost halved) and redrafting all Tenet policies into a condensed structure of business standards followed by guidance - our Pure Protection policy for example has reduced from 29 pages to two pages of standards and six pages of guidance. It is disappointing that we had to take the decision to delay the implementation of focus:adviser and the new remuneration functionality. However, it was important that we at Tenet were 100% confident that everything was robust before it was rolled out. After we completed a few weeks of testing on the new system, we uncovered a large number of critical “bugs”, and we were not prepared to go live under these circumstances. Over the past few months there have been a number of high profile financial services firms launching new technology that wasn’t robust, and their customers have suffered as a result. We didn’t want to do that, especially given that it relates to your income payments. Following a pilot stage, our practice buyout scheme was officially launched at the start of the year,

and at the time of writing we now have six acquisitions under our belt, ranging from smaller client bank acquisitions to larger company buyouts. This came from the recognition that succession planning is traditionally a tricky issue for advisers, who want to realise the value they have built up within their firm at the same time as retaining a safe home for their client bank. Our scheme offers our network members that all important exit strategy at retirement, with that peace of mind regarding continuity of advice standards for their clients under the Tenet umbrella. We were also delighted to be awarded the title of ‘Best Network’ at the Money Marketing Awards, as well as Legal & General’s Business Quality Award for Customer Excellence (Networks), both for the second consecutive year. We also recently knocked St James’s Place off the top spot in FTAdviser’s Top 100 Financial Advisers list, which sets out to showcase some of the best financial advisory businesses in the UK. These are clear indications that we continue to move the business in a positive direction, as well as a ringing endorsement of the quality of our membership, so thank you for continuing to work in partnership with us to achieve such high standards.

“I’m really pleased with the strong position we have created for ourselves, and with our new structures and processes in place, I’m confident that 2019 will be incredibly successful and rewarding for everyone.”

4 - INDUSTRY UPDATE

Looking to the future now, what are the key regulatory milestones in the months ahead? January sees MiFID II statements of aggregated costs and charges coming into play, essentially providing the client with information on how much it has cost for them to invest, taking into account advice, product and fund charges for MiFID investments. Having a plan for a uniform process to deliver this will be key, although in the first year there may be some dependencies upon what information is available from platforms and other providers. Stakeholder and personal pensions, including SIPPS, are out of the scope of MiFID II, however we strongly recommend that firms also consider providing, where available, ongoing charges disclosure for the pensions investments as clients receiving this information in respect of their GIA and ISA holdings may otherwise wonder why this information is not being provided to them. So there is a common approach, the same process of aggregated reporting for MiFID products is also being extended to insurance based investment products (such as investment bonds) under the Insurance Distribution Directive (IDD) from 1st October 2019. IDD continuing professional development will also be one to watch, as the starting pistol has been fired for the 15 hours of insurance related CPD. All Tenet events and webinars now specify any relevant IDD content, plus additional people who may have to now complete CPD (such as paraplanners) are welcome to attend all our professional events. Directly authorised firms will need a named person in the firm who will be responsible for collating the CPD records, which will need to be kept for a minimum of three years. Pension advice, and in particular DB scheme advice, was obviously firmly under the spotlight in 2018, and we don’t foresee this changing. Central to this were the changes the FCA made to improve the quality of pension transfer advice, with the replacement of the current transfer value analysis in favour of a requirement to undertake an appropriate pension transfer analysis (APTA), including a prescribed transfer value comparator (TVC). Further changes resulting out of the FCA’s final rules and guidance on improving the quality of pension transfer advice will come into play in 2019, including perimeter guidance on triage services in January, which will set out where the boundary between advice and guidance lies, and updated pension increase assumptions in April.

As 2018 draws to a close, the FCA also undertook further thematic work with directly authorised firms with DB transfer permissions, but as yet has not provided a project timeline to identify when the logical next steps will follow. This is the first step however for the regulator in refreshing its previous understanding of the quality of consumer outcomes, where only 47% of cases were deemed suitable. To help ensure we manage the risks in this specialist area, in order for network members to retain the OPT licence, we made the decision earlier in the year that advisers will need to have an appropriate FCA recognised Pension Transfer Specialist qualification in place by 31st January 2020, so 2019 might necessarily involve related revision for some. For directly authorised firms, if you have pension specialists within your firms who are not QCF4 investment qualified then you need to identify a programme of learning to get them to that point by 1st October 2020. Defined benefit transfer activity as a whole will also continue to impact the availability and affordability of professional indemnity insurance in the wider market. June 2019 will additionally see advisers banned from taking out professional indemnity insurance policies which limit cover in cases of insolvency and this risk will have to be priced in, (although Tenet’s own PII does not contain such an exclusion) coupled with the proposal to increase the Financial Ombudsman Service’s compensation limit to £350,000 for new advice. We couldn’t consider 2019 without reference to Brexit, whatever that may end up looking like! For those firms with clients outside of the UK, it will depend on what deal, if any, we end up with. However, in preparation, firms should identify any passporting rights they have currently and the clients impacted, although it’s worth noting that Tenet appointed representatives cannot passport for MIFID instruments. Investment markets consequently look set to be predictably unpredictable at the moment and clients may be contacting firms more frequently with concerns, so ensuring you are prepared for this possibility would be prudent. Finally, directly authorised firms will move to the Senior Managers and Certification Regime from 9th December 2019, so the foundations will need to be laid for this over the year ahead.

Firms will have to identify their certification staff at the start of the new regime, which will typically include advisers, those that are responsible for them and anyone who can cause significant harm to the firm and its customers. They will then have 12 months however from the 9th December to complete the initial certification process. Senior managers and certification staff will need to have been identified and trained and abide by the conduct rules from the start of the new regime, but firms will have 12 months to train their other staff on the conduct rules. We’ll be here to offer guidance for firms this affects however and from our research earlier in the year, we know that 80% of directly authorised firms who responded will fall under the Core regime and the other 20% under the Limited regime, so we will tailor our support for directly authorised clients accordingly. Appointed representative firms will continue under the current Approved Persons Regime, at least for the present time, so escape the impact for now. We do expect that AR firms will come into the new regime in some form at a future date, but this will be dependent upon changes to current legislation. Looking to the future, reducing numbers of advisers and an ever- increasing demand for advice, especially since pension freedoms, means that there are exciting times ahead for those firms who can rise to the professional challenge. This will undoubtedly lead to further consolidation in the market, with access to affordable professional indemnity insurance a key factor. From a Tenet perspective, 2019 will be a year for building on all the new foundations we have put in place over the past 12 months. As well as the initiatives I mentioned at the outset, we are also looking to re-launch the TenetLime and TenetSelect propositions to ensure they are offering the best possible range of services and support for advisers in those markets.

I’m really pleased with the strong position we have created for ourselves, and with our new structures and processes in place, I’m confident that 2019 will be incredibly successful and rewarding for everyone. Simon Broadley Adviser Propositions Director

INDUSTRY UPDATE - 5

TECHNICAL SERVICES AND RESEARCH

From a technical perspective, 2018 proved to be a very busy and challenging year for the Technical Services and Research team.

In House Support The Tenet ‘Attitude to Risk’ Tool was updated early in the year following the completion of a scheduled review of the ATR Questionnaire and taking into consideration feedback from advisers regarding risk outcomes. This resulted in an updated questionnaire, new risk level descriptions and updated guidance, covering attitude to risk, capacity for loss and financial sophistication. The Tenet Model Portfolios also underwent an overhaul with the Strategic Asset Allocation being adjusted. Following research, it was determined that the long-term expected risk level represented by each portfolio was slightly lower than it was at the point of implementation in 2010. By adjusting the allocations, the expected risk level for each portfolio was moved back towards the centre of its intended risk band, providing the optimum asset mix for each profile whilst increasing the potential for returns. We also introduced increased support to advisers operating a Centralised Investment Proposition (CIP). A range of resource documents, guidance and templates was released onto the extranet to assist advisers in creating and running their CIPs. The guidance was drafted with the FCA’s Product Governance rules in mind, ensuring that advisers are meeting the required standards and demonstrating adherence to these rules. Defined Benefit Transfers As if all those projects weren’t enough to keep us busy, the FCA also introduced the Appropriate Pension Transfer Analysis (APTA) requirement in October. Whilst we felt that this just confirmed the approach we have always taken to Defined Benefit pension transfers, it also brought the Transfer Value Comparator (TVC) into the world. Extensive

To provide some context to the support we offer our members, let’s introduce some statistics. During 2018, the Technical Services and Research Team have: • Received over 8,700 inbound calls and made over 3,300 outbound calls, totalling over 700 hours on the phone, • Handled approximately 5,200 emails on a variety of subjects, • Reviewed 375 off-panel submissions, • Assessed 143 specialist case submissions. We also integrated the Lime Technical Team into the broader Technical Services and Research Team with the aim of streamlining our processes to provide greater efficiencies and more effective support to our members. Whilst that kept us extremely busy, we still had plenty of work left to do. Major Regulatory Changes The year started with a bang with the implementation of the Packaged Retail and Insurance Based Investment Products (PRIIPS) on 1st January 2018, followed by MiFID II on 3rd January, and the Insurance Distribution Directive (IDD) on 23rd February 2018. These new regulations brought in a raft of changes which presented quite a challenge to the team, both in terms of digesting and understanding the regulations but also providing the necessary support to our members. Various guidance documents, research, updates, checklists and communications were issued throughout the year, assisting our members with navigating these new regulations.

6 - TECHNICAL SERVICES AND RESEARCH

The Year Ahead Looking ahead into 2019, the regulatory landscape appears to be much more stable with no major pieces of legislation similar to MiFID II on the horizon. This can only be viewed as a major positive within our team, providing some much needed stability and giving us an opportunity to provide much more support to our members. We believe that the key to Technical Services and Research being a valuable resource is the adoption of a proactive approach, providing support and improvements in areas where advisers do not even realise they need support. A major focus for 2019 will be on projects that will really add value to our proposition and assist members in reaching their goals. An upcoming example is the proposed overhaul of the specialist investment process, providing a much higher level of support and guidance. This should increase the number of cases being approved first time and help open these types of investments to advisers who may not previously have considered them. However, we have to acknowledge that the industry is constantly changing and new risks and opportunities often present themselves without warning. With the spectre of Brexit hanging over the UK, there are a large number of unknowns that will only come into focus as the exit deadline approaches. Whilst we endeavour to be as proactive as possible, we will always be in a position where we have to react quickly to any arising issues and support our members wherever possible. However, we are confident that the expertise and experience within the team will enable us to provide a much greater level of service in 2019.

DB Transfer guidance was provided, explaining both the APTA process and the TVC as well as detailing best practice for DB pension reviews. Additional templates were also produced to support recommendations for retaining DB pensions and incorporating the TVC. These changes also necessitated the introduction of a more robust cashflow tool. Adopting this tool into existing processes was always going to prove challenging but our team has been well placed to answer any queries and help walk advisers through cases.

The failure of business owners to plan for, and protect against, the financial impact of major events such as the death of a shareholder or the incapacity of a key employee, places the wealth of the business owners, and employees, at significant risk. Including business protection in a firm’s plans can help your client’s business survive and continue trading under seriously challenging circumstances.

By understanding how the business is structured, it should become clear how any protection policies should be structured and whether they can be held directly by the company or via a business trust.

This factsheet should be read in conjunctionwith the BusinessProtectionGuidance which providesm e detailed information relating to business protection.

KeyPersonProtection Many businesses have key employees whose skills, knowledge, or experience are important to the continued financial success of the business. This can leave the business vulnerable as the loss of a key personmay result in loss of profits, additional recruitment costs, disruption to development plans or increasedworkloads for staff. Key Person Protection is life assurance (with critical illness cover if required), or income protectionwritten on the life of the key person. The business owns the policy and pays the premiums, resulting in the business receiving the funds necessary to continue to trade and to find a suitable replacement. With partnerships in England,Wales and Northern Ireland, the policywould need to bewritten on an own life basis and placed in trust for the benefit of the other partners. Business LoanProtection A significant number of businesses have some form of debt althoughmany of these firmsmay not have any insurance backing this debt. Business Loan Protection ca be used to help a business pay any outstanding debt should the guarantor die or become critically ill during the policy term.

The below chart outlines themain types of policy that can be utilised:

Business protection

Continuity planning

Succession planning

Shareholder / partnership protection

Business loan protection

Keyperson

TypesofBusinessOwnership The first step in assessing the protection needs of a business is to ascertain the legal structure of the company. The types of business structure currently in the UK are as follows: Sole Trader; Partnership (England,Wales andN. Ireland); Partnership (Scotland); Limited Liability Partnership; Limited Company (LTD) / Public Limited Company (PLC).

Business loan insurance can cover any type of commercial debt, including:

Overdrafts

Commercialmortgages

Commercial loans

Directors’ loans

Ifyouhaveanyqueries,please contactuson 01132395317 oremail [email protected] .uk

Additional Guidance As part of our ongoing support, we also extended our library of factsheets, incorporating: • Assessing and quantifying capacity for loss, • Assessing and evidencing financial sophistication,

“...the aim of streamlining our processes to provide greater efficiencies and more effective support to our members.”

• An introduction to structured deposits, • A best practice guide for platforms.

TECHNICAL SERVICES AND RESEARCH - 7

HOW TO MARKET YOUR BUSINESS IN 2019

When it comes to marketing, for most advisory firms, there are two problems – not enough time and not enough in-house expertise.

You’re already busy doing your day job and marketing isn’t something that necessarily comes naturally. So, marketing can be seen as another project rather than part of your everyday activity. It’s also the odds-on favourite to go to the bottom of the pile when other priorities appear. It’s advisable to start to view marketing as part of your firm’s fabric rather than as a ‘bolt-on’ or a project. To make this work, you’ll need to decide what amount of time you can realistically devote to marketing and what budget to allocate (whether that’s for the support of an agency or for advertising/promotional costs). You’ll probably only be able to devote a few hours each week/ month and so you should set objectives accordingly. One of the main reasons that firms aren’t successful with their marketing is that they are over-ambitious and try to do too much too quickly and can’t therefore sustain the level of activity or devote the time required. It’s important to develop a rough plan, outlining what you want to achieve over the course of the year (e.g. increase referrals or grow AUM). It’s helpful to consider your marketing in two ways – foundations and promotion. The foundations are the key elements of your marketing. They include, key messages, brand (logo etc.), website and any collateral you’ve produced. Are these as professional as they should be? Do they accurately reflect your business? Also, are you communicating regularly with existing clients? The foundations need to be considered first. Dig into the foundations

For some, activity such as social media is part of their foundations, their everyday activity. Something they need to do to be seen as a credible, professional business. For others, it’s an extra which isn’t essential and to be viewed as ‘promotional activity’. Similarly, some consider seminars, for example, as part of what they do and therefore very much part of their fabric, their foundations. The elements that make up your foundations are pretty obvious and, once in place, they won’t need significant day-to-day attention. Promotional activity, which is a catch- all term which covers anything that will promote your business and attract new leads, is more short-term and to be successful will require regular input and management – even if you’re using external agencies. Too much choice? When considering promotional activity, the main issue encountered by firms is that there are too many opportunities, too much to choose from. Which ones will work for your business? Unfortunately, there isn’t one straightforward answer. When making your choices it’s worth doing what your clients do, i.e. take professional advice. You should always keep your objectives in mind. What is it that you are trying to achieve? On target In addition to viewing your marketing as foundations and promotional activity, you should also consider your audiences. For most firms, these fall into two groups – existing and potential clients. You may also have

other groups such as professional connections. Although your marketing activity may be of interest to all your audiences, they should be targeted at specific groups. The more the activity is targeted to a particular group, the more successful it tends to be. So, rather than viewing your potential clients as one homogenous group, it’s best to define or segment them. For example, where do they live? What age group are they? Are they retired? It’s better to have, say, two or three clearly defined small target segments, rather than one large, loosely defined group. If you’re targeting farmers, you know that they have different interests and different financial situations to pilots or solicitors. Start with existing clients When embarking on any marketing, there’s a temptation to first consider how to acquire new clients. It makes sense though to start with your existing clients. Undertake a quick audit – are you fulfilling all your obligations in terms of providing updates, newsletters etc.? Is there any more you should be doing? Are you making it easy for them to give you referrals, are you encouraging them to do so? Having a calendar in place for client contact can be helpful. And perhaps decide on how many times, during the course of a year, you’d like clients to receive some form of contact from you – in addition to review meetings. Before you start developing a plan and making decisions about what activity to undertake, there are a couple of other things you might want to think about. The first one is to look back at the success – or otherwise – of any previous activity.

8 - TOMD

send them? Do you record where they heard of you? You need to maximise the chances that someone who enquires then becomes a client. You also need to be sure that you can monitor the success of campaigns. The marketing opportunities open to businesses, of all sizes, are myriad and increasingly complex – thanks to the rapid development of all things

digital. It’s important to remember that good marketing still relies on content (the words/messages you write) and design (presenting your firm professionally). Whichever channels you use, you will almost certainly need one or both of these – plus some marketing know-how, especially of online media and platforms.

How much did it cost, why did it/ didn’t it work? If it did work, why didn’t you repeat it? First impressions count Also, look at the process for new enquiries, i.e. what experience do they have of the firm? How quickly do you contact them? What do you

10 1

TIPS

Make sure you’re doing all you can for your existing clients

6

Set realistic marketing objectives

2

7

Identify and segment your target market

Create a rough plan

3

8

Review what’s worked before

Don’t be over-ambitious

4

9

Check the process a new enquiry goes through

Look at your foundations

Consider promotional activity in the light of your objectives

5

10 Take professional advice

To help you communicate with clients, pre-approved materials, including newsletters and review documents, are available from the Tenet marketing store www.tenetmarketingstore.co.uk

There is also a comprehensive toolkit available from Tenet - visit your extranet for more details.

TOMD - 9

GIVE YOUR BUSINESS A NEW YEAR BOOST

The New Year is a perfect time to give your business a boost, and our marketing service could be the perfect starting point.

available to make it quick and easy for you to use. We will even add your logo and contact details for you. Most of the support is available without charge (you just cover the cost of printing the materials or the cost of placing an advert as relevant), but we do also have a website and newsletter service which is provided by external suppliers which do carry a cost, albeit at a discounted rate. Plus, don’t forget to take advantage of our range of social media posts and adverts. You can choose between a range of Facebook, Twitter and LinkedIn posts, and all are designed to work alongside advert images which have been produced

That’s because there is a wide range of compliant options for you to choose from, all of which are quick and easy to use…and needn’t cost you a penny! What does our Marketing service include? There is a lot of support to choose from, including leaflets, brochures, posters and adverts across a wide range of mortgage and protection themes, all of which are designed to give you a professional look to your brand and promote your business. A key benefit is that we streamline compliance processes by pre-approving most of the marketing support that’s

as Jpeg images. In the majority of cases it is necessary to include the relevant advert image to make the post compliant (as it carries any necessary risk warnings), but there are also some posts which can be posted with or without an advert. The advert images are important in social media terms as they will help your post stand out.

If you need any help, call 0113 2390011 and ask to speak to the Marketing Team or email [email protected]

10 - GIVE YOUR BUSINESS A NEW YEAR BOOST

What Customers Really Want

When you think of Life Insurance or Critical Illness benefits, what comes to mind? A cash pay-out? Financial peace of mind? From a customer’s perspective, these would top most lists. Of course, financial security is the backbone of any insurance policy, but what can we offer a customer that doesn’t involve them becoming seriously ill or worse? Customers today want more than peace of mind. They want more for their money, and they want it fast. And why shouldn’t they? Technological advances and the success of companies such as Amazon and Uber are creating changes in customer expectations. With so much choice and speed of online shopping, they can afford to be picky. So how can we match this shift in customer expectation? How can we show customers what they’re buying is much more than financial protection? The answer is Support Services. What was once seen as a ‘nice to have’ extra has developed into the backbone of any insurance product. Not only are Support Services available fast, as soon as you take out the cover, but they show a commitment to your customer’s everyday financial and mental health. expectations. They should be talked about at the first possibility, providing a benefit on par with the financial protection associated with life or health insurance. Many customers will be unaware of what else a policy offers, but highlighting how Support Services can have immediate benefits can make all the difference. Take, for example, Life Insurance. Typically seen as just providing a cash These instant benefits provide the ability to match customer The rise of the Support Service

pay-out to family or loved ones when you die. And for good reason, that’s exactly what it does. Thousands of husbands, wives, partners and children would struggle financially without this lifeline, but Canada Life insurance can now help families with everyday financial struggles. The Canada Life app can help stretch your pay packet just that little bit further. Helping customers save money on daily essentials such as buying groceries, travelling, paying your bills and treats like going to the cinema. But it’s not just money saving perks that can help customers straight away. The app has a regularly updated Wellbeing Resource brimming with podcasts, articles and top tips on how to live a happy, healthy lifestyle. If you top up your cover with Critical Illness Insurance, the app also becomes your own personal gateway to a qualified counsellor at the touch of a button. Telephone counselling, legal and financial advice and help with childcare and eldercare are all just a phone call away with your PersonalCare Counselling Service. The Canada Life app clearly bolsters an already impressive set of products and services. By offering more than financial security, the customer can see the tangible benefits insurance policies provide from the outset. For more information on Canada Life’s Individual Protection Support Services, take a look at our website. Customers receive exclusive access to a range of discounts from over 40 retailers including Waitrose, Tesco and Currys PC World. You can also treat your friends and family with savings on restaurants and days out.

“What was once seen as a ‘nice to have’ extra has developed into the backbone of any insurance product.”

CANADA LIFE (PROTECTION)- 11

By Richard Jones Fund Manager First State Stewart Asia

Still in bed with an elephant

Investing in Asia has long been all about China. We have remarked before that we are all in bed with an increasingly irritable elephant. It didn’t used to be like this. India, being mainly a domestic and consumer-driven economy, offers a ready alternative. But, valuations there are already rather high. China’s financial system often reminds us of that famous Churchill aphorism about Russia: “It is a riddle, wrapped in a mystery, inside an enigma.” There are few signposts as to where we are going. Like America, China is big enough, such that you can always find an anecdote or indeed even real evidence to support whatever opinion you care to advance. These China scares come along fairly regularly, but one day we may indeed have a more significant and long- lasting reversal. Maybe even now? Nobody knows, but it would hardly be surprising, either hereabouts or indeed globally. There is very little margin of safety in the system, whether you consider the world on a top-down or on a bottom-up basis. All seems relatively calm for now. Earnings per share (EPS) growth in Asia has, if anything, been better than expected. But, there is a sense that the macro-plates are shifting; the current and rather long post-‘08 bull market seems increasingly exhausted. Returns- dispersion has widened sharply and the

supporting arguments for enthusiasm appear to be folding one-by-one. Only time will tell. This cycle has been extended, but it is nothing novel. Maybe the rise of hyper-active passives is something new, but they do little more than exaggerate our existing human frailties. We have, in the past six months or so, used ongoing market weakness to buy into higher growth companies. We purchased Cognizant Technology, which, though listed in the US, is an Asian company. The group competes with Tata Consultancy Services (TCS) and Infosys, providing IT services to the world. Like the others, Cognizant’s growth has been held back by a lack of spending in the banking industry. Financial services accounts for 40% of sales. In particular, their shorter-term growth has been hindered by a couple of European bank customers moving some business back in-house. Such things are broadly deflationary, but we believe this is shorter-term noise, with the longer-term drivers of digitalisation (of everything) providing a strong structural tailwind for the sector and the company. Banks and insurance companies apparently spend 5-6% of sales on technology, while the corporate average is just 1-2%. We believe the longer-

term opportunity is therefore quite substantial. Cognizant have a large presence in healthcare too (30% of sales) and the group has made a public commitment to lifting margins. The digital transition is something that we have already experienced with Tata Consultancy Services. We believe TCS is the furthest ahead in embracing the new opportunities, per the US$1bn deals they have announced with the likes of Marks & Spencer and Transamerica. TCS has become one of our largest holdings over the last twelve months. Our position in Cognizant remains small for the time being.

“Maybe the rise of hyper-active passives is something new, but they do little more than exaggerate our existing human frailties.”

Important Information This document is not a financial promotion and has been prepared for general information purposes only and the views expressed are those of the writer and may change over time. Unless otherwise stated, the source of information contained in this document is First State Investments and is believed to be reliable and accurate. References to “we” or “us” are references to First State Investments. First

State Investments recommends that investors seek independent financial and professional advice prior to making investment decisions. In the United Kingdom, this document is issued by First State Investments (UK) Limited which is authorised and regulated in the UK by the Financial Conduct Authority (registration number 143359). Registered office: Finsbury Circus House, 15 Finsbury Circus, London, EC2M 7EB,

number 2294743. Outside the UK within the EEA, this document is issued by First State Investments International Limited which is authorised and regulated in the UK by the Financial Conduct Authority (registration number 122512). Registered office 23 St. Andrew Square, Edinburgh, EH2 1BB number SC079063.

12 - FIRST STATE INVESTMENTS

Build equity release into financial planning

Improving lifestyle • Clients who are looking to pay for private medical care. They may wish to fund this privately in order to avoid a potentially lengthy (and lifestyle-limiting) wait for NHS treatment. • Clients who want a one-off holiday of a lifetime. Or they might want to buy a caravan, motorhome, or holiday home. Family financial planning – advancing inheritances and skipping a generation • Clients with grandchildren who can’t afford a property deposit. Your clients might not have the money or assets to help. And inheritance may be too late to meet their grandchildren’s needs. • Clients helping with grandchildren’s education costs. Some grandparents may want to advance some of their inheritance now, skipping a generation. But they may not have enough non-property liquid assets. • Clients who want to give an early inheritance to the family, perhaps for a wedding or to ease the financial effects of a divorce. • Clients who are reluctant to enter long-term care. They (or their partner) may want to remain in their own home but need help with the costs of adapting their home and/or daily healthcare support. They may even be looking to find ways to prefund the cost of a funeral plan for themselves and their partner, but may not have the cash resources available.

Later life planning – things to remember It’s possible to either service or roll up the interest on a lifetime mortgage. It’s also possible to take an initial advance with an added pre- arranged drawdown facility. While we offer an interest roll-up and drawdown facility, we don’t currently have an interest-serviced option. Other lifetime mortgage providers can offer the interest serviced facility (if that’s what your client needs). Another option is a home reversion plan. This is where a percentage of ownership is transferred to the home reversion provider from the start of the policy. No interest is charged as home reversion is not a mortgage or loan. It’s important to note that clients will receive less than the current market value for the share sold.

Good financial planning is about putting the right amount of money, into the right hands, at the right time. That’s why we believe in building equity release into the financial planning process. Here are some scenarios where it may be useful to consider equity release as part of the client’s overall financial plan. Debt repayment • Clients with maturing interest- only or endowment mortgages (particularly where there is a shortfall). These clients may now be receiving letters from lenders asking for a resolution. • Clients with high credit card debt or payday loans and no clear repayment strategy. However, please think carefully before recommending securing other debts against your client’s home. Day-to-day living expenses • Clients who are on a fixed income and struggling to cover one-off unexpected purchases. This might be replacing white goods or car repairs. • Clients who are struggling to cover household bills because of inflation and rising energy costs. Maintaining lifestyle • Clients unable to buy a new car through existing cash resources or regular payments. • Clients struggling to fund a regular holiday. They might not want to sacrifice the enjoyment of an annual getaway.

Already qualified? Then your dedicated account manager can help grow your equity release business, using our wide range of tools and marketing support.

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By Christina Rigby Protection Product Owner Royal London Intermediary

Protecting clients against their biggest risks

earning a wage and have something to protect. And the truth is it doesn’t really matter what that is – it could be their mortgage, their rent or their lifestyle – without a regular income they’re going to be in a spot of bother regardless of their personal situation. It makes you think that perhaps a product that protects against the higher risk of a client being unable to work due to illness or injury should be right at the top of the list for consumers when it comes to protection. So perhaps the traditional ‘life cover with a bit of critical illness cover’ view needs to make room more often for ‘life cover with a bit of income protection’ instead? Income protection that meets clients’ needs Some of the reasons income protection isn’t sold as often as life cover or critical illness cover is that many clients think it’s complicated, expensive and won’t pay out. In short – that it won’t meet their needs when it matters the most. And it’s down to providers and advisers to make sure the common misconceptions about this type of cover hold no weight. On the face of it, income protection should seem a lot simpler than, say, critical illness cover – customers don’t need to meet definitions of a particular set of illnesses to make a claim for a start. And with many providers, including Royal London, now choosing to remove the ‘working tasks’ requirement, customers are eligible to claim if their condition means they can’t do their own job. Of course there are still elements of this type of cover which make it seem complex, such as deferred periods and payment periods, but these features enable customers to tailor their cover to suit their needs and their budget. That’s why good financial advice is essential to a successful income protection sale.

It could be argued that traditionally a go-to protection policy would include life cover with a bit of critical illness cover – after all these are the products most people are familiar with. And recent research carried out as part of our State of the Protection Nation report seems to back this up. It showed 42% of people in full-time employment had life cover in place and 20% had critical illness cover 2 . However, we have a tool on our website – the Risk Summary Report - which shows the relative risks of a person dying, getting a critical illness, or being unable to work due to illness or injury during their working life. As an example, a female non-smoker aged 30 runs the following risks before she turns 65 1 : • 3% risk that she’ll die during that time • 12% risk of suffering a critical illness • 44% risk of being off work for two months or more because of an illness or accident. So her risk of being off work through accident or sickness is four times greater than the risk of critical illness and 15 times greater than the risk of death. Yet our research shows that 49% of 35-54 year olds feel they don’t need income protection 2 . Perhaps the name ‘income protection’ confuses things – possibly it conjures up thoughts of a product akin to the dreaded PPI? Whatever the reason for the reluctance from consumers to consider income protection, more education on the risks and benefits of this product would certainly be useful given the higher risks to this age group of being unable to work for a period of time. Is it time to reconsider our protection priorities? If a client is thinking about protection it’s fair to say they’re likely to be

Going beyond client expectations To give customers the confidence that the protection plan they’ve paid for will be there for them when they need it, providers need to make sure their products are going to make a real difference to customers – and provide them with the financial support they expect. For example, we include fracture cover and hospitalisation payments with income protection as standard. Neither of these benefits affects a customer’s main income protection cover, so they don’t need to wait for their chosen deferred period to end before making a claim on them. We also include back-to-work payments for customers that choose a deferred period of 13, 26 or 52 weeks, because we recognise these people will probably need to ease back into the workplace. Accessible at any time, not just at claim, our Helping Hand service* means they can get access to support as soon as illness or injury occurs. Helping Hand is there for as long as they need it to help them get back on their feet – and back to earning a full wage. To find out more about how our Income Protection can meet your client’s needs, visit adviser. royallondon.com/protection. * Helping Hand is a package of support services, provided by third parties that aren’t regulated by the Financial Conduct Authority. These services aren’t part of our terms and conditions, so can be amended or withdrawn at any time.

Sources: 1. Royal London Risk Summary Report tool, 2018. Studio.royallondon.com. 2. State of the Protection Nation report, 2018.

14 - ROYAL LONDON