Case Study: “I don’t really know what we have, how can you help and if so, how much will it cost?”

Enquiry:

I received a call from Mary, a potential new client, asking me how I could help her and her husband to understand their current cover and pension provisions. She stated she had a mortgage protection policy but wasn’t sure exactly what this covered. She remembered her partner (Peter) taking out an insurance policy which included some illness cover but didn’t remember exactly why they had the policy. They both had various pensions with different companies and employers and she wanted to see if it would be worthwhile merging them.

Cost:

Mary hadn’t previously used a broker so was a bit apprehensive. “Before we go any further, what is the cost for you to review our policy’s?” I responded with “If you are happy for me to be your broker on these policies, there is no additional cost for you.” Mary: “But how do you get paid?” Me: “In many cases a broker’s fee is included in a policy whether you use a broker or not. You can request a fee-based charge which I can calculate based on work required but this will not reduce the cost of your existing plans.” In short, most people prefer to pay through fees paid direct from the pension/life providers.

Information gathering:

Mary asked me to investigate their policies and I informed her that if both partners simply sign a document entrusting me as her broker, I could obtain all the information required to review her policies. Mary asked if this would change her policies in any way or cost her more money. I reassured her that this just allowed me to discuss her policies with the companies but that it did not authorise me to make any changes or give any instructions that would impact these plans. I emailed this one-page document to Mary and they both signed and returned it to me.

Meeting:

I met with Mary and Peter following my review and was able to outline the exact cover and pension savings they currently held, along with the pro’s/con’s to making changes or leaving in place. They informed me of their priorities and as their children were in their teens there wasn’t a necessity for as much life assurance, so they decided to direct more of their funds towards their pension.

Peter had become a non-smoker, so a cheaper price or more cover for the same cost became available to him. Mary had the option to combine two pension plans, however she was better off moving it into a pension bond in her own name. If she had chosen to combine, she would have lost a tax-free lump sum option that was unavailable in her existing employers pension plan.  

Funeral Payment Helping Hand

The death of a loved one is always a traumatic time. But, in the midst of the grieving process, a funeral needs to be arranged and ultimately paid for. This is done by means of a grant of probate. This process can take a long time to complete. In such cases, the probate process must be complete before a full claim is paid. Research indicates that, on average, it takes 489 days to receive a grant of probate in Ireland.

This could cause a significant impact to your family’s financial position during the intervening period. This means that even though you have taken positive measures to protect your family financially, if you were to pass away there may not be immediate funds available to pay for a funeral.

A leading Life Company has introduced a feature which can help to bridge that gap. The company will pay for Funeral Director costs where they accept a death claim but payment is delayed due to probate. They will pay an advance payment of the cover in place, up to the value of €10,000, to cover Funeral Director Costs. The Funeral costs will then be deducted from the lump sum the policy will provide, as soon as a grant of probate has been achieved.

The Payment

This advance payment is only available to cover costs from Funeral Directors, which can include: a coffin, burial costs, church fees, cremation, death notices, plot, services of Funeral Director, e.g. hearse/car.

The payment will be made to the Funeral Director directly or to the Executor(s) of the estate. Brokers and Executor(s)/Solicitors acting on behalf of the family will be notified of this payment once it has been made. This feature is limited to death claims and only covers Funeral Director costs up to a maximum value of €10,000.

How can my family avail of the Funeral Payment Helping Hand?

  • They can make contact with your Financial Broker as soon as possible and where probate may be an issue or delayed, your Broker will explain the policy and make contact with the Life Company on your behalf.

  • The Funeral Director’s invoice or receipt will then be required.

  • Payment will be made to the Funeral Director directly or to the Executor(s) of the estate.

  • The Broker will let the relevant people know, e.g. Executor(s)/Solicitors, once the advance payment has been made.

Irish worrying less about money, health is still biggest focus……

According to research commissioned by a leading protection specialist, 37% of Irish people view money as their biggest worry this year. What is particularly noteworthy about these findings is that this is almost 10% less than the 46% who said that money was their biggest concern in 2016. The survey asked 1,000 respondents nationwide what their biggest worries were and what their biggest focus was in 2017.

Health was cited as the majority of people’s main focus (37%), followed by career (26%) and travel (13%). What is surprising is that there has been quite a drop in the number of people who identified money as their biggest concern in 2017 when compared with last year. This could this be an indicator that things are on the up for people financially as Ireland is on track to have the EU’s fastest growing economy for the fourth successive year and has a decreasing unemployment rate which last month was at a near 9-year low.

The survey found that after money, 22% worried about their family most in 2017, a big jump from the 14% who said the same the previous year. Meanwhile double the number of respondents said they were concerned with loneliness compared to 2016; 8% versus 4% respectively.

The survey results also highlighted the large difference that exists between the priorities of the younger and older generations surveyed. For 18-34 year olds the focus lies, understandably, much
more on their career (42%), health (19%) and family (13%). While an equal amount of 18-34 year old respondents (10%) said property and travel were at the forefront of their minds. For over 55s their
biggest priority was their health (60%) and travelling (27%).

Overall health is a big focus for every age group surveyed. It is the top focus for 35-54 year olds and over 55s whilst it is the second top focus for 18-34 year olds. One of the ways people are prioritising their health is shown by the uptake in more Health Insurance policies. The largest uptake increase has seen people in their 40s taking out policies, with almost 33,000 people between the ages of 40 and 49 joining a scheme since the start of 2015. As people are becoming more informed and involved in protecting themselves, there has been a noticeable increase in people interested in discussing Serious Illness cover and Salary Protection cover.

There is no escaping that money is still a big worry for many people throughout the country. Unfortunately managing household finances can be challenging. The thought about what might happen in the future that could adversely affect family finances, is never far from peoples’ minds, it would appear. Making contact with a local Financial Broker to discuss personal finances and the options available to people may be one way of helping to alleviate this worry.

The future of financial advice in Ireland

So this is where we take out our crystal ball! Consumers sometimes are not clear about the value of financial advice, a situation that we are trying very hard to change. We know the value that is offered every day by Financial Brokers the length and breadth of the country, so here are a few thoughts on what you can expect to gain from seeking financial advice from a professional Financial Broker. The good news is that this future has now pretty much arrived! A good Financial Broker will deliver on these today.

Consumers don’t want conflicted advice
This is probably the key point. Consumers want advice and financial solutions that are based on their specific goals and objectives, and not those of the person giving the advice. The independence of the advice giver is critical here, they need to be able to seek out and provide the very best solution in the market for the client. The days of “force fitting” clients to the single product solution that is the only one available to a product seller are long gone. The solution must start and end with the client – their specific goals, their requirements and their specific circumstances.

Financial Brokers are not aligned to any one organisation and can advice upon the products of many organisations. Their advice starts and ends with the client, not the products available to them.

Consumers want clear and transparent charging
Similar to any other product or service bought by consumers, they rightly want to know what it is costing them. The providers of financial advice need to be able to clearly demonstrate the value that they are bringing through their advice, and what this advice costs. The adviser needs to be able to set out clearly how they will make a difference to the financial future of the client, and charge accordingly for this. Consumers can choose to pay for this through commission taken by the adviser from products, or by separate fees – however the adviser needs to be able to communicate clearly the value that will be gained from their advice.

Financial advice is about lifetime relationships
This might sound like a lofty statement, but it is so true! Financial advice is not a point in time transaction, it is a journey. It starts with the adviser identifying the desired financial outcomes of a client (the destination) and understanding the client’s current circumstances (the starting point). The adviser then puts in place the financial solutions (the vehicle) to help you achieve your objectives.

But as with any journey, the minute that you set off, everything changes! Financial markets change, your circumstances change, maybe your objectives change. So your financial adviser needs to travel on your financial journey with you.

Unlike in your bank branch, your Financial Broker will be a consistent figure throughout this journey. Continuing to guide you and redirect you as needed.

Financial advice was never more valuable. Can you afford not to get it from a Financial Broker?

 

In your 30’s? Here’s some financial advice!

Living through your 30’s can be a challenging time financially. It’s often the time when “big moves” happen in life: marriage, having kids, buying a home, career development etc. It’s a time to be enjoyed, and it’s also a time to be careful financially! You don’t want to spend your 40’s and 50’s trying to make up for a lost decade… Here are a few ideas to help you avoid that very situation happening.

Live off your income only
Living an appropriate lifestyle is crucial to financial stability. Once you start living beyond your means, credit card bills start racking up and you’re on a downward spiral. And when this spiral starts, it’s very hard to break out of it. The solution is to match your lifestyle to your income. If that means less nights out or luxury purchases, well that’s the way it has to be!

Don’t blow your bonuses!
While not suggesting for one minute that you should live a miserable existence with no luxuries whatsoever in your 30’s, bonuses are not an opportunity to just fritter away cash! Yes you and your family deserve treats, and bonuses might play a role in these.  However getting a bonus is also an opportunity to put a few euros away for a rainy day, whether that’s a war chest from which you’ll educate your children or indeed providing a boost to your retirement planning. Money saved now will make a huge difference in the future, as the impact of time and compound interest will turbo-charge your retirement fund.

Know your spending
Financial Brokers observe that one of the main challenges faced by clients in their 30’s is actually knowing where their money is going. Having a family budget is a critical element of personal financial planning.  To do this effectively, you need to actually track every cent spent over a period of one to two months. You’ll be amazed where money is being spent that you’re hardly even aware of. Is there an alternative to buying all those coffees every day? Can you cut down on taxi journeys and use public transport? Could your family shopping methods change, to feed the family in a more cost effective (and possibly healthier) way?

Focus on your career
Your 30’s are the time when significant career moves can happen. Are there opportunities for you to bring your career to the next level by undertaking further study or indeed by putting your hand up for more work? After all, your career is the driver of your income and increasing your income makes a lot of these challenges much easier to face. 

Debt is the enemy of savings
Of course you need a mortgage if you want to buy a house. But make sure you can afford your repayments. And keep that credit card in check! Servicing debt is a killer when trying to save money so beware of taking on debt that you cannot afford.

Above all, enjoy your 30’s! They are halcyon years, a time of great fun and opportunity. Live your life and set yourself up well for your later years too.

A financial broker, not just a salesperson….

I attended a Financial Broker Seminar some weeks ago where they presented the results of a survey which they had conducted with over six hundred random customers.  These customers agreed to contact a chosen selection of brokers and banks for financial services advice and some of them were at the seminar to share their personal experiences. I feel that some of the feedback from this panel regarding financial brokers is relevant and worth discussing.

I asked a question, expressing the fact that “I don’t sell televisions; I advise on financial products which could have a huge financial impact on a person or families life”. I also stated that “I like to inform every client of the services I provide, but when people just ask me for something specific like a life assurance quote, they can react indifferently to me when I try to inform them of the various other financial products I can provide”.

One of the panel responded with “If I only want a Life Assurance policy, I don’t want to hear about any other products unless I ask for it”. In a way, suggesting that they feel this would be wasting their time or possibly just a chance for a broker to try to sell them something they do not want.

Recently I visited with a client of mine who had just been told he had only 2 weeks to live. I visited him to pay my respects and say goodbye. While visiting, this man said to his wife and children “Drumgoole Financial Services look after all my financial stuff, contact them when I am gone”. I had met with him several times over the previous few months so his financial affairs were clear and in order.

I got the very sad news that he passed away the week I started writing this column. This client chose to be involved in the financial planning process. He discussed all the services we provided and chose to take out the policies he felt were most relevant for his family.

My relationship and work with him didn’t stop as soon as I advised (“sold”) on a suitable policy. It was a continual journey that included reviewing and altering his plans as his personal circumstances changed over time. I will now be assisting his family with the death claim process for his Pension, Life assurance and Investments. His surviving family will be able to rely on me to help arrange all of these affairs while they grieve the loss of their loved one.

There is a tendency for customers and financial brokers to avoid discussing these distressing subjects. I chose to share this factual sobering story to highlight that a financial broker can be an important supporting character in prudent financial planning.

 

Does a Financial Broker offer a different service than your bank?

Financial advice and the products sold by Financial Brokers, banks and life assurance company salespeople attract on-going and rigorous scrutiny by the media and other commentators. And rightly so! Consumers are placing their trust, their hard-earned financial assets and indeed their future lifestyles in the hands of these professionals, and so the industry deserves scrutiny.

The world in which financial advisers live is a highly regulated world. This is important as it helps build trust. But regulation on its own won’t achieve this; best practice has to also be employed by all of the professionals in the industry to help build this trust. Financial Brokers can at least be optimistic that they are continuing to build a greater sense of trust in what they do. In the internationally renowned Edelman Barometer 2015, trust levels in Ireland in financial services businesses continues to exceed that achieved by banks, and indeed financial services businesses showed the fasted growth rates in trust (albeit from a relatively low base).

So why are Financial Brokers more trusted than banks?


They want to build long-term relationships. Financial Brokers are different to bank salespeople as they are not out to achieve this year’s sales target, as passed down from Head Office to your local bank branch. That is the focus of the bank branch as staff change and move around from branch to branch. A Financial Broker on the other hand will only build a successful business if he or she can build loyal, long-term client relationships. They want to support you and provide financial advice as you go through every stage of your life. Thinking about short-term sales targets can never achieve that!


Their advice is impartial. At the end of the day, helping you to identify your financial objectives and developing your financial plan is only part of the financial advice story. You then need the right products in place. While bank staff only have access to the products of one company, your Financial Broker can find the right product for you from right across the market. This can result in cheaper life cover, broader and more suitable investment choices and better pension planning options for you. Your Financial Broker is solely interested in finding the best solution for you, as opposed to potentially force-fitting you into the only product available from a single supplier, as banks do.

Their sole focus is helping you achieve your financial objectives
Banks lend money, they hold deposits, they sell credit cards and (hopefully) they will give you a mortgage. They are, or at least should be good at all of that. But then the bank branch will also try and advise you in relation to your personal financial affairs.

Financial Brokers on the other hand are singularly focused on helping you manage your affairs and achieve your financial ambitions. That’s what they do, and they will travel on the long road with you as you achieve your financial dreams.

Pension and Investment Lessons from the Economic Crash: A Financial Broker Perspective

Think back to the start of 2008. The economic storm clouds were getting darker, there were rumblings about losses building in banks across the globe and investors were beginning to get nervous. And now race forwards 7 years and consider the lessons to be learned with the benefit of hindsight. Like all lessons, these are lessons that can easily be forgotten again!


Research has shown time and time again that “stock picking” investors rarely out-perform the market. Yes some hit lucky and beat the market, but the majority would be better off in a fund that tracks a stock market index, or a professionally managed active fund.

 

Why is that? At the end of the day, people make poor investment decisions because they are human. They see stock markets racing ahead, and then decide to buy in. Or indeed (as during the economic crash) when there are huge falls in the market, investors decide to jump ship. And of course this is exactly the opposite of what we should do, i.e. buy low and sell high. Your financial adviser will help you to do the right thing, and often that might be to sit tight and do nothing at all. 


Every Financial Broker will know the horror stories of one-way bets and sure things. Surely, if you had a genuine one-way bet, you’d tell no one about it! So the “guaranteed” returns that were coming from apartments in far-flung places and the certain returns from Irish bank shares were shown up for what they are – investments with risks attached, just like all other investments. Your Financial Broker will ensure you have a diversified investment portfolio that matches your risk tolerance. They will caution you against these “sure things”!


In the past, when people were asked about the amount of risk they were happy to take, they bullishly took on more risk, with the hope of gaining greater rewards. However the folly of this approach was laid bare when the crash came and investment losses increased. Many investors realised that they were ill equipped to deal with these losses, either financially or emotionally.

Having a Financial Broker in your corner will help take the emotion out of your investments. Their financial advice will be based on experience and knowledge of the highs and lows of the markets over many investment cycles. Their only interest is in your financial goals and objectives and how best to achieve them. From their experiences as a financial adviser, they have learned that there is no quick route to success.

Instead they will bring rigour and a structured methodology to the financial advice that they offer. So apart from fulfilling their traditional role as your financial adviser, a Financial Broker can be your financial conscience!