Putting protection on the wealth agenda

 Good morning everybody, and welcome to today's webinar, which is all about putting protection on the wealth agenda, and we're really pleased to have you join us today. I'm Gregor Sked, Senior Protection Technical Manager here at Royal London. I'm joined today by my colleague Fiona, one of our senior pension technical managers, and between us, we're going to be exploring how protection and pensions advice intersect, particularly when it comes to estate planning, client resilience, and hopefully as well within there the evolving needs of wealth clients. I think one of the things that we certainly know, and we see from our perspective at Royal London is that many wealth advisers protection isn't always front of mind and investment strategies, retirement planning, tax efficiency, often dominate client conversations. But the reality is that without a strong foundation of protection in place, even the best laid financial plans can fall apart. Now, our goal today is to show you how protection can be embedded into your existing advice processes to hopefully enhance that long-term value that you deliver to your clients.

And we're also going to be looking at some of the big questions being asked around pensions right now, especially where proposals around inheritance tax and death benefits could create new planning opportunities or even risks for your clients. Together we'll unpack all of what this means from both a technical and a practical perspective.

And as ever, pleased to send those questions that you've got through to us using the usual methods. And we'll follow up with all the questions covered in today's session afterwards, and you'll also be able to get access to your CPD certificate following the session today.  So, what can we expect for the next 60 minutes?

Well, there's four areas that we're going to look at and hopefully provide you with key learning objectives. Now they are to understand the importance of protection in holistic financial planning. Be able to profile the main protection risks faced by customers and be able to explain how protection solutions can support clients in protecting their financial resilience. And fourthly, be able to, hopefully, be a bit more up to date with the consultation to apply inheritance tax on pensions.

So, let's get started. I'm going to start off with a very blunt question. Why bother with protection advice? I think we all know that delivering good outcomes for clients has always been a core part of what you do as advisers, but with the introduction of consumer duty, there's now even more pressure to ensure that we're offering the right products and services that genuinely support clients' best interests, both now and well into the future.

Now the consumer duty has been a real game changer, and it has required us to deliver good outcomes for clients across all aspects of advice and protection is no exception. And, let's be honest, for many clients, protection is often that overlooked piece of the puzzle that often doesn't get the attention it deserves until it's too late.

Now, offering protection advice doesn't have to be complicated or time consuming. And actually, if we integrate it into existing advice processes, we're going to be reinforcing that value that you already bring to your clients and those conversations that you're already having. Whether it's income protection, whether it's life insurance, critical illness cover -protections about ensuring your client's plans don't fall apart when those unexpected events happen.

So, when we talk about consumer duty, think of protection as an essential part of meeting that duty. It's about ensuring that your clients are not only given the tools to grow their wealth, but also the peace of mind if something does go wrong, their financial plans won't crumble. The bottom line is that protection advice is no longer an optional tick box. It really is a critical component of delivering those good outcomes.

One other thing I think is important to address is the UK protection gap. Now it is estimated to be in the billions of pounds of protection gap being the number of individuals across the country who are either underinsured or not insured at all.

Now, the table you're looking at just now shows the findings from a report produced by Royal London in 2023. A few things that stand out to me. Firstly, the middle column and the right-hand column. I would say they're most concerning. On the left-hand column, we've got homeowners that are mortgage free, in the middle we've got mortgage homeowners, and on the right, we've got those in the rental sector. You can probably tell initially why I am saying the middle column and right column are the most concerning when we look at the lack of protection that those individuals have.

Now, how many people remember the old product and acronym of IPPSI? If anybody's gone through your exams recently, you may have come across that little acronym, considered to be the order of priority when it comes to financial planning, generally known as protection, income protection, pensions, savings, and then investments. Well, I've actually changed things around a little bit. Now you might be thinking, are those referencing we've given, he's flipped them around a little bit. Might not be what you're thinking. because what I've thought recently and what I've seen other industry references make to the financial planning priority is actually thinking about is IPPSI. This is because if we don't protect our clients' incomes, how can they pay for those premiums? How can they pay for their bills? How do they pay for those other advice fees? So just a little consideration to get started today is should we be thinking or rethinking that financial planning priority as potentially income protection, protection, pensions, savings, and investments.

So why is protection advice considered to be the starting point of financial planning? If you think for a moment about the role protection advice plays, it's there to make sure that clients can retain their financial resilience if they face unexpected life events. It's a way to make sure that there's money on the table when the worst happens, a way to make sure that clients and their families can pay off debts and maintain their standard of living when the worst happens.

Now the ABI, the Association of British Insurers, actually define that phrase, financial resilience as one's ability to withstand life events that impact your ability to earn an income. But what exactly do we mean by life events? Well, it could be somebody is too unwell to work, maybe because of an illness or an injury resulting in that customer losing the one thing that holds their lifestyle together, which is their income.

There's a further risk if customers plan to rely on savings because it's how liquid are those savings? Are tied up in investments, property? What about the impact of market volatility on those savings as well? Somebody might have developed a serious illness. Now it doesn't necessarily need to be one that's terminal, but it might however mean somebody has to take ill health early retirement, maybe make adjustments to their home, reduce their work hours, all of which have some significant financial ramifications, but could their later life plans also suffer too? Premature death. Nobody wants to think about death. But if there is one thing the pandemic's changed, I think it's the perception of morbidity, mortality, or at least the perception that we are a bit more open to talking about it. And actually, premature death could derail the financial resilience of any surviving family members.

Estate planning, it's not inherently a risk, but it's a stage of life where actually without protection of advice being considered. It does create a risk of loved ones being burdened with inheritance tax liabilities. You've also potentially going to come across clients that maybe you want to leave something behind for loved ones. How can we consider the role of protection advice in those conversations? Well, things around like making sure life is covers maybe written into trust can help them achieve those objectives. Now, since last year's budget, inheritance tax has found itself in the spotlight again. It's going to be an even bigger focus for advisers and clients due to that change in relation to inheritance tax, to pensions, business and agricultural relief. And as I said, Fiona's going to share some insight on that particular topic a little bit later on.

We've got business succession and business continuity planning. So, from a succession planning perspective, again, not inherently a risk, but succession planning is something that many business owners will be thinking about at some stage, and you might be having discussions with them about already. It's something that could easily be derailed by unexpected life events; therefore, business owners really should be thinking about things like partnership shareholder cover to prevent the shares of the business being inherited by unwanted beneficiaries and hopefully avoiding the disruption and upset that could be caused for those business owners.

Key person cover as well can provide businesses with that lump sum or that short term income if that key person become critically ill or passed away, hopefully helping that business pay their ongoing bills and expenses. And continuity planning. So, sticking with the theme of business owners, do any key people within that business have responsibilities for business loans? Do they have bank loans, directors’ loans? Maybe personal guarantees, and if they're personally liable for the repayment of those debts and they became ill or died. Does the business have the capital easily accessible to repay those debts?

And then right at the bottom of that list, we've got wellbeing, probably the least obvious area where protection advice in 2025 can provide protection to the resilience of customers. It's less about the financial resilience and more about the emotional and wellbeing resilience and accessing a variety of different support services can really help clients at difficult stages. And hopefully maybe even creating a, an additional safety net for them to access services and support that can help them through those difficult times.

Now, I'll take a look at what you may well be very familiar with it may, it could very well be a very familiar site to a lot of you, which is the asset class quilt, a very colourful representation of how different asset classes perform over time or shift in places each year based on market conditions. And it's really highlighting a very essential truth in the world of investing, which is diversification is key. No single asset class consistently outperforms. So actually spread and risk is crucial to helping clients achieve that long-term financial management. But here's the question. Is there something missing? You know, we carefully construct portfolios to manage market volatility, but what about life's volatility? What happens if a client fell ill? They suffered a loss of income or if they die, that diversified portfolio, that financial plan that you've very carefully constructed, could unravel. And in many ways, protection is a bit of a missing asset class, isn't it? It's the one element that doesn't rely on market performance that delivers exactly when it's needed most. It acts as that safeguard. It ensures your client's long-term goals remain achievable, even when life takes that unexpected turn. Now, if we wouldn't dream of advising clients to invest in just one asset class, why would we allow them to build wealth without securing it first?

So, should we be viewing protections, maybe an essential component of every client's financial portfolio? And as we're about to see, for most clients, their protection needs won't be solved by just one product. Life insurance can help provide funds to pay off a debt like a mortgage. But what about other lifestyle costs? The protection product recommendations to clients really should be diversified as well to help protect them against the different range of life events and risks that they face.

Now, that actually brings me nicely onto how do we bring risk to life with protection? And of course, as we've just established there, protection really should be seen as an essential part of client's portfolios. But when we're advising on investments, of course you're going to be assessing the client's attitude to risk and capacity for loss. But how often do we apply very similar thinking to the world of protection? Now again, very familiar to many people on today's session. Attitude to risk and capacity for loss. Attitude to risk, of course, is all about your client's personal feelings, maybe towards a bit of uncertainty in an investment context, you're going to be asking clients how much risk they're comfortable taking with their money, but what about the risk of losing their income, their health, or even their life? Do they truly understand the financial impact of these risks and how much are they actually prepared to take on themselves versus transferring that risk to an insurer? Then there's capacity for loss. So again, the real, that measurable ability to withstand financial shocks. Again, in investment terms, we're going to be assessing how much a client can afford to lose before their financial goals become compromised. But if your client's income stopped tomorrow, how long could they cope before their financial situation became unsustainable? For many, it might be a few months. For others, it might be much less.

Now, no doubt you're very familiar with risk profiling. Again, in an investment context, you'll typically be placing clients on a scale ranging from very cautious, maybe through to very adventurous or something similar, all based on their attitude to risk and their capacity for loss. Now, if we apply the same logic to protection advice, where do you think a client that has no protection in place might sit on a scale like this? We've got a little case study on the right-hand side. We've got Beth and Rob. They're both 34. Plan to retire about age 68. They've got outstanding mortgage liabilities. They've got some very good incomes. They've got some savings set aside, and they are members of the workplace pension schemes, but they have no protection in place. So where might they sit on a scale like this? Would you consider them to be very cautious? Potentially they are more likely to be sat around the very adventurous scale.

You know, if we have no insurance, no income protection, no critical illness cover, would they be described as very cautious, or say very much far from it? The reality is the clients like this are taking an extremely high-risk approach to their financial future. Arguably more risk than they might even take if they were the most adventurous with their portfolio. But how do we bring this to life? How can we visualize the different risks that individuals take?

Well, if we take one of the examples there, let's take Rob, 35 on his next birthday. He's a non-smoker. He plans to retire about age 68. What do we see as the probability, the risk, the likelihood of Rob passing away before he reaches age 68? I'll give you a second or two to have a little think about it. And if you're looking around about 3% chance that individual could pass away before they reach age 68. Now, if you had a hundred clients that matched that customer demographic, which may well represent a lot of clients that you speak to, that's 3% of those individuals, three of a hundred of those individuals could pass away before age 68.

What about the likelihood of any of those individuals developing a serious illness? What about the chance of developing a critical illness before age 68? Again, we're taking a slightly higher up trajectory here. We're looking around about the 18% mark. 18, out of a hundred of these individuals could be looking at making a claim on a serious illness on a critical illness cover policy before age 68.

What about the likelihood of being off work sick for two or more months? Look at 40%, 40 of a hundred of these individuals could be off work sick before age 68 for longer than two or more months. Ultimately making or potentially making a claim on an income protection policy.

And if we combine all those risks, how many of these individuals face any of those risks before age 68? Well, we're looking at just over a flip of a coin chance here, but 52%, 52 of a hundred of these individuals could be facing any of these risks before they look to retire. So, there's a couple of reasons why I'm showing you this little visualisation. So firstly, we all face risks to some extent, but actually secondly, if we're ignoring those risks, if we're not bringing to life the protection risks that individuals face and the solutions that are out there to help them mitigate their financial impact on those risks, are we helping or are we hindering that consumer duty requirement to avoid future foreseeable harm? If we know that the clients face risks, but we're not talking about those potential risks, are we helping or hindering avoiding future foreseeable harm?

So, what we've looked at so far really is about exploring the financial logic behind integrating protection into your client's portfolio, how it acts as the missing asset class, how risk profiling can hopefully help naturally extend that discussion into protection. But beyond the financial argument, there is another crucial driver to why protection advice simply cannot be ignored. And of course that is regulation. Regulation isn't just about compliance. It's not just about doing that tick box exercise. It's about doing the right thing for clients. And actually, the regulatory landscape has made it very clear that protection is no longer just an optional extra, but a real fundamental part of delivering good client outcomes. And actually, if we fail to consider it that aspect, and actually it very much could leave a lot of advisers, advise firms and the industry as a whole exposed and really subject to regulatory scrutiny.

Now in this section, what we want to look at is just a couple of how some of the recent changes over recent years with regards to regulation has brought to life this need to reinforce protection advice. So, I'd say one of the biggest shifts of recent times anyway is with regards to, of course, consumer duty and it couldn't really be more relevant to protection advice, that overarching aim of consumer duty is of course to make sure that firms act to deliver good outcomes for retail clients. If we're taking that seriously, protection has to be part of that conversation. One of the key regulatory requirements, of course for principles of business 2.1 is it states that firms must conduct business with due skill, care, and diligence. Now, if we're applying back to protection, so again, if a client is building an investment portfolio but has no financial safety net, can we really say we’ve delivered due care, if we focus only on wealth accumulation without considering the risks that could derail that plan, have we demonstrated due diligence? And if we don't even read the subject of protection, can we see that we've done everything we can to help deliver a good outcome for that client?

I think this is where consumer duty moves protection from this nice to have to that essential part of holistic financial planning. It's no longer, as I say, that tick box compliance exercise. It is about embedding protection into every client conversation, ensuring that financial plan isn't left vulnerable to unexpected risks. Suppose the bottom line here is actually advising on without considering protection isn't just bad practice. It really is a regulatory risk, and that's why bringing protection advice into the advice process isn't just important for clients, but it's really essential for you as advisers as well.

Now I think this is a really good time to, to bring in Fiona, just to take a look, look at some of those changes in recent years and particularly in recent months to life. So, Fiona, I'll hand over to you.

Thank you so much, Gregor. Hi everyone. My name's Fiona Hanrahan, and I work on the pension side. So, if you're predominantly on the protection side you might not have met me, but I thought it would be really useful within this session to talk about the consultation as it stands at the moment, which is looking to apply inheritance tax to pensions for any deaths after the 6 April 2027.

So, the consultation was launched as part of the budget, which was on the 30th of October. And you know, it really did take us by surprise. This wasn't something that was on our ‘might happen’ list. And the proposal at the moment is that inheritance taxes, I said is looking to apply to any pensions for death after the 6 April 2027. Just so you're aware, up until that point pensions are certainly historically have generally been exempt from inheritance tax, so that's often being promoted or given as a reason why a pension when you're later in life can be useful to hold onto and perhaps spend from other assets first.

HMRC or the government have obviously realized that recently pensions have been promoted or used as a way of passing or cascading wealth through generations rather than getting your tax relief to provide for your retirement. So, this is why this proposal has come about. So, between the 30 October last year and the 22 January this year, that was a period for providers or firms to go back with comments on the consultation.

So, our sort of working assumption at the moment is that the consultation isn't whether inheritance tax will apply or not. It's more about the practicalities of how inheritance tax would be paid in that situation where someone dies with pension funds still remaining after the 6 April 2027. Because the proposal is a bit different in terms of how other investments work, in that the consultation is proposing that pension providers will deduct any inheritance tax due before any payments are made to beneficiaries. Now that is quite different. It's not what we're used to. It is not normally how pensions work. Normally, pensions, if it's quite straightforward, can be paid out quite quickly to beneficiaries. So, this is different and definitely adds in a layer of complexity or complication that we're not used to. And means that pension scheme administrators and those who are administering the will of an individual will need to liaise with each other to establish any no rate band available, if there's a spouse and therefore how much inheritance tax is due.

Something else that we've talked about a lot is that in theory when someone dies, inheritance tax plus income tax would apply. So, the proposal would be that any inheritance tax would be deducted first. Then after that, whether that's through drawdown or the beneficiary taking a lump sum, income tax would potentially be due in that circumstance, particularly if we're talking about a death after age 75. So that's quite a lot of tax that we generally haven't been used to.

In terms of information that we're still waiting to hear, obviously that, proposal or how it'll all work. We're definitely waiting to hear on particularly providers who have to administer or operate that. It's not entirely clear what is in scope and what is out of scope. And by that we mean when someone dies will inheritance tax be due on every single pension or only some? They definitely confirmed that any payments to a charity wouldn't suffer an inheritance tax that would entirely be expected and quite normal, and we know that dependent scheme pensions inheritance tax wouldn't apply. So that would be someone, let's say, who dies where a dependent is paid a pension directly from that scheme rather than say a lump sum or draw down, and that pension would be subject to income tax on that beneficiary. That is looking like being out of scope.

There's still some clarity we need to wait on, for example, a death in service lump sum or some types of annuities, whether they're in scope or not. So that's something else, that we're desperate for that detail on. So, in terms of how it's administered, what's in scope and what's out of scope we're hoping to hear some more in the summertime. So, if this is something that you're keen to hear about, obviously it's not just about pensions, it's about protection too. Because if you're talking about protecting someone's estate when they die from inheritance tax, then obviously knowing what's in and what's out of scope in terms of pensions is really important, whether you're, you know, used to dealing with pensions or not. So, Keep an eye on that. As I said, we're expecting some more information in the summer. Royal London will be all over it, and I'm sure we will do another webinar after that point with what we know as at that date.

So right now, I know from talking to advisers that this is definitely something that clients are picking up on and asking the questions about really what should I be doing now? Is this definitely happening? Is it likely just to go away? Our assumption is that inheritance tax is going to apply to pensions. The consultation is more about the detail of how it operates. So, in other words, you might want to be doing something now. Should you be thinking about taking some income from your pension if inheritance tax is going to be an issue and using some of your gift exemptions now, definitely worth thinking about.

I can only assume that whole of life and joint life second death will become more popular, whether that's increasing cover that you've already got, or taking out these types of policies, if you know you're not wanting to use your gifting exemptions during your lifetime. We're not entirely sure how death benefits payable to a trust will work. That's rather than having your pension death benefits paid immediately to beneficiaries, you can pay them to a trust. And then the trustees, people you trust to pay those benefits, they can pay them as per your wishes. How exactly inheritance tax will work in that situation, either trusts that have already been set up, money that's in one of those trusts, or future ones, we'll just need to wait and see. I expect the answer to that will still be about control rather than saving tax.

In terms of the payment of death benefits being delayed the answer can only be yes. I can't understand how they would be any quicker if we're going through these extra layers of process and procedures to establish no rate band exemptions, et cetera, that can only delay the payment of death benefits, which honestly, when you think about the consumer duty and doing the right thing for the consumer, slowing down the payment of death benefits, certainly to me, doesn't feel that entirely fits with the consumer duty and providers I'm sure have been vocal in expressing that exact sentiment. In terms of the order of taking benefits, that's a really interesting one to anyone who's got clients with a platform type arrangement with different assets, they'll know that, thinking about where you take your income from in the most tax efficient way is exactly the way to reduce the tax payable.

If you've sent any CII exams, then you go through that in a case study basis. So, if your logic up until now has been I'll take income from my ISA, I'll use up my personal allowance perhaps from my pension, but I'll leave the rest of my pension because inheritance tax is going to be an issue for me, so I'll leave what's not subject to inheritance tax till last, because that absolutely makes sense. That logic you know, perhaps wouldn't apply after the 6 April 2027. So, the order of taking benefits may or may not change. As usual with pensions, often the answer is it depends. The consultation I'm sure will change something, if you've read any of the press, I'm sure providers have been quite vocal on this sort of additional administrative steps and slowing down the payment of death benefits, et cetera, and paying any inheritance tax due. So, we will just need to wait and see, but I'm sure it won't go through exactly as proposed. Thinking about your exemptions, it'll be really important, particularly if you're looking at gifting now during your lifetime when perhaps you weren't expecting to because you know your pension was exempt from inheritance tax. As we said, whole of life and joint life second death are entirely likely to become more popular or cover increased.

And as I said, death in service is a really interesting one because it's not clear entirely whether that will be in scope or not. That right now feels like, almost an insurance where during your lifetime you're not enjoying that death of service. It's only something that gets paid when you die. So, having that included in your estate for inheritance tax purposes does perhaps sound a little bit unfair. But that's clarity that we'll need to wait on. So hopefully you found that useful in terms of feeling you're up to date in terms of the consultation to apply inheritance tax to pensions, death from the 6 April 2027. That's as up to date as we can be right now. As I said, it's the summertime we're hoping for more information, so just keep your eyes peeled for that and we'll definitely have a future webinar, at least one covering this subject. That's all I was going to say, Gregor. Thank you.

I think it's really stands out to me just again the important role that protection plays throughout there. Thank you so much for that.

So, I want to move on to something that if you have any exposure to protection advice you have likely come across at some point, which is objections. Actually, whenever we talk about protection objections are going to be inevitable, whether they come from the client, whether they come from yourself, and that is completely natural because very much protection can often be misunderstood. It can of be often overlooked. It can often be seen as a, an unnecessary expense. But I suppose, here's the thing, objections aren't always roadblocks. They are opportunities. And throughout the remainder of our session today, we're really going to be bringing to life those opportunities. But objections do also give us a bit of a chance to educate, to reframe, maybe even to redemonstrate that value that protection can bring. I think overcoming objections isn't just about hard selling, it's about challenging a lot of those misconceptions, help them to provide reassurance and actually making sure clients are fully informed about the decisions that they could be making.

So, what we're going to be looking at over the next few slides are really just some of the most common objections that we've heard from both clients and advisers and hopefully look at some effective ways to pre-empt those objections and maybe helpfully position protection on the back of them. I want to start off with some of the most common objections that we hear advisers face from clients, and you may well have come across these yourself.

So it could very well be, as we've got right at the top, I can self-insure, I've got enough assets to self-insure, so some clients may well believe that they have enough savings to cover any financial shocks, but I suppose the question here is for how long? How long would their savings last through a serious illness, a disability, a loss of income? Actually, something we'll look at later on is around cash flow modelling, which can be a really powerful way to show the real cost of self-insuring versus the affordability of protection. Work already covers me. Many clients assume that their employer covers enough, but does it cover all their financial needs? Group schemes often don't provide full income replacement and life cover might only be at a multiple of salary, plus what happens if they change jobs or if they or have to leave employment? Actually, helping clients understand the limitations of these workplace benefits is important as well. It won't happen to me. So, nobody likes to think about worst case scenarios, but statistics tell a very different story whether it is critical illness and capacity premature death.

The reality is these events do happen as we looked at a few moments ago, sharing real life claim stories as well, and industry statistics can help bring that message home in hopefully a way that that clients can resonate with. And I don't want to think about it. Protection does deal with uncomfortable topics, as we've said, illness, death, financial hardship. If we're avoiding the conversation, it doesn't reduce the risk. In fact, it does very much the opposite. A simple approach could be to ask if something happened, who would be financially impacted? And that simple phrasing or rephrasing actually shifts the focus from fear to responsibility.

Now if we look at some objections that we've heard from advisers that have maybe thought, I don't know if it's really something that I want to get into. And how do we overcome some of those objections? Well, some of the common ones we've heard are, I focus solely on investments and pensions. But again, that's great, but remember, it is our job to help clients protect their investments too. A financial plan is only as strong as the foundation it's built on. If a client's wealth plan were to collapse because of an illness or a loss of income, who benefits? You know, not the client, not the family and very much likely not the adviser either. Clients aren't asking for protection. I suppose the truth is, clients always don't necessarily know what to ask for. Just like we don't ask for tax planning, portfolio rebalance and pensions, draw down strategies. That's the job, of course, their adviser to guide them, proactively highlight the risks that they might not have considered.

It's a hard conversation, but it doesn't have to be. Framing protection as a, but it's really part of a broader financial communication or conversation can make it a real natural discussion rather than just that standalone difficult topic. It's about financial security and peace of mind, not just that worst case scenario. And it's not my area of expertise. That's okay. Nobody has to be a protection specialist. But we do need to flag the risk. If you're comfortable advising on protection, great. If you're not comfortable advising on protection, partner with a specialist, refer that client to somebody that does specialize in protection. The key, making sure that protection is at least part of the conversation.

I mentioned earlier the opportunities are where I really want to take the rest of the session today. And I think first thing to address here is that opportunities are available with protection advice throughout the client's lifetime. And I think that's a big misconception that, that as an industry, we need to overcome that protection's not a one and done conversation. And every client's financial needs will evolve over time. Protection should evolve with them. Again, the key to embedding protection into your business is about recognizing some of those natural opportunities that exist at different stages of life.

Now, I guarantee you've all read the consumer duty guidelines back to front. You've highlighted your favourite passages. You've probably got the guidelines on your bedside table, no doubt. One of the things I think are really important within the guidelines is this little phrase that I've highlighted here, which is the regular reviews we require firms provide an opportunity to identify any new or emerging harms. And I suppose that goes back to something I mentioned a second ago is how do we recognise some of those natural opportunities where protection could play a role or protection choice could play a really important role? I suppose another way to think about it is for those on the call today, how many of you have had the same client for longer than five years? A bit longer than 10 years? 15 years? I imagine a lot of you are probably nodding virtually or saying yes to yourself. Financial planning is very much a long-term service. So, it's going to be something that's part of that client's life for the long term, whether that's engaging with them regularly through remortgage, review their investments, discuss retirement plans, look at cashflow modelling. And over the course of that lifetime of theirs, how many changes are they going through that could warrant or should warrant a review of their protection risks and their protection needs? Now, often at Royal London, we often break down our customer groups into four different stages, four different customer groups, and it can often be a really useful way just visualising the different protection needs that they each have.

So, we've got starting out, so younger clients often focusing on their early careers often focus on growing wealth. Income's probably their most valuable asset. Many often in this stage overlook income protection, yet they may have the lowest financial resilience. If something goes wrong, it could be the perfect time to introduce income protections, the foundation for financial security. We've got building and growing, so families, mortgage holders thinking about career growth here, higher financial commitments. So again, mortgages, potentially children, lifestyle costs. A loss of income due to illness or death could have very devastating consequences. And so again, this is where life insurance, critical loans cover, family income benefit could be really valuable conversations to have. To and through retirement. So, pre-retirement and actually transitioning into retirement. Again, that client could be shifting from accumulating wealth down to drawing from it, business protection, inheritance tax plan becomes key considerations here. Long-term care planning might also start to come into focus. And then later life, so retirees thinking about legacy planning, estate planning, really the focus here is about ensuring wealth is protected and passed on efficiently to the next generation, so things like whole of life insurance, joint life second death, estate planning can really become really valuable tools. I think what's clear is that protection isn't just that one time conversation. It does need to be part of that ongoing dialogue that evolves with clients as their circumstances change.

And the great news is you're already having these conversations. But making protection a real natural part of these discussions, you can deliver even more value to those clients and obviously strengthen your business for the long term as well.

Now, if you're like me, I'm a massive history geek. I love bit of Greek mythology, so you'll probably know where I'm coming from with this. But if we talk about how your protection advice naturally fits into those various life events and plan scenarios, I've called it the Trojan horse, because protection can actually seamlessly enter financial conversations that you're having already with clients. It's not about forcing a discussion, it's about recognising the right opportunities to, to introduce in a meaningful way.

So, I'm going to jump around this slide a little bit here, but it could be exit planning. So, if you're discussing business owners' exits from their business, whether that's for retirement or selling the business, it's really crucial to consider protection that's sudden death that owners could derail plans, lead businesses and families financially vulnerable. So, business protection, shareholder protection, income protection can help safeguard these plans.

Market updates. So, market updates can often trigger financial reviews, which create an opening to reassess protection needs. That shift in investment strategy might also signal I need to revisit a client's insurance portfolio.

Child might be moving out, so if that child leaving home is going to be a major transition for parents, they might be reevaluating their expenses, their long-term financial goals, might not be a good time to review existing policies. Now, changes in employment, I think similarly a job change brings new risks. Does the client still have adequate life cover? Will their new employers’ benefits leave gaps in their financial security? Many assume that work benefits will provide enough protection, but as we said earlier, do those group policies cover all their needs? Assigning policies into trust, often trust review services or trust are vital for ensuring that payouts from protection policies reach the right people in the most tax efficient way at a relatively appropriate time as well. So, reviewing trusts regularly ensures that they remain fit for purpose and actually they're aligned with the client's wishes.

Retirement planning, retirement plan is often focused on wealth accumulation, but protection can then play a really key role to ensure that wealth is safeguarded, how the impacts of a long-term illness could quickly erode a client's retirement savings without the likes of income protection or critical illness cover.

Gift planning. So, gift and wealth are also a really key area for protection. Considerations of clients are making gifts that are potentially exempt, transfers and die within seven years of making that gift, it could potentially become subject to inheritance tax. And I want to come back to that shortly. I want to go into that as a bit more of a detailed opportunity.

Changes of income as well. So, if client's income changes, their financial obligations are likely going to change too. Whether they've received a raise, maybe face a reduction, remortgages. So, another opportunity here if lenders are assessing risks when approving mortgages, but the clients think about their own risks. So, if their income suddenly stopped, could they keep up with the repayments?

Clients are looking at starting a family. Or marriage, civil partnership, two of the biggest financial commitments that clients might ever make. Well, dependents rely on their income, their life insurance, critical illness cover, become even more essential. Clients might not be thinking about these risks and the excitement of these milestones. So again, it's hopefully a big role that you can play to bring that into the conversation.

If clients are making wills or reviewing beneficiaries, again, that's a vital part of estate planning. So, does that naturally extend into the protection space? Reviewing beneficiaries that are on policies?

Business owners that might be starting a business. Again, a great opportunity to bring to life key person insurance, business loan protection. Property transactions, or buying, selling properties, major financial transitions as well. And divorce or dissolution of civil partnerships. When that relationship ends, financial plans will change too. Protection policies should be reviewed to make sure that they still stay appropriate, and they align with that client's situation. A former spouse might be still named as a beneficiary. Income protection might need to be adjusted to reflect single income households. There might be additional liabilities that could also be protected as well. Really, there is an inverse array of opportunities to bring protection to life and also just spot those natural opportunities.

Cashflow modelling as well. So, I think a really effective way to, to introduce protection is through the use of cashflow modelling tools. Why? Because it's a great way to visually show clients what their future could look like, but also a visual way of highlighting the potential impact. When we're using cashflow modelling, if we are modelling income assets, outcomes, over time, you're creating that plan that is, again, all based on assumptions, you know, like good health, uninterrupted income, one partner maybe not being there or always being there, but what happens if those assumptions don't hold up? What if the main earner suffered a critical illness? What if one of the partners died? What if the business owner was no longer around to, to take any drawings out of the business? You know, those what if scenarios aren't about scaring clients, they're about helping them to plan more completely. So actually, showing the financial gap is really key here because if protection isn't in place, it often really speaks volumes as to the impact that could have on those later, later life plans. So again, whatever tool is you're using for cash modelling, just think about the potential ways to bring to life the impact on different life events and actually how protection could be brought to life through these different tools.

Now just jumping back to that Trojan horse analogy, and as advisers, you're going to know that gifting is one of the straightforward, yet powerful tools that you've got when it comes to, to estate planning. But while clients are often keen to pass wealth down to the next generation, they're often you're just as concerned about the what ifs.

What if they don't survive those seven years, for example. You know, it creates that unintended tax bill for loved ones. Before we get into the nuts and bolts of how protection can support this particular area with regards to intergenerational gifting strategies, it's really important, I suppose, just to pause, consider some of the broader inherited tax reliefs and exemptions. As you can see on screen, there's a number of ways to pass wealth on without triggering immediate IHT liabilities. Some of them can like no rate, residents, no rate bans, they're automatic if the estate qualifies. Others like your £3,000 annual gift exemption or gifts on marriage, you often rely on using allowances efficiently and effectively over time.

But what I want to really want to pick out on is what if clients are making more substantial gifts, potential gifts, where they come into that potential exempt transfer category? Again, if the individual is making gifts, they survive for seven years, it falls out the estate entirely, but if they die within that window, it becomes chargeable. And that's where things can get complicated, especially for the recipient of those gifts. And actually, that's where I want to really want to take the protection conversation. So great opportunity to bring protection to life here. So rather than leaving that tax liability chance, we can use things like life insurance policies to protect against it.

So just taking a closer look at one of the most underused exemptions. So, it's normal expenditure out of income. So, an exemption, incredibly powerful for clients with surplus income, particularly those with defined benefit pensions, investment income, other reliable income sources, again, that might extend beyond their lifestyle needs. So, of course, the benefit from the exemption the gifts need to be made from income. They've got to be regular; they can't impact the donor's standard of living. I think quite important that one, the gifts they should be surplus to the requirements, not leaving the client to fall short. There's no maximum value. But I think, and I suppose this is critical, that the exemption is only going to be assessed again after death here.

So, what's the opportunity? Well, this is where I think for example, clients could use this exemption to fund life cover and trust for children, grandchildren, perhaps to offset potential inheritance tax or on previous potential exempt transfers and even bring into life the use of things like gift Inter Vivos products as well. The key thing here is, whatever conversation's going on, I mean, you've got that crucial role of discussing, considering the protection solutions that, that are out there.

Mentioned potential exempt transfers, just if we explore that a little bit further. So, again, there are outright gifts to an individual, not spouses or civil partners and trusts. Example, again, could be a £50,000 gift to your daughter towards them buying a property. You wouldn't be able to claim a normal expenditure from income as it's not a regular gift. Most lifetime gifts excluding those between spouses and civil partners or ignoring other release are potentially exempt transfers.

Now, as we've mentioned before, death within that seven-year window could potentially cause the gift to fall into the estates of the effect the recipient and potential for taper relief could apply here. So, where the potential exempt transfer itself does become liable to IHT, that taper relief might apply if the donor died more than three years after making the gift. So, it's important, I suppose, here to understand that taper only applies to the amount of tax payable, not the value of the gift. We've got the rates on screen just now.

Now the, do you offer an opportunity here for a bit of additional protection advice? So really formed around that gift I Vivos solution. So, it's a way of protecting the IHT liability on the recipient. So, let's look a look at an example, just a little case study to, to bring that to life. We've got here, Andrea, she's 70. She wants to help her granddaughter, Emily, with a deposit for her first home. So, she's going to gift her £150,000. She's already used up her no rate band, having previously made a gift in trust. Now, since Andrea's no rate band is fully used, that entire £150,000 gift could be subject to IHT if she died within seven years. Now the potential IHT due and the gift is referenced on table, on screen just now. And if we applied that taper relief, you can see the reduction in IHT due and by the seventh year, of course, as we've saved that gift was be fully exempt. However, if she died within three years Emily will owe £60,000 on the gift in IHT.

So how and what could Emily use to fund that requirement to, to pay that tax liability? She might have to sell investments. She might have to borrow money or look towards any savings that she has, and again, does she actually have access to savings that can provide that sum of money? Is there another alternative option here? One of the most common solutions for protecting these types of gifts for beneficiaries from potential tax liabilities is to set up a life insurance policy to cover that reducing liability. Now, they're genuinely known as gift Inter Vivos policies, so they have a fixed seven-year term and cover will reduce in steps to match the reduced liability as taper relief takes effect. Now, although the cover reduces, the premium typically stays fixed for that whole seven-year period. Before we're setting up gift Inter Vivos policies, you do need to make sure that taper relief will apply. That's a key step here is will taper relief apply? Of course, as well, lifetime gifts are going to be allocated against the individual with no rate band when they make them. So that means that the initial impact on any gift or actually any subsequent gifts is to effectively reduce their no rate band for that seven-year period, thereby increasing the liability on the residual estate during that time.

That's generally how gift Inter Vivos plans work. Now, instead of the gift Inter Vivos policy, there is an alternative option, and it could be using something called a multicover plan, a menu plan. Now that could work in the sense of you creating a multicover plan, and it's made up of a group of five level term assurance plans. As you can see on the screen just now, these five covers run alongside each other with terms of three, four, five, six, and seven years respectively. Each cover would be set at one fifth of the liability. So, in our example from before that £150,000 gift from Andrea exceeded her no weight band by £150,000. Thereby a 40% inherit tax liability of £60,000. We would arrange each of these five covers at a fifth, so £12,000. That would provide the full cover of £60,000, which would be five policies at £12,000 from day one, and for the first three years, at which point the first policy would cease. Thereafter, the total cover provided will decrease by £12,000 each year as the next policy in the multi-plan reaches its full term. So, after the end of year three, you've got four covers left, giving £48,000 worth of cover at the end of year four. There are three policies left giving £36,000 worth of cover and so on.

Now, the reducing cover will match the reducing inheritance tax liability in the same way as the gift Inter Vivos cover does. But the added benefit in using a menu plan also brings that the premiums that the individual pays will reduce each year after year three, as each of the individual covers ceases. So, and actually that can really significantly reduce the overall cost. So just a little opportunity there. I thought it'd be worth bringing to life.

Now I mentioned earlier on around, referring where we're maybe not, we're having those protection conversations ourselves. Again, bringing back that Consumer Duty guidelines. Just to bring to the importance of signposting these conversations, it is stated in the Consumer Duty guidelines that where a firm declines to provide a customer with a particular product or service, the firm should still consider whether there is information or support it could provide to help the customer pursue their financial objectives.

I suppose when we think about delivering the best outcomes for clients, we do need to recognise that financial advice doesn't always exist in isolation. Your clients don't just rely on their adviser. They also have relationships with accountants, solicitors, estate planners. I suppose the question is, are we engaging with those professionals to open up the protection conversation?

If we think about some of the areas that are listed on the slide just now, exit planning for business owners. They're going to be relying on their accountants to structure their succession plans. Have they considered how key person or shareholder protections fit within that plan?

Wills and estate planning. So, solicitors can help structure the assets for inheritance, but have they ensured that the families have the liquidity to cover any IST liabilities or financial support for dependence.

Trusts. Fiona mentioned trust a little earlier, they are a key tool for financial planning, but are they being used to maximise the benefits of protection policies?

Guardianships, powers of attorney, again, they're there to ensure decisions can be made of clients lose capacity, but does the client have financial protection in place to maintain their quality of life? Suppose the reality is, if we're not part of these conversations, we're missing an opportunity to add value and strengthen that client relationship and hopefully grow your network as, as well.

And necessarily, you don't have to write every protection policy yourself. You don't have to be the protection specialist, but you do need to make sure the protection isn't being missed. So, there's really three simple ways you can do that, and that's to write it. So, if you are able to provide that protection advice to yourself, that's great, but the key thing here is to make sure that your client knows it's on the agenda whether you're covering it in your first meeting, your second meeting, or wherever, making sure that that protection discussion is happening. And again, building it into your fact find, your suitability letters, your review process, and hopefully that way no one's left exposed because it wasn't raised. Referring it. So, protection isn't your area, or your firm has separate specialists, refer it on. Again, that might be internally to a colleague, or it could be externally to a trusted partner. You might be referring pensions, mortgages, or wills, whatever it is. Signposts helping your clients get that holistic advice.

I think the last part here is maybe an obvious one, which is don't ignore it. Especially if clients you, if there are obvious ways for bringing that protection to life, it's important that it isn't ignored. And again, there's lots of different services out there that can help where clients maybe are dealing with specialist circumstances more complex needs. But the key thing is the FCA has been very clear under Consumer Duty, clients need to be given good outcomes. And we've mentioned that a lot today. And helping them get protection in place, either by writing it, referring it, or signposting it is one of the most valuable things that that we can do.

I suppose also, when we talk about protection, we're not just talking about policies, we are talking about people, and some of those people will be vulnerable. The vulnerability isn't all always obvious. It's not always permanent. It can arise from health conditions, bereavement, relationship breakdowns, mental health issues, financial stress, caring responsibilities. But it also does really mean that under the Consumer Duty, both ethically and under the duty, to make sure that the advice you're providing meets the needs of all clients, including those that might be less able to withstand financial shocks. Again, protection advice can be a way of helping support that.

For someone of maybe low financial resilience, the death of a partner or a period of time work because if an illness could be catastrophic. If you've got higher net worth households, vulnerability can very much still exist, even if one partner is financially dependent or if adult children with additional needs are involved in the plan as well. Again, specific protection here is about making sure it's not just about products, but it's about making sure those outcomes are being discussed.

So, in terms of a recap and just re reviewing what we've looked at today, hopefully what we've done is highlight that protection should be that natural part of the financial advice journey. No matter what route you or your clients are taking. Its bit of a cheesy analogy but think of financial planning much like this long winding road that we've got on screen just now. You know, along the way there's going to be very much key milestones. It could be. Buying a home-built wealth plan for retirement, passing on assets. And at each stage, clients can rely on you to navigate that journey. But imagine driving down that road without a seatbelt. You know, no matter how good your car is, no matter how experienced a driver you are, you are exposed to risks and protection is very much that seatbelt. It's won't stop the bumps in the road ha being there, but it can ensure that if the worst did happen, clients don't lose everything that they've worked for.

Regardless of your specialism, whether it's investment advice, protection, pensions, mortgages, estate planning, business succession. Protection isn't a detour; it is part of that route. And if we do fail to consider it, we're leaving clients to get vulnerable to those risks that could throw their entire financial plan off course.

So hopefully as we leave you today, maybe just asking yourself a few questions. Am I making protection part of my process? Am I helping clients secure not just their financial goals, but their financial resilience? And am I ensuring that they're truly protected? Whatever turn their journey takes? And I think one of the last things just to reiterate is, as we're coming to the end of our session, some key takeaways about the benefits of bringing an integrating protection advice into your business. Not just for clients but for you as business owners.

We talk about, I think if we review revenue and profitability angle protection policies provide upfront commission and reoccurring income. They can help build sustainable revenue streams alongside investment and pensions income. From a retention and engagement perspective, clients want trusted advisers who can support them through all aspects of their financial journey. And if we offer protection advice, it's again, enhancing your credibility as that holistic planner. Strengthening those client relationships and increasing loyalty.

And from and from a risk management perspective, we've talked about regulation a lot today and the importance of delivering good client outcomes. So, discussing protection not only ensures you're meeting those Consumer Duty expectations, but also lowers the risk of complaints. If clients experience financial hardship due to a lack of cover and it's been making protection part of your advice process, you're reducing the risk for both your clients and your firm.

So, we've got our learning outcomes back up on screen now. Hopefully we are able to say we've achieved all of them today. Hopefully the session today sparked some ideas on how protection advice can play a much bigger role. In intergenerational planning, especially when clients are looking to make financial gifts or manage their estates and as we've seen, protection is far more than just a product. It really is a powerful way to help clients protect their outcomes that they want to achieve, whether that's passing on wealth, supporting younger generations, maintaining financial independence.

So, our next step, I would say, a key call to action. If you'd like help on anything that we've looked at today, whether that's support of trusts, pensions planning estate planning, reach out to your Royal London Business Development Manager for either pensions or protection. We also have an in-house corporate and estate planning specialist team that are there to help with more complex cases and help you get those opportunities in front of business owners and high net worth clients as well as some of those gifting strategies. Ultimately, we are here to make your pensions and protection advice easier and hopefully help bring the value that you offer to clients, to life even further.

On behalf of Fiona and I want to say a huge thank you for joining us today and thank you so much again for your time. Thank you. Bye.