National Protection Sales Manager Bernie Buron highlights the potential business protection gap that might arise from the upcoming tax changes.
The UK government has announced that as of April 2017 the tax relief landlords were enjoying on their mortgage payments would be phased out over the following years. With the stamp duty changes also coming into effect in April 2016, there has been an expected increase in limited company applications in the buy-to-let sector, as many are looking at their current situation and deciding that applying for mortgages as a business is a preferable option.
This has opened up a world of opportunity for advisers as their landlord clients find themselves facing a different set of business protection needs that can not only protect them and their employees from financial detriment, but make their portfolio as tax efficient as possible.
Limited companies receive tax relief on premiums that they pay for business protection. With your advice, they can ensure their move to a limited company set-up can benefit them whilst ensuring a stable and secure financial future for themselves and their employers.
Although there are different types of business protection, there is one main area that is likely to be pertinent to your landlord clients:
Relevant Life Cover
A tax efficient death in service contract paid to the employer but written under trust for the beneficiaries of the plan.
- Covers individuals such as employees or directors of a business
- Applies to limited companies, sole traders or LLPs
- Premiums can be treated as a business expense and claimed against corporation tax and/or income if sole trader
- Maximum value can be gained from placing it in trust
- Aviva have recently added Critical Illness to their relevant life cover
If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.
Head of Mortgages and Insurance Stephanie Charman takes a look at the upcoming stamp duty tax changes on buy-to-let and second homes.
As of 1 April 2016 the stamp duty land tax (SDLT) on second homes and buy-to-let purchases will be increased by 3%. If that was not enough for landlords, the government has also announced that as of April 2017 the tax relief claimed by landlords on their financial costs will be capped at 20%, instead of the higher rate of 45%, which will be phased out over the following years.
Chancellor George Osborne also added that the current ‘wear and tear’ allowance afforded to those letting out furnished property would be scrapped and replaced with tax relief against the cost of replacing furnishings. With so many changes on tax all within a small time frame, it has created a complicated scenario for many landlords, who may be seeking the financial guidance of an adviser to ensure they make the right decisions.
In an effort to curb incentives for housing investment, the government has introduced the tax changes to “level the playing field” between landlords and first-time buyers. This has caused some controversy within the industry as some feel the changes are unfairly targeting landlords when the housing crisis is also affected by many other factors.
Some landlords are even considering incorporation and setting up a limited company to apply for their mortgages, to ensure their portfolio remains as tax efficient as possible. But this is a complicated area and these changes will affect each landlord differently.
If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.
With National Storytelling Week in February, we spoke to appointed representative Caroline Hawkins about her involvement with charity Seven Families, who work to raise protection awareness among the public through telling real-life stories about those who have experienced the hardship of not having protection when it was needed most.
Caroline is an experienced independent adviser specialising in Business and Personal Protection and large loan mortgages. Working at appointed representative Direct Finance Solutions, Caroline prides herself on building long term relationships with clients over time, supporting them over the years with regular reviews and ongoing advice.
We spoke to Caroline about her involvement with Seven Families, the effectiveness of telling stories and the power of protection.
So how did you get involved with Seven Families, and how has it helped you promote the need for protection?
“As a protection adviser I have always ensured I maintain a strong presence not just with my clients but in the industry as well. This includes social media, which is a fantastic platform to get the word out and share stories. It was through LinkedIn, a very good social media platform for professionals, that I was contacted by a representative at Scottish Widows, who said that Seven Families were looking for an adviser who was passionate about protection and raising awareness to look after their seventh family, the Knights.”
“The client, Melanie Knight, had lost her job as a midwife with NHS in 2014 after prolonged absence due to arthritis. She was also diagnosed with Danlos syndrome, a disorder of the connective tissue affecting the movement of joints. Seeing the support of her employer ebb away was a painful process and it is a sad story that tells the tale outside of just the facts and figures.
“As soon as I was on board with Melanie I was able to help her with the life cover she currently had, as her provider offered access to Best Doctors. Often it is the knowledge of products and providers that makes the difference for clients, as they sometimes don’t associate the benefits of their life cover outside of the final pay out. Getting value out of their policies through ongoing support is all part of the service for my clients.”
How and why do you share stories with clients?
“I have my own personal protection story that I sometimes like to tell because it highlights not just the need for protection but also for the right advice. That is why I want to get it right for clients as much as I possibly can, because I know how difficult and stressful these situations can become. Good and bad news stories are important, to show the difference between being without and being with protection just when it is needed the most. The Seven Families story is a great example of this.
“One of the most important aspects of my job is to build long term client relationships built on trust. Not just as an adviser but as a professional friend that they can turn to for support. If a client wants me to find out more about their policy after they have taken it out, or has any other protection questions I always encourage them to call me.
“Stories can have a very powerful impact on people, sparking emotions and helping them to relate to the subject at hand. It is still important to discuss health risks and comparisons with state and employer support, but telling a story that you believe in or is close to your heart can have a real impact on clients, helping them to learn the lessons others have experienced in the past.”
We know that advisers take different approaches to protection. What techniques and formats work best for you and your clients?
“I know some firms prefer to have a protection specialist, or separate the protection conversation altogether. But I believe in letting the client know very early on in the process that we will be having a mortgage and protection conversation. I truly believe in treating customers fairly, and this means knowing your products and the providers well enough to have confidence in your advice and showing that you take it as seriously as any other part of the discussion. For me, it has always been less about selling a product, and more about helping the client protect themselves.”
“Understanding the benefits of each product is also a really important aspect of advice, and I have seen these added-value benefits make a big difference to people’s lives. Knowing which deferred periods are best suited to each client also delivers the best value out of the policy. It is after all a notoriously complicated market, which makes knowledge and understanding central to protection advice, especially as every insurer is different.”
What are the most common consumer objections that you have helped them overcome?
“Misinformation still sticks to the industry and it is surprising how many assumptions about employer and state support are made. Some people are simply not aware how long and painful a state claims process can be compared to a good value, comprehensive protection plan. I often ask clients how reliable they believe insurers to be and many assume it to be around the 50% mark, as opposed to the real figure which is normally above 90% reliability.”
“Sometimes clients just don’t know about protection at all so it is important to bring it up as soon as you can, letting them understand the benefits. More importantly, let them hear or see the real life scenarios that would leave them in a difficult situation, helping to break through the “it won’t happen to me” stance.”
Is it just as important to share stories between advisers and within the industry?
“Absolutely. It isn’t just about raising awareness and talking to clients, it is also about spreading the word and sharing stories between advisers within the industry or network. Whether through social media or face to face networking, I find that stories genuinely affect those I speak to. At networking events I enjoy standing up and speaking about protection, with profound effects on others who come up to me afterwards.
“Attending seminars and events featuring providers is an excellent way to build knowledge around protection, whilst staying up to date with all the latest innovations and changes. If you don’t believe in what you are selling, then clients will pick up on it and be put off. I use CI Expert as well, which is a very useful tool to compare and contrast policies and to talk about protection with clients, helping to find the right “fit” for their circumstances.”
Do enough advisers embrace protection?
“Many advisers really engage protection and are seeing positive results. But unfortunately there are some that are not as interested. I think this is a worrying trend considering the importance of Treating Customers Fairly. Even Business Protection is not considered enough which can be devastating for the parties involved when not discussed properly.
“Some of it is simply about confidence. If they do not feel they know the insurers and products well enough they might feel they cannot provide the best advice for their clients on the subject. But I believe advisers also have a responsibility to understand the industry and ensure the conversation is fully incorporated into advice. As some advisers simply don’t know how best to talk about protection, I do what I can to spread the word, share advice and most importantly share protection stories where I can.”
If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.
Head of Mortgages and Insurance Stephanie Charman highlights the main reasons your client’s home insurance claim may be rejected and the importance of getting to know their policies.
Research from the Association of British Insurers (ABI) has revealed that more than one in five home insurance claims are rejected. The figures have been published after an analysis of 1.8 million claims made during 2013 and 2014.
But under what grounds might your client’s claim be rejected and what can they do to protect themselves?
Wear and tear
The ABI stated that this was the main reason for home insurance claim rejections. If the policy holder fails to maintain the property to an agreed level, then this can lead to wear and tear that would not be covered.
Storm damage caused to a property’s roof might well be a valid reason to claim, but damage caused from a lack of repair may not be. In a nutshell, home insurance is there to cover clients in the event of a sudden or unexpected event such as a violent storm, not for the repair of property over time.
Claiming below the excess
One of the other reasons for invalid claims highlighted by the ABI, was when the value of the claim fell below the policy excess. The excess is of course the amount the policyholder must pay out when a claim is made.
Being tempted into increasing the excess when the policy is taken out in order to decrease the premiums might seem financially beneficial, especially if they don’t need to make a claim. But it can also increase their chances of non-payment when they eventually do, especially if the excess covers a relatively wide variety of circumstances.
The wrong level of cover
Unlike motor insurance which covers specific events and has a claim rate of 99%, home insurance often covers a number of differing circumstances. But it may also not cover damage from pets, to fences and boiler repair, which may come as a surprise to some.
Prioritising price, rushing through the application or even not reading the policy documents thoroughly when policies are taken out or renewed, can leave policyholders without the level of cover they thought they had.
Get to know the policy…
The ABI are using these statistics to raise awareness among consumers about purchasing home insurance and to help improve transparency and build trust. But it is still a complicated area. That is why talking your client through the options is important to ensure they have the right sort of cover for their circumstances.
If you would like to know more about how to join our award-winning Mortgage Network as an appointed representative or becoming a member of our Mortgage Club, call our Broker Support Team on 0845 130 7446, option 1.