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How well are you looking after your Business Partner?

The health and welfare of your business partner is a really important factor in your financial planning. After all, they have probably been working alongside you since you came up with the idea for your business, and also have shared the highs and lows as your business survived those difficult early years and has hopefully grown as time went on. Your partner has toiled alongside you, shared the stresses and hopefully you’ve built a business you’re both proud of. It wouldn’t have been the same, or indeed may not have happened without them.


Now I want to tell you a story about a situation we came across recently. Two business partners (let’s call them Tom and Gerry) built a great manufacturing business in the Southwest of the country. They built a great business that supported them nicely and indeed also a small team of dedicated staff. Unfortunately Gerry developed a very serious medical condition and passed away after a very short period of time. Tom was of course devastated; the 2 men had been a great team working together, very reliant on one another and sharing everything down the middle. And that included having an equal share of the value of the business. They had never felt the need to formalise the situation, they were very trusted friends to each as well as partners.


After Gerry’s death, his son who had just finished college decided that he would (with his mother’s blessing) take his father’s place in the business, minding what was an important financial asset to them. Tom was not 100% happy with this as he now had an equal business partner again, but not the one he had built the business with. The 2 partners tried hard to make it work, however they just had very different visions for the business. In the end, after real slippage in the business and quite a bit of bad feeling creeping in between Tom and Gerry’s family, Tom managed to secure a sizeable bank loan and bought out Gerry’s family.


Tom now owns all of the (smaller business), under pressure to pay off the loan and without his friend alongside him. And all of the angst and financial pain could have been avoided… Unfortunately, such situations are repeated frequently each year around the country.


Business Protection

There is a range of business protection solutions available to help businesses survive the death or indeed the serious illness of someone that would result in a financial loss for a business. These solutions provide a number of benefits for businesses;

  • They offer real peace of mind benefits to the directors or partners, as they remove the financial worries associated with the death or serious illness of a colleague.
  • They remove the need for businesses or surviving partners to borrow money to buy out their partner’s share of the business.
  • They remove the need for a surviving family member to take the deceased’s place in the business.


In the situation mentioned earlier, if Tom and Gerry had co-director’s insurance to the value of their shares in the business on each other’s lives, all the stress would have been avoided. When Gerry died, Tom’s insurance policy would have paid out, and he would have been in a position to immediately buy out Gerry’s share of the business for a fair price and keep control of it – which could have been agreed as a right for each of them when effecting the policies.


There are a number of different types of business protection solutions available to suit the different types of business structures.


Co-director’s insurance

This would have been the answer to Tom & Gerry’s issue! Each director insures themselves against the death of their partner, enabling them to buy out the partner’s shares on death and/or serious illness. As an alternative, the insurance can be effected by the company itself.


Partnership insurance

Similar to the above, a partnership takes out insurance, protecting itself against the death or serious illness of an individual partner, enabling them to compensate the deceased partner’s estate for their share of the partnership.


Key person insurance

This helps a business to minimise the impact of the death or serious illness of a key employee. The insurance can be used to quickly attract a replacement employee or indeed to pay off loans of the company that may have been guaranteed by the deceased.


So the good news is that Tom & Gerry’s situation can be avoided. The key to finding the right solution is getting the right advice. And that’s where we come in! If protecting the future of your business is a concern to you, please give us a call and we can walk you through your options.

Photo courtesy of glasseyes view

10 Lessons to Teach your Children about Money

Every Irish child has at some stage heard an exasperated parent saying, “You know, money doesn’t grow on trees”. You may have even used it yourself! While it is a valuable lesson for a child, there are many ways we can guide our children to help them understand money and put them on the right path to managing their money wisely.

Here are some ways that you can help your kids with their financial futures. As the lessons apply to different age groups, we’ll start with a few for children who are still at a very early stage in their financial lives.


1. Establish a savings routine

This can start as soon as children start to receive pocket money. Encouraging them not to spend it all as they receive it and instead to save for a bigger treat to be bought every few weeks or months can set in place the benefits of delayed but ultimately greater rewards. We all know the benefits as we’ve got older of saving for holidays and cars etc. instead of borrowing and paying back far more than the actual cost.


2. If it looks too good to be true, well it probably is.

While we all may associate this only with a “great” share tip that eventually turned into a very expensive lesson, this is a useful lesson for children too. My nephew recently bought a 1,000 piece jigsaw from a friend of his for only 20¢ and was delighted with himself. That was until a few days later that he found the last four pieces were missing…


3. Look after the pennies and the pounds will look after themselves

Another old saying that many of our parents used but well worth remembering and passing on to our children. This one is all about small amounts eventually making a big difference, teaching children the value of not getting complacent and wasting what seem like insignificant amounts of money to them.


4. Beware borrowing

It’s important for children to understand debt. The line from Hamlet of “Neither a borrower nor a lender be” is probably not the best advice for kids as they grow up today. After all, they’ll probably need a mortgage one day and using debt can sometimes deliver savings – for example where there is a significant discount for paying a full year’s subscription in advance.

However children need to learn to plan debt carefully and to avoid expensive debt, particularly buying impulse purchases using credit cards that they won’t be able to immediately pay off.


5. Share our own mistakes

Now here’s one to test us all! We’ve all made mistakes over the years. Maybe we ended up overweight in property six or seven years ago, maybe we didn’t get proper independent financial advice early enough in our lives.  Tell your children about lessons you’ve learned and how they can avoid making these same ones themselves.


6. Make companies fight for your business

Your children need to understand that they have real buying power in relation to a lot of the products and services that they purchase. They offer the potential of being very long-term customers, the types that brands really want to attract. So whether they are opening a bank account, booking a hotel, getting car insurance, buying a car, some electronics or even just clothes, they should get into the habit of making sure they get the best price by haggling.


7. Plan your financial future

This is probably the most important lesson of them all… Financial planning shouldn’t start when people hit their forties and start worrying about retirement. Financial planning should start at a very young age; when children are thinking about all the things they want, but can’t afford! Choices have to be made, careful decisions need to be taken and a plan needs to be put in place to manage their limited resources to achieve the maximum effect and/or enjoyment!


8. A bank’s job is to sell to you

Banks are a necessary service provider for everyone and your children will need one (if they don’t have one already). But children need to understand that banks don’t provide their services and products for free. At the end of the day they have shareholders who want to see a return. That return is achieved by selling products to all of us – loans, credit cards, investments, insurance.

Children need to learn to separate the necessary services banks provide (current accounts, mortgages, deposit accounts) from the other optional products that they might try and sell them.


9. Fund your pension early

Every 10 years earlier that you start a pension, your fund approximately doubles. So children need to be taught that pensions are not for old people! They are for savvy young people who have planned their financial futures and who want to make their financial objective throughout life easier to achieve.


10. Get cover while it’s cheap and accessible

Life assurance, income protection and other such products are much cheaper and easier to get (younger people are healthier, underwriters take a more benign approach) so young people should get cover in place early. They should look potentially at convertible policies that they can maintain cover on, off into the future. These could be very valuable, particularly if they are unfortunate to suffer from ill health as they get older.


Does Independent Financial Advice Deliver Better Outcomes?

This article does not go into all of the reasons (of which we believe there are many!) why it makes sense for consumers and business owners to avail of the services of an independent financial adviser. We hope that we demonstrate these to you every time in our dealings with you!

Instead, this article brings a more scientific approach to answering this question. It refers to 2 separate pieces of structured research that have been carried out in this area, each carried out with the aim of identifying whether people who received advice achieved better outcomes than those who did not.

The most recent research in this area was commissioned jointly by the Professional Independent Brokers Association and Standard Life. It was conducted by Research Plus in July 2013 among 1001 adults aged 18+ across the Republic of Ireland. The results were very interesting in that they identified three key findings;

  • Those who get financial advice have pensions that are 53% higher on average.
  • Those who get financial advice have 14% more life cover
  • Those who get financial advice have on average 80% more savings and investments.

Of course there could be many reasons for these findings. People who avail of the services of an independent financial adviser may have a greater propensity to save and invest? But this on it’s own does not explain the difference.

To help us answer this, we refer to a very comprehensive independent study carried out in Canada on households in December 2010, comparing the financial outcomes of advised versus unadvised clients. The study was conducted on over 10,000 households, with a follow up survey on approximately 3,600 of these conducted six months later. The Canadian Centre for Interuniversity Research and Analysis on Organisations carried out the research.

The first finding was in relation to the amount of financial assets for households that use an adviser versus those that don’t. Households that use a financial adviser have significantly larger financial assets – in fact the results showed a multiple in excess of four times higher!

One again could be sceptical and pass the findings off as being that those consumers with money go to advisers, while those with fewer resources just go it alone. However, more importantly, this report draws a link between advice and greater financial assets. The study considered the direction of causality — i.e. that wealth follows the advice rather than the other way around.

On average, participants that used an adviser achieved a 173% greater increase in financial assets over those without an adviser, assuming the same starting value of assets and a greater than 15 year time period! There was similar outperformance over shorter time periods too!

To achieve 173% over a fifteen year time horizon would require a 7% p.a. compound return. Other studies have suggested that the addition to return from the better choice of funds adds about 3% p.a., so the study suggests the extra return arises out of a combination of better fund selection, increased savings rate, better diversification and greater tax efficiency. This is the value that your independent financial adviser helps to deliver!

The study also found that the increase in the value of financial assets as a result of using a financial adviser begins to be seen after four years. Specifically it found that for participants that used an adviser for 4-6 years, financial assets were 58% greater than for non-advised households. The difference in financial assets is explained by higher household savings rates (for advised households) and increased allocation to non-cash investments.

So this is the hard data that demonstrates the value that an independent financial adviser can bring to the management of your financial affairs. But of course your adviser offers many more benefits;

  • Helping you to identify all of your financial goals and objectives.
  • Building a risk appropriate portfolio to help you achieve your desired outcomes in a controlled manner.
  • Finding the very best products in the market to help you achieve your objectives.
  • Staying abreast of all the changes in personal taxation, products and other market developments to identify opportunities for you.
  • Regularly reviewing your portfolio to ensure you stay on track to achieve your goals.

In short, we’re there to help you protect yourself and your loved ones from financial shocks, to help you grow your financial assets and to provide for your retirement in a tax efficient manner. And as demonstrated in the research, to deliver much more favourable outcomes to you in the process!

We really welcome your comments. Please feel free to leave any views in relation to this article below.

Now that’s Innovation!

The market for financial protection products has seen some great innovations over the last few years, and all to the benefit of the consumer! First of all, the cost of protection products in general has fallen, due mainly to advances in medical science helping to reduce claims and also the product providers competing keenly with each other on price.

In order to compete with each other today, the battleground for product providers has moved on from simply reducing prices to adding exciting and valuable features and benefits for customers. Long gone are the days of consumers simply deciding whether it is life cover, serious illness cover or income protection that they need, they now rightly demand access to the exciting additional benefits on offer. Today’s market presents a challenging (but interesting!) role for financial advisers to stay ahead of these innovations, to ensure that we continue to offer the very best cover to our clients.

So, as we put in place new cover for people and review existing cover for clients looking to save money and access new benefits, we’ve identified a few innovations in the Irish market that we think you might like to be aware of.


Underwriting has got more client friendly!

Long gone are the days of the perceived “default setting” being the requirement of clients to travel to a doctor for a medical examination. In many cases these medical examinations have been replaced with alternative methods of gaining the required information, but in a far more friendlier way for applicants.

Today if an underwriter requires more information than that provided in an application form or by the client’s own doctor, they may seek either of the following;

A nurse medical: This is where a nurse travels to your home or office and carries out the medical examination at a time and place that suits you. As a result, you don’t have to waste time travelling for a medical and enduring the inevitable wait in the doctor’s surgery.

Tele-underwriting: This is where the information is simply requested in a phone conversation with a medical professional. They ask all of the questions that you would have been asked in a doctor’s surgery, and of course still have the opportunity to ask follow-on questions where they need more information (this is hard for them to capture through a written form completed by you). Again it saves you the bother of having to attend a doctor’s surgery.


Best Doctors

One of the providers that we deal with now offers a really exciting service to their protection customers. You can now access Best Doctors, which is a global organisation bringing the world’s leading medical expertise to you and your family, offering a second opinion when you need it most. In the event of you suffering a serious medical condition, a Best Doctors medical specialist will help to verify your diagnosis and treatment options, and will conduct an in-depth review of your medical files.  The process can reduce potentially serious complications that can result from a misdiagnosis, and help you and your treating doctor determine the proper course of action.

Being diagnosed with a serious illness would be an emotionally overwhelming experience if it happened to you. You would have lots of questions and nagging doubts:

  • What will happen now?
  • Is the diagnosis correct?
  • Will the treatment be right?
  • How can I be sure?

Best Doctors will help to assuage these concerns. It’s also included as a benefit of the policy!


Income Protection Deferred Periods have got shorter and shorter

The deferred period on income protection policies is the amount of time from the date of accident or onset of illness, until the claim will begin to be paid. This traditionally was anything from 3 months to a full year. This frustrated some potential customers who reckoned they would be recovered and back at work before the claim would even begin!

We now see deferred periods as short as four weeks on offer. In fact, for professionals and other lower risk occupations, income protection cover can now be secured from the very first day of illness of accident – no deferred period at all! Now that is real innovation as a result of listening to the needs of customers!


Some great policy features

Some of the providers include some lesser-known but really valuable added benefits on their policies to make them stand apart. These include;

Rehabilitation support on income protection policies: For income protection claimants, recovery means a chance to return to work or to begin a new career. Some providers offer resources and assistance to help you get back into the workforce when you are ready.

Relapse benefits on income protection policies: There are policies available that will immediately restart paying your benefit if you have a relapse within six months of returning to work. There will be no deferred / waiting period in this case.

Partial benefits and career changes for income protection claimants: There are providers who clearly recognise the benefits both to themselves and to the claimant, of the claimants getting back to work. However the claimant may only be able to work reduced hours than before their illness or accident, or indeed may need to change careers to a less demanding job. Providers have financial and other supports available to claimants to help them achieve these ambitions.

Terminal illness benefits on life assurance policies: Many life assurance policies will pay out the full benefit immediately on diagnosis of a terminal illness, removing the financial stress at this very difficult time for a family.


These are just a sample of some of the great innovations available today. Unfortunately all of these innovations make your choices a bit more difficult. But that’s where we come in! It’s our role to stay abreast of these changes and to ensure that our clients have the very best benefits in place at the lowest cost. If you’d like to find out more about any of these innovations, please give us a call.