Wealth Management and Protection

1. Wealth Management and Protection Master slide deck

2. Contents • Wealth preservation: 3 – 51 • Supporting and Underpinning the Wealth Management Proposition 52 - 74

3. Wealth preservation

4. Agenda: • Introduction- why should wealth advisers engage? • The advised process • Business ideas • Support • Conclusion

5. What are the challenges that you face?

6. Adviser business model challenges

7. Advice process - critical

8. Why should wealth advisers engage? Every £100 spent on Investment - £4 spent on Protection • RDR - strategy selection • Economic and consumer necessity • Outstanding revenue and profitability driver • £10b investment – only 4% underpinned with appropriate protection • FCA interest in “Risk” & “Capacity for Loss”

9. Here’s why: Good for you, good for your clients • Enhanced client proposition • Enhanced client security and peace of mind • Enhanced revenue per client • Enhanced cash-flow • Enhanced embedded value of your business • Reduced consumer risks within the business • No longer an “average” wealth adviser

10. Advised process

11. Knowing your customer

12. Identification of demands, needs and possible solutions - PIPSI

13. Wealth management process Protection / wealth preservation

14. Risk and loss? Key FSA findings “Although most advisers and investment managers consider a customer’s attitude to risk […] many fail to take appropriate account of their capacity for loss.” “By ‘capacity for loss’ [the FSA is] refer[ring] to the customer’s ability to absorb falls in the value of their investment. If any loss of capital would have a material detriment on their standard of living, this should be taken into account when assessing the risk that they are able to take.” FSA Finalised Guidance: Assessing Suitability – March 2011

15. Understanding loss and the consequences Key risks for firms to consider In the FSA’s view, poor outcomes can occur if firms fail to assess a customer’s capability for loss. The FSA states that although most firms consider a customer’s risk preferences or appetite for loss, they often do not consider their capacity for loss… An example of good practice cited by the FSA was a firm that used “one process to assess the customer’s attitude to risk and a separate process to assess their capacity for loss…” FSA Finalised Guidance: Assessing Suitability – March 2011

16. What if something happens to a client with no protection?

17. What if something happens to a client’s assets with a financial underpin?

18. Wealth preservation - risk Translating attitude to risk to protection Wealth management – investing for future goals Wealth preservation – protecting your goals and lifestyle against the unexpected

19. More new business ideas

20. Opportunities – Business to Business • Increase revenue now - commission • Protect and increase future revenue - protect funds under management • More income from existing clients - replace trail income • Increase productivity per adviser • Diversify - alternative income stream

21. Business solutions for business risks • Client retention - generational planning • Compliance - identify shortfalls, risk • Avoid litigation - cost, reputation, PI • Differentiate - additional client services, Vitality • Increase business value - complaints, relationships

22. Opportunities Continued Three to focus on • Wealth preservation planning • Inheritance Tax planning • At/or post retirement planning • Vitality

23. A hierarchy of personal tax needs • Income tax/NIC • Capital gains tax • Inheritance tax • But…..

24. Key factors in driving interest in estate planning Age Wealth Family Self -sufficiency Rates/exemptions

25. Key target segments Older, wealthier families and property owners

26. What does the challenge look like? IHT fundamentals: summary • Payable on death (for most) • Lifetime transfers can be taxable though • 7 year “culmination” • Exemptions • Reliefs • The “nil rate band”

27. IHT planning: the golden rules • The less you own on death the less IHT you pay • So, lifetime planning can be effective – especially if you use the exemptions/reliefs • BUT • Many need to “look after themselves first” • AND • To be effective (generally speaking) you should not benefit from your gift • SO • At least use the nil rate band

28. The main impediments to (effectively) giving • The (would be) donor’s need for access to what is being given • Gift with reservation (GWR) • Pre-owned asset tax (POAT)

29. Trusts can help Control: Bare/discretionary Access: Loan trust/DGT

30. Life policy/trust combination: “a bargain” • Allows you to: • provide for IHT without you needing to change your life • “contract out” of serious giving

31. Life policy/trust combination: “a bargain” Sum assured Premiums Life policy IHT free Exempt Trust Normal expenditure Annual exemption

32. Campaign ideas • Providing for IHT without changing your life • (Effectively) paying IHT in instalments • Protecting your pension fund • No probate delays

33. Providing for IHT without changing your life IHT paid Trust Home Business Investments Payout Death Policy IHT Premiums exempt Full owner access and control

34. Paying IHT in instalments Trust Policy Future sum assured Premiums Beneficiaries A good investment?

35. Underpinning Pension Drawdown

36. Client exampleClient aged 55Spouse 3 years youngerPension Fund £400,000PCLS £100,000No income at outsetAge 60- £10k paAge 65- increased to £20k paAge 70- client dies

37. Income drawdown underpin 1st death 2nd death Estate Ceases

38. Income drawdown underpin Spouse aged 67 elects to take Income DrawdownDesignation £398,000Continues to take Income Withdrawal of £20,000paDies 8 years later aged 75 For illustrative purposes only

39. Income drawdown underpin Spouse aged 67 elects to take income drawdownDesignation £398,000Continues to take Income Withdrawal of £20,000paDies 8 years later aged 75 Year 1 = 0.49% Averaged = 0.64% Year 1 = 0.49% Averaged = 0.38% For illustrative purposes only

40. Income drawdown underpin Cost as percentage of Income Withdrawal Fund (After PCLS) at outsetBased on £300k IW Fund Age at Cost Commission Outset Fund (%) M55/F52 0.49%pa £2,463 M60/F57 0.62%pa £3,081 M65/F62 0.81%pa £3,677 M70/F67 1.08%pa £3,099 For illustrative purposes only

41. Support From PruProtect

42. PruProtect – providing in depth support

43. Advice process – support we can offer

44. Wealth preservation - attitude to risk questionnaire • Identify: a way to identify the protection needs in an existing investment fact find • Prioritise: help prioritise death and serious illness / incapacity

45. PruProtect – “My Plan” Needs analysis tool

46. The Vitality Programme

47. Our plans come with Vitality which makes it easier to get healthy with discounts on things like health screens and exercise devices, as well as the opportunity to reduce premiums each year Vitality Plus *Vitality is not available with Relevant Life policies

48. A selection of our Vitality Partners Included free For £4 per month extra

49. Underwriting service and support • Offer a pre-sale underwriting support via direct access to our underwriters on a dedicated free phone number • Experienced underwriting team in South Africa UK office hours, ABI regulated etc • UK team training third party relationships IFA visits

50. Key points • URE (Underwriting rules engine) - Recent up-grade - 60% straight through process - Commitment to being market leader as demonstrated by recent hire of industry expert • Turnaround times - Decisions made well within agree SLA’s (24 hrs for applications/48 hrs for medical information) • Flexibility to review - Will review lifestyle related loadings if client’s health improves • Medical providers - Make use of Medicals Direct, Doctors Chambers and IQED in order to receive medical reports as quickly as possible