Source: Cover Magazine, 11th September 2018
L&G's Richard Kateley quizzes two financial advisers with Chartered Accountancy backgrounds about meeting the protection needs of businesses.
Left to Right: Mark Laverty, Richard Kateley, John McComiskey
The importance of accountants and financial advisers working together to help their business clients find the right protection cannot be understated.
As a passionate advocate of ensuring SMEs are fully covered for any eventuality which may befall their workforce, I have previously written on the importance of accountants and advisers working together to provide a fully protected solution.
This time, though, I wanted to talk to a financial adviser whose foundations were built in the accountancy world.
Business Protection Solutions (UK) Limited is a firm which not only sees the synergies but also the huge benefits to SME clients of their accountant having a close working relationship with a financial adviser.
John McComiskey and Mark Laverty have used their Chartered Accountancy backgrounds to focus clients' attention to the importance of the business protection services through BPS (UK) Limited.
With backgrounds as financial advisers and accountants, their views and experiences could prove invaluable to others in order to further the cause of raising the awareness of business protection and its potential importance to your clients. I sat down with John and Mark to discuss these experiences...
What are the main benefits you can offer a small business, as an independent financial adviser?
John: Providing independent advice and fully informing clients on all the issues or risks they may be exposed to as business owners is central to our ethos. Our main focus is to provide the client with all the information they need to make an informed decision. Education plays a vital role to helping them to identify their requirements and allocate a sufficient budget to purchase the right solutions for their business.
How important is education of clients in your role?
Mark: Education is an underlying value in everything we do with clients. Very few business clients have experience of the issues which could affect their enterprises, unless they have someone within their workforce who has previously been affected by such concerns. As such, most businesses do not fully understand the value of having key person cover or relevant life plans (RLPs) in place, making education vital in ensuring that business prepare for the worst by purchasing insurance.
In your view what are the benefits to a business in having an accountant and a financial adviser working together?
John: There are definite benefits to be gained from accountants and financial advisers working closely together and putting their clients' needs first. By using their expertise, they can create a more joined up process to ensure that their clients are fully protected and are aware of the best types of protection for them. This approach can also provide guidance on other benefits of having protection in place such as tax-efficiencies. However, as in all situations, communication between all parties is key for the advisory process to be as efficient and effective as possible.
If you don't have a personal relationship with the accountant, how can you still make sure the client's needs are put first?
Mark: Even if no close relationship exists between adviser and accountant, it's important to send a detailed report to the client's accountant of what is being advised. Whilst ensuring your client and their business is protected is crucial, keeping everyone involved in the business informed is also imperative to make sure that everything functions smoothly.
John: Both advisers and accountants have the same core values of acting in a client's best interests and establishing a strong relationship can ensure there is a flow of information between parties. By doing so, advisers can provide guidance on the best type of protection for their client, taking into account all of the client's circumstances.
What level of awareness do the companies that come and see you for the first time have on subjects like losing a key person or a business owner and the impact this could have on their business?
Mark: There is a huge lack of awareness among business owners about the implications of losing a key person and how they can protect themselves ahead of time. We have never had a client come in off their own back and ask us for any form of business protection. Business owners are aware they need to insure their buildings, cars and machinery, but very few have discussed what might the impact may be if they were to lose a business owner or a key person.
John: The day-to day activity of running a business means that for most owners it is easy to put issues like this aside. It's our job to help them recognise these concerns and risks, whilst being able to advise them on solutions to provide a financial safety net should the worst happen. Very often they have no idea that these solutions exist and can be extremely affordable to put in place.
Mark: Through working together, we can raise awareness of these issues and make people aware of the risks they are exposed to, helping them to make an informed decision. If we do our job correctly, then their business will be in much better position when they leave our offices than when they arrived, even if that means just being better informed.
Turning to a specific product, do you think accountant or clients understand the benefits that a Relevant Life Plan can give them?
John: Many clients, or even their accountants, do not have a detailed knowledge of RLPs, however the real issue is a lack of awareness that these products even exist. For accountants, RLPs are a great product to recommend as they can offer tax advantages and they are usually an allowable business expense meaning they can be offset against a company's corporation tax bill.
Mark: Clients rely on advisers such as accountants to recommend products such as these which would be tax efficient for them, so accountants have a huge role to play in ensuring their clients are protected.
How does a business' lifecycle effect what risks they are most exposed to and what protection solutions are most relevant for them?
John: Every business is different, and for SMEs in particular these differences can be more pronounced depending on how long they have been established. For example, a younger company may have more reliance on a few key people, whereas a more mature firm may be more interested in protecting the value of their business for the owner's retirement plans.
However, no matter how established the business is, one of the most harmful events a business can fall victim to is the death or critical illness or an owner or key employee. This can have serious consequences on your enterprise, possibly leading to instability and financial difficulties, so having protection in place is vital for these businesses to ensure they can continue trading in the uncertain days and months which follow the death of an owner.
Have you seen first-hand a company that has survived the loss of a key individual because they had protection in place?
Mark: Yes, we once had a family run bakery business who we advised on about protection. The two owners were brothers; however, one was far more involved in the day-to-day running than the other. Once we had explained key person cover, they didn't hesitate in seeing the benefit this could have on their business. Although initially they only believed they needed cover for the more actively involved brother, after some advice from us they decided to take out protection of £100,000 for one of them and the £230,000 for the other.
Unfortunately, the less involved owner suffered a stroke a few years later. This had a huge impact on the business as he usually handled the logistics for drivers, meaning they lost orders and sales and put undue pressure on the remaining brother to keep the business afloat. The money they received as a pay-out from their key person protection made a huge difference and made them realise the importance of having cover in place, as they wouldn't have been able to handle the strain alone.
For some businesses, the money from an insurance policy claim will not necessarily be the only reason a business survives the death of a key employee, but it certainly helps to alleviate some of the immediate financial issues.
Conversely, have you seen first-hand a company that has not survived or has struggled with the loss of a key individual because they had no protection in place?
John: Absolutely. Another family business we were advising were reluctant to take out any protection, however we continued talking to them about it on a number of occasions. Sadly, the father had a heart attack and passed away shortly after, leaving the rest of the family to pull together to keep the business trading. Unfortunately, the pressures of running the business meant they still did not think about taking out cover and recently one of the brothers involved in the business had a heart attack as well.
With hindsight, I would have advised more forcefully about the importance of business protection, however ultimately it is the client's decision. The outcome for the business is still unsure, but if they had taken the polices out it would have perhaps eased the situation and could have ultimately saved the business, if indeed it does fail.
Do you think accountants should actively seek out financial advisers to work with in terms of their clients or do you think that it should be the advisers who approach the accountants?
Mark: There is a real synergy between accountants and advisers and they should certainly look to work together to benefit their mutual clients. However, in many cases, the main barriers to achieving this is lack of knowledge or unfamiliarity of the issues or and the risks. In reality, it is not a matter of who approaches the other first, but that both utilise each other's expertise, whether that be the accountant having the clients or the adviser having the solutions, the ultimate aim of both should be to raise awareness about business protection.
John: Clients require us to work together to make sure they receive the most reliable information, knowledge and solutions for their business to help them succeed and survive, so it is vital that we ensure this happens. Any business, whether they are a metal-welding business, recruitment company or even an accountancy firm, rely first and foremost on its people and losing one of them will undoubtedly have consequences, some of them potentially devastating.
Are there any special rules around whether accountants can introduce their clients to financial advisers?
Mark: I am not aware of any restrictions, but accountants will need to make their clients aware of any relationship they have with their recommended adviser. Referral fees are available for accountants and can be a good incentive to refer clients. However, putting the needs of the client and ensuring they are advised correctly should be the highest priority.
What advice would you give to an accountant who maybe considering working more closely with a financial adviser?
John: For both parties, it is advisable to do your due diligence when looking for referrals or references. A successful long-term partnership will come from working together and building trust. It's also important to discuss the client and their circumstances with an adviser before referring them to ensure the adviser can help and offer guidance. As ever, acting in the best interests of the client first and foremost it crucial.
Finally, what would your accountant partners say about the impact your business has had on their client?
Mark: The only acceptable answer for me to accept, and I hope they would say this, is that we had exceeded their expectations at every level and made a positive impact on their clients. I also hope working with us has reflected well on the accountancy practice in the eyes of their client that they have referred to us. However, the best comment I could receive would be that we did right by every client.
I would like to thank John and Mark for their thoughts, which I hope others find insightful. We certainly should not underestimate the importance of the role advisers and accountants play when it comes to raising awareness about business protection.
Recent research by Legal & General revealed that over three quarters (77%) of businesses would expect to learn about Business Protection from either their accountants or adviser. Of those who already had protection for their business, 89% only bought it because they were advised to do so. If they approached you, would you already have links with an experienced business protection financial adviser? Many advisers would welcome the opportunity
Both these professions can provide complimentary services to their business clients and it's a great opportunity to work together, utilise each other's expertise and provide a business with a plan for the future that incorporates a fully protected solution.
Richard Kateley is head of intermediary (protection) at Legal & General