John Joe McGinley Marketing Communications Manager at Scottish Equitable looks at post Aday opportunities.
Pensions Term Assurance
A-day will have a massive impact on the life assurance market. Pension tax simplification will revitalise the pensions term assurance market leading to opportunities for tax efficient life products.
So from 6 April clients can have life cover included within a pensions wrapper. This will be within the lifetime tax allowance though care must be taken to ensure it doesn’t invalidate any enhanced protection. Tax relief will be available on premiums at both basic and higher rate bands.
This is a great opportunity for advisers who advise on both pensions and protection and for their clients.
The key benefits for your clients are:
• The net PTA premium will be significantly cheaper for some basic rate taxpayers and for all higher rate taxpayers when tax relief is taken into account
• As PTA falls under a pension scheme, the policy is automatically under trust, which usually means it is not subject to IHT.
And for you…
• Commission will be based on the gross premium, usually higher than the equivalent life premium.
Still a future for SIPP
Despite the chancellor’s U-turn on residential property and exotica I firmly believe there is a big future for SIPPs. Being in marketing I always look for the unique selling point in any product. With SIPP that USP has to be flexibility.
The question you need to ask is do your clients need this flexibility? For example, to invest in commercial property, or in a pooled residential property fund of some description that might not be available in a normal insured personal pension?
If people do need that flexibility today then an immediate SIPP would be the answer. If people think they might need that flexibility at some point in the future then perhaps a deferred SIPP should be considered.
Using A-day to change your business
A-day raises the question for many advisers “where should my business be positioned post A-day?”
A good way to identify where your business should be is to carry out a segmentation exercise. This will firstly help you establish the key business opportunities for you with your client bank.
However, a word of caution, it may also raise a potential question for you, “do I have the client bank to justify my present business model?”
You now have the opportunity to decide where you position your business on the advice spectrum.
We will see a market where one end of the spectrum will be low advice, Sandler driven, vanilla products. These will not provide the remuneration for a high level of adviser client interaction and, as such, lend themselves to the concept of ‘e’-selling, ‘e’-promotion and ‘e’-servicing.
However, once your segmentation exercise is complete you may discover that you have a high level of clients who would benefit from fuller advice. They may:
• want control over where and how their funds are invested.
• understand investment risk and reward and the need for initial and ongoing advice
• understand the value of advice in return for quality information, ongoing service and potentially better investment performance
You should now be considering who in your client bank will be relevant for a fuller advice service and who will be best served by a lighter touch approach?
This strategic thinking, if done now, could be the catalyst to drive your business forward in the post A-day world. Good Luck
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