The next step in wealth planning

“The importance of money flows from it being a link between the present and the future”John Maynard Keynes

Wealth Protect – why has it been conceived?

• Wealth planning is about helping clients achieve financial independence

• But there is a clear gap in the financial planning process

• Today’s wealth strategies help clients achieve their future goals

• But can fail if something happens to the client before this goal is achieved

• Traditional life insurance is not designed to solve this

• Something new is needed

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What’s wrong with this approach?

Cash flow model

• They go through a process that helps them understand where they are and where they want to be

• They set clear financial goals for items such as retirement and any shorter-term ambitions

• And adjust their saving to achieve their future goals

Pay as you go model

• They save as much as they can afford• They have some idea of an end goal but it is

less specific• As they can afford, they save more• Ultimately, they are trying to build toward an

“imagined” future

Gap in the process

• Whilst in both models, they will progress toward an intended outcome if they live• What happens to the other if one of them dies?• Shouldn’t this gap be dealt with as part of their overall financial plan?

but

How do people save?

or

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Client presentation

Journey to target income

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

0

100000

200000

300000

400000

500000

600000

700000

Position Day 1 Target outcome

Actual funds, made up of future contributions and investment growth

But what happens if one

of you die early?

Could the other still afford to make future

contributions?

Or would they end up without

enough?

Data based on FTSE All-Share Index 1984 to 2013, existing funds £50,000, regular contributions £500 a month increasing in stages to £850 per month

For adviser use only. Not to be shown to retail customers.

Client presentation

Protecting your plans

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

0

100000

200000

300000

400000

500000

600000

700000

Position Day 1 Target outcome

Ensures your future plans are

achieved whatever happens

Value for money - only ever pay for

what you need

Protects against any

market movements

Data based on FTSE All-Share Index 1984 to 2013, existing funds £50,000, regular contributions £500 a month Increasing in stages to £850 per month

Actual funds, made up of future contributions and investment growth

Shortfall filled by Wealth Protect

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Using Wealth Protect

Protect future payments and underpin current fund value

Client has £50,000 invested and is making £500 per month ongoing contributions.

Aged 40 now, plans to make payments to age 65

Target amount

Investment£50,000

Payments£150,000

Total£200,000

+ =

Protect future payments and growth and underpin current fund value

Client has £50,000 invested and is making £500 per month ongoing contributions. Aged 40 now, plans to make payments to age 65.

Future growth projected at 4.5%

Target amount

Investment£50,000

Payments£150,000

Growth£231,223

Total£431,223

• If they die, future payments (and anticipated growth) are pre-funded • Allows surviving partner to maintain the plan, or create a new plan with the funds

+ +

=

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Why traditional life insurance is notthe most suitable routeFinancial advisers tell us

The current protection solutions don’t directly meet the need. For example:

• Life insurance does not take account of the clients Investments

• And it is not easy to "flex" the life cover as clients wealth plans develop

• The process is also very separate from any wealth planning, making it harder to incorporate in their client meetings

• And can be complicated and lengthy, and so very different to the typical wealth planning process

• They don't want to be involved with commission paying products as this does not fit their business model

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Demonstration of system

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For adviser use only. Not to be shown to retail customers.

Using Wealth Protect

Ageas and Ageas Protect

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Ageas (UK) Limited; a leading provider of award-winning personal and commercial lines insurance and life protection in the UK.

Ageas distributes high-quality insurance through a range of channels including brokers, IFAs, intermediaries, affinity partners and online.

The company serves around nine million customers in the UK and has picked up numerous awards for consistent and high-quality customer service.

Ageas Protect insures almost 300,000 customers and has built a 9% share of the IFA protection market, as the sixth-largest IFA protection provider by volume.

What does a typical client look like?

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• Age 35 -55

• Has dependants

• In reasonable health

• Started to save on the platform

• Has some sort of future goal

• Significant gap between current wealth and this future aspiration

• Interested in making sure loved ones are provided for if something happens to them

• Already covered their basic financial needs (life insurance on mortgage etc.)

For adviser use only. Not to be shown to retail customers.

Approach

Identify suitable customers

• Age• Making

regular contributions

• Gap between current platform assets and desired target outcome

In client discussion

• Identify relevant future goal

• Discuss impact of death of one or other partner on this goal

• Explore whether they already have protection

Agree target amount

• Based on discussion, agree an amount required

• Discuss which wrappers link to this amount

• Agree timescale over which insurance required

Complete application

• Decide whether you or client will complete

• Agree fee basis and fees

• Complete direct debit mandate

Produce a promotional campaign aimed at suitable existing customers

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Case study

Situation: David is 40, married with two children under 18 and has assets on platform worth £150,000.

His financial adviser has identified he needs to save £800,000 for his retirement to provide circa £40,000 annual income from an annuity (based on current rates). He is making regular contributions of £600 per month.

However, if he had died last night his financial adviser has calculated he would need to leave £650,000 to ensure his family could maintain their planned lifestyle.

Solution: David’s adviser recommends Wealth Protect to provide life insurance to bridge the gap between his fluctuating asset value and the £650,000 they agreed as the target amount needed for his family. The flexibility built into the plan means as his assets grow and the amount of insurance he needs varies, Wealth Protect will ensure his cover remains on track and he is only paying for the cover he needs.

For adviser use only. Not to be shown to retail customers.

Case study

Situation: Joanne is 45, a business woman and single parent, and has £98,000 on the platform which was part of her divorce settlement.

She hasn’t been able to pay regular contributions onto the platform as most of her income is being spent on daily expenditure. But she plans to return to full-time work and to start to make additional contributions. She is concerned that if she dies she should leave her children provided for. Her adviser has calculated that she would need £500,000 as a target amount, to be invested to provide income/ trust fund for the children until they finish university.

Solution: Joanne’s financial adviser recommends Wealth Protect with an initial sum assured of £400,000. The flexibility of the product also means it will automatically reflect any future regular contributions, and as her assets grow the insurance will reduce accordingly.

 

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Case study

Situation: Tony, a self-employed 48 year-old divorced taxi driver, has funds on the platform as savings for his retirement.

He pays in a lump sum at the end of the each year to grow his pension assets and so far he has £220,000 on the platform. As he is self-employed, he has no death-in-service cover. He would like to leave £600,000 on death as a target amount, to be split between his three children.

Solution: Tony’s financial adviser recommends Wealth Protect with an initial sum assured of £380,000. He sets this amount as a maximum sum assured as Tony doesn’t want the uncertainty of premiums increasing significantly on any occasion when there may be adverse market asset fluctuations. Tony feels this is sufficient as the sum assured is providing a nest egg for his children rather than covering a specific amount i.e. if covering a debt.

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Charges – applications and premiums

Adviser

A monthly adviser fee of up to 25% (to be discussed and agreed by both parties) of the monthly premium is built into the premium and is payable to the financial adviser.

We do not require a client signature to confirm these charges at application.

Ageas

A monthly premium calculated daily and charged monthly for the duration of the policy.

Premiums are based on age, health and the amount of cover required.

Minimum premium is £5 per month.

Platform

A hosting fee of 5% of the monthly premium is built into the premium and is payable to Nucleus.

The hosting fee is for the provision of the technology required to host this service.

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Benefits to the financial adviser

A simple online application process – it saves time and clients can complete the sensitive parts of their application in the privacy of their own home

Discovery – another reason to move assets onto a platform

Extending ongoing service – another part of the annual review

Diversification – widening the range of products you can advise on

Client retention – broadens relationship with client and ties in life insurance to platform-related advice

Flexible fees – you can opt to take an upfront fee and/or a trail fee (up to 25% of the monthly premium).

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Administration

Client and policy eligibility

Client• UK residents who are also Nucleus clients• Have assets on the platform and have a life insurance need• Aged between 18-69 (insurance cover expires on the

client’s 75 birthday)

Policy• Minimum term: 5 years• Minimum initial sum assured: £20,000• Policy limit: £5 million• Policy basis: single life

For adviser use only. Not to be shown to retail customers.

For adviser use only. Not to be shown to retail customers.

Managing the insurance

Setting the policy up• Client specifies the amount they would like as their future goal • They nominate the wrappers within their Nucleus portfolio to offset against this goal and the

difference is the policy sum assured• Insurance premiums are charged on this difference, meaning clients only ever pay for

the insurance they need• The premiums are collected by direct debit

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Client assessment

Height and weight Medical conditions

Occupation and social activities Lifestyle

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Premium collection

Premiums - what will we do?

We will collect a monthly premium in arrears by direct debit. This will be collected on the 1st of the month, or the first working day after that, until the date the policy ends.

Initially, we will collect two payments from the client after the first full month of insurance. This will cover the initial days in the first part month, and the first full month after that.

If at any time the value of the assets meets the target amount, we will continue to collect a minimum premium of £5 per month.

For adviser use only. Not to be shown to retail customers.

Missed premium and cancellation

What happens if the client wants to cancel?

A client has the right to cancel their policy within 30 days of receiving their insurance documents. At that point we will refund any money they may have paid.

If the client cancels after 30 days, the contract will end and no money will be paid back to them.

What happens if the client misses a premium?

If the client misses a premium, they have 15 days within which to make the payment. During this time the policy will still be active.

If the client fails to pay within 15 days, their insurance will be suspended and takenoff-risk.

The client has the option to reinstate the policy up to 60 days from the date of missing the monthly payment. If the client decides that they require cover again after this point, they will need to submit a new application.

For adviser use only. Not to be shown to retail customers.

Changing the sum assured – increasing insurance cover

Increase cover

• A client can increase their insurance cover at any time provided:• The client can show proof of increased investment• The sum assured does not increase by more than 10% of the initial sum

assured in any one year• And the total of all increases is the lower of 50% of the initial sum assured or

£250,000, up to a policy limit of £5m.

Example

This client would be able to, without any additional underwriting:• Increase their cover by up to £41,000 in any one year• And by £205,000 in total

Target amount £600,000

Initial value of wrappers £190,000

Initial sum assured £410,000

For adviser use only. Not to be shown to retail customers.

Product flexibility – example case

• Initial goal £406,405• Insurance gap of £356,405• Initial contribution £500 per

month• Start premium £19.27

At start

• Increase contribution to £550

• Goal increases to £428,972

• Next premium increases from £19.93 to £21.19

1st review (end of yr 2)

• Increases contribution to £732

• Goal increases to £489,286

• Next premium increases from £28.43 to £29.98

4th review (end yr 8)

This is an example of how the product may be included in a regular review with a client but does not contain current premium rates.

For adviser use only. Not to be shown to retail customers.

Changing the sum assured – reducing insurance cover

Reduce cover

• A client can reduce their target amount at any time• If a client withdraws assets from the platform, the target amount will reduce on a £

for £ basis. They can maintain the current target amount when assets are withdrawn if:

• The total of assets withdrawn is the lower of 10% of the initial sum assured• And £25,000

Example

This client would be able to withdraw assets worth up to £25,000 without having to reduce their target amount

Target amount £600,000

Initial value of wrappers £190,000

Initial sum assured £410,000

For adviser use only. Not to be shown to retail customers.

Product information

For adviser use only. Not to be shown to retail customers.

Wealth Protect v traditional product

Wealth Protect Traditional decreasing term product

Term Underwritten to age 75 Fixed at outset

Rates Guaranteed Guaranteed

Charging basis Age-related Level throughout

Sum assured Linked to platform assets (can rise and fall as needed)

Decreases by fixed amount through term

Future increases Formula allowing future increases without medical

evidence

Guaranteed insurability options

Medical underwriting Individually underwritten Individually underwritten

Financial underwriting Based on assets and future contributions

Individually underwritten

Payment for advice given Fee taken from monthly premium collected

Indemnity commission

Demonstrating suitability

Ageas Protect will help build some suitability paragraphs

They will focus on:

• How the insurance works

• Why the way the insurance operates is suitable for your client, for example they only pay for what they need and enhanced flexibility to cope with changing goals

• How the premium is calculated and collected

• Explains the added value benefit of access to Best Doctors which is included with Wealth Protect

For adviser use only. Not to be shown to retail customers.

For adviser use only. Not to be shown to retail customers.

Support from a selection of the world’s best doctors – as voted for by other doctors

• Your client can use it as soon as the policy goes on-risk

• Covers them, their children and their partner

• Can use it at any time while the policy is active, as many times as they need to

• Advice on their condition and treatment options, not just from any doctor, but from a selection of the best in the world

• Quickly, easily and free of charge

More than financial support

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Cost example: Dave

Male, age 40, date of birth July 30th 1974, existing assets of £150,000, target amount £800,000, initial sum assured of £650,000, contributing £600 per month.

Year Premium Average sum assured at end of year (assuming 4.5% return on assets)

Year 1 £35.12* £635,876

Year 5 £43.21* £572,730

Year 10 £48.38* £476,437

* As at August 2014

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Cost example: Joanne

Female, age 45, date of birth July 30th 1969, assets of £98,000, target amount £500,000, initial sum assured of £402,000, contributing £500 per month

Year Premium Average sum assured at end of year (assuming 4.5% return on assets)

Year 1 £28.40* £391,445

Year 5 £37.30* £344,255

Year 10 £41.81* £272,295

* As at August 2014