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Featured video - Helping your clients navigate their way through the long-term care journey in later life

In the Q1 edition of our equity release webinar we explored the changing needs of customers and discussed how lifetime mortgages can help fund long-term care.

Georgina Oxton (GO)

Andrew Gething (AG)

GO: Good morning everyone and thanks for taking the time to join us on our webinar today; we really do appreciate it. My name's Georgina Oxton and I head up the Equity Release Sales team here at LV=. I'm also joined today by Andrew Gething from MorganAsh.

We have partnered with MorganAsh to provide additional support to our customers in later life, and Andrew will explain more about this partnership later. Before I go through the agenda for today I just wanted to cover a little bit of housekeeping.

You will all be on mute throughout today's webinar which means we won't be able to hear you. If you have questions about what you hear today, you can submit them using the chat function and we've allowed time at the end to answer as many questions as we can.

So, back to the agenda.

I will be covering the learning objectives of the webinar today followed by a little bit of context around how care funding has become such a crucial issue for many clients in later life. I'll then hand over to Andrew from MorganAsh who will introduce you to Care Navigator, explaining how the service can provide much needed support to your clients and more about the partnership between our two businesses.

Andrew will then hand back to me and I will be covering the market context and changing customer needs, together with a short overview of our lifetime mortgage proposition and the added value benefits we can offer your clients. We'll then draw everything together in a summary and have some time for questions at the end.

Okay, so displayed on the screen now are the learning objectives of today's webinar.

Firstly, to allow you to consider the changing client needs and how equity release could support their later life journey. Also to learn more about LV=’s partnership with MorganAsh. For you to learn more about how Care Navigator can benefit your clients who need help navigating their way through the care system and finally to demonstrate how we at LV= can add value to your equity release clients. And the last thing for me on this, obviously we've set learning objectives for this WebEx. We will be sending you all CPD certificates within the next two weeks.

I'm sure you will have spoken to many clients and their families who are concerned about the rising cost of care. According to an article in The Telegraph published in May 2018 a year in a care home can easily cost more than £50,000. There are a number of factors which can negatively impact an individual's ability to fund care and have a financially secure retirement - pension income may be less than hoped for; people are living longer than ever. Many older clients may be providing support for both their children and their parents.

The so-called sandwich generation and many older clients may be asset rich, yet cash poor. For many of these people their home may well be their biggest asset.

So you can see from this slide that social and financial trends mean that older age groups have now become the biggest owners of property in the UK. This changing distribution of property wealth has been partly fuelled by the UK's ageing population. Another related factor has been the growing concentration of home ownership amongst older households. According to the ONS the number of over 65s has increased by 2.1million since 2008, half of the total 4.2 million rise in the entire population.

Nearly two in five UK adults are now aged 55+ compared to a third in 2000. And according to the Silver Spenders Report published by Legal & General in February 2018, the potential to release this asset can benefit individuals by helping them to be self-sufficient in later life and also support the wider economy. With every one pound of equity released, it's estimated to add two pounds and 34 pence to gross UK output.

And in June 2019 the Equity Release Council published a report on the changing role of property in later life financial plans and they found that 72% of the over 45 homeowners want to live in their current property for as long as they can with the home for life mentality more visible in later life. And homeowners aged 45+ are more likely to see property as financially important rather than emotionally important.

So as you can see housing wealth has a critical part to play in providing financial security in later life.

So I'm now going to hand over to Andrew from MorganAsh.

AG: Thank you Georgina and morning all, thanks for joining us. So it's great to be working with LV= and it's incredibly timely that we have this Care Navigator launch with you guys today. I want to take you through what is Care Navigator and the challenge for care. So the first thing is you know this is prior to any virus issues. We all know that people are living longer.

Care needs are increasing. And then also families a lot of families are living remotely. So it's not unusual to have a mum living up in Yorkshire and kids living down in London. And that puts great strain on when families need to find care.

There are care facilities also provided by the NHS and social services. But navigating a way through that and understanding it is difficult, especially when mum or dad may be in a difficult situation. It's distressing on a personal level too. And you know, understandably, you only do it once or maybe twice. So the whole problem of finding care can suddenly be dropped on a family at a distressing time. And that can be hugely distressing for everyone.

For anyone who's done it you know they all come out to say "yes, it's a nightmare". There's a gap between social services and the NHS and trying to bridge that and understand it, can be very difficult. Especially at the present time; people are self-isolating and they're going to be even more worried I think. Also, if we were talking to sort of 50 and 60 year olds and they have elderly parents, looking after mum and dad it is a really high priority in our sort of Maslow's Hierarchy of Needs.

Our parents are typically the most important thing to us and we look after them more necessarily ourselves. So, obviously with the present problem with the virus (Coronavirus) that's going to put extra stress on families. We don't want necessarily people going and visiting care homes, care homes are under a lot of stress and being prepared is a big part of the service.

So let's look at what Care Navigator is.

So Care Navigator is a concierge type service. It's about first of all understanding the needs and then helping people find suitable care and that care can be in a care home or it can be at home so-called domiciliary care. It's an unbiased assessment and a bit like in finance where we do the fact find first and then we do the recommendation, and data fact find is a sort of the boring part, but is actually the most important – it’s absolutely the same here.

We need to understand the needs of the individual and what their likely outcomes are going to be. So the first thing we do is what we call the care assessment report which we assess their needs and it’s all done over the phone. All assessments are done by qualified nurses. We do that and then the second stage is then to go out and make a recommendation. Some of that can involve a bit of what we call tough love and that may be to the family, maybe to all or the person that needs care as well.

And this can be some quite difficult conversations. As part of that will also help navigate all the way through NHS and social services which is all the red tape and the confusion, and it's totally independent. So we don't take commission for many care homes of anything of that nature. Our focus is purely on the people on who are needing care. We also give quite a lot of support to the whole family during that time because that can be very distressing for them and indeed we'll talk through that in one of the case studies. It's a phone based service primarily.

We do sometimes send people out but primarily it is phone based.

At the moment most people don't know that these sort of service exist, so they just stumble into either going to Age UK or something like that and getting some information, but they don't know that they can get help. So from that point of view it's great to have that into the wider market. I should say it's not an emergency service.

So if there aren't emergencies particularly in the present virus situation then hospitals and NHS would be the better place to go.

So how does that support advisors?

In our view looking after mum and dad and looking after the emotional side is often the most important aspect and care and worrying about that is of high concern and a lot of cases money is secondary to pay for that care or it's secondary to pay for the house which will then enable each of you to look after yourselves. Care itself is frightening and most people don't know much about it. And indeed there are a lot of variable situations in the care world.

Also many care solutions that are care committees are trying to fill beds so they have financial advice to go with that. So you may find that there's other people involved. So, if you advisors can provide part of that care solution. Care Navigator we’re all medical, although we serve the financial sector we serve financial advisers. Indeed we are FCA regulated. We actually do not do any advice and we just don't know much about money.

It's all about care and all about people. So we'll never pinch your customers from that point of view. We will very much be helping you to help your customer. And if there’s an issue about affordability we'll be coming back to you as the advisor to say, you're the person who will help on the finance side. Also with regards to equity release of course come the end of the loan, if there’s going into care then we can help at that point.

So let's look at a couple of case studies.

So the first one Mark - not his real name. He was carer for his older mum. He lived up in the North and was offered a new job actually down in London and is worried about if he moved away, how would he then look after his mum. So he immediately started searching online for care homes and then got really confused. Fortunately his manager introduced him to us and then he came on to us. We assessed his mum's health. It became pretty clear to us that she didn't have to go into care homes she could stay at home.

So we arranged for an occupational therapist to visit and do a full assessment at home. Once we've done that then came up with a recommendation on the adaptations and those were put in place. Mark's comment went from start to finish the whole journey did nothing but brilliant.

AG (reading a quote): Prior to talking to the team I was stressing and overthinking everything about my mother going to home and how she'd cope once I'd moved away. Once I spoke to a nurse, I felt like a weight had been lifted off my shoulders. I didn't realise how stressful finding the right care would be. The nurse was great and I'd highly recommend the service if you’re looking to find the care for mother or father.

Let's move on to another case study. I’m normally well up when I talk through this one because I did speak to this lady myself.

So a lot of what we're doing is helping people through that emotional time so this is a story that doesn't end necessarily well.

And the person didn't end up going to care but it does show a great amount of empathy for what it's all about.

I'll read her story.

AG (reading a quote): I received a flyer from LV= offering a support. I needed help in caring for my very sick husband John, who had been discharged from hospital at the end of February. My husband was quite poorly with multiple conditions and about to be discharged from hospital. The lady on the LV= helpline offered me the Care Navigator service. I received a phone call from Kay of MorganAsh one of the lovely nurses.

Together we discussed all our John's medical conditions, my health conditions and the impact it was having on me and explored different types of care in the home for when John returned from hospital. The doctor at the hospital advised me to look for a Nursing Home for him. I was dreading the thought of doing this. Once again Kay reassured me and told me they would do the research for me. Kay is wonderful, a gentle, kind, professional, empathetic lady. Unfortunately John's journey ended there in the hospital. In July, the day after our 45th wedding anniversary John passed away peacefully with me and my daughter by his side.

I'm so grateful to MorganAsh for their support through a very difficult time for my family, especially Kay. I felt they were there for me, by my side. Thank you both so much, your help and kindness will never be forgotten. LV= agreed to pay for John's funeral, which I was otherwise funding difficult to afford. Thank you to LV=, particularly Samantha for introducing me to MorganAsh. Your company gave me a wonderful service. I'll never forget, I didn't realise there was so much kindness in the world.

AG: That shows the whole emotional side which is the most important part we tend to talk about.

The actual service side and what we actually practically do and the next slide “service options” talks through that in a bit more detail which you'll certainly need when talking to people.

We break it down into several categories. And if you see the service option slide you'll see that. The fees on there are the full fee you get at any adviser who has worked with LV in any capacity and is entitled to a 10% discount. So let me just take you through each of those steps.

So the first part is the care need assessment. So a bit like the fact find we do for everyone and the care assessment report is the outcome of that. For some people they want to just take that if it's a relatively simple case. Now they may say well I know the care homes in my local area, I'll go and do that. So they can do that and that's perfectly fine and that works very well.

Further on from that then we'll liaise with clinician; family; we will arrange discharge arrangements and we can arrange interim care. But essentially you pay more for those that you see with the platinum service and then we do the Full Care recommendation report. So the full doing everything then is what we call the platinum service and that's the most expensive but there's the three options there. And customers can choose, they can start with just the silver and then they can progress and upgrade if they want to later on and if advisers want to bundle them with a service with something else they're doing.

We're very happy to do that. Equally you can just recommend to us and we will charge the consumer directly. So, just to talk about what are other options in the market?

So there are many existing services out there. Also, the social services you can go on to charities Age UK is probably the best one and you can get information from that. They tend to be information only if people go on the Internet they will also be led onto care homes who will also add to financial advice.

There are also some very good local services but they tend to be local and lack scalability where we cover the whole of the UK.

So we're totally independent from that point of view. There's no commission. It's a straight handoff from that point of view so liability and all of that stuff is with us. We are ISO twenty seven thousand one and it's all about human empathy with a digital view. So we are sort of fintech with empathy which allows us to do these things at scale and cost effectively while providing empathy to that. In our view it's a great way to add value to your customers. Empathy and the way we feel is probably the hardest thing and one probably generally lacking in financial advice. Also just like to add a lot of people come to us at that time of need or pretty close to it. But we also and we'd love to do a lot more where we're planning on doing things in advance so we can help elderly parents.

Another case study.

She's 90 she's driving she lives at home, she's absolutely fine, she's quite frail, she's brilliant but her kids live away from home and she's slightly concerned. So the kids are slightly worried. In that case we've got all information should something happen and it will happen sometime over the next 10 years. Then we will help her we'll be on hand to pick her up and help because we'll know we have all her preferences, have all the details on file and will be able to help with that point and so we'd like to do more of that that. But now reality is a lot of people are just reactive from that point of view and I think that's all for me.

Back to Georgina.

(GO): Thanks Andrew. I don't think I'm alone in saying how relatable those case studies were and how much value I can see that the Care Navigator service can add on a daily basis.

I think the slide you may have in front of you may say that it's Chris talking to you now.

I'm sure you've detected it's not actually Chris, it’s me but just bear with me. We're now going to go through how LV can add real value to your equity release advice process.

So what you should see in front of you now is some reason for loan data.

So this is internal LV= data that just shows what our customers are doing with the equity that they’ve released.

So a common misconception about equity release is that it's used as an option of last resort or by clients who are struggling financially. Whilst that is accurate for some, there are very many other reasons why customers might choose to release equity. Their home will be the biggest asset often that they have. So not considering that in the round with their other assets at retirement, you know could be a missed opportunity. So looking at the data here you can see 31% nearly a third of our customers are clearing mortgages or debts with equity release.

That's definitely increased year on year over the last two or three years and what we are seeing growing rapidly is gifting to family. Currently at 16%, actually that has doubled in the last three years and of course a secondary benefit of gifting to family perhaps to help them onto that the property ladder or help them out of our financial situation as there may be some inheritance tax benefits as well medical treatment and providing care.

Total 4% of our releases but we would certainly expect that to increase with an ageing population combined with you know increasing longevity and obviously that the confusion that exists around how to navigate the care system and the care options.

So we're moving on now just to talk a little bit about the LV= Lifetime Mortgage proposition.

So what you should see in front of you now is the Lump Sum product features. So the Lump Sum plan is our flagship product at present and is primarily there to release a one off lump sum to customers. Rates start at 2.75% and go up to 3.05% a year currently depending on age and LTV.

It is a conventional roll-up mortgage and additional borrowing may be available beyond that one off lump sum but that is non-contractual. Interest rate is fixed for life and our maximum loan is now £1.5 million. And interestingly for those larger loans we are not quoting higher interest rates for that business. It is our standard interest rate across all of our loans. We're currently offering a zero application fee for loans of £50,000 and above, say for loans below that the application fee would be £595.

So that offer is currently in place for up to the 30th of April with the application deadline being the 14th of May.

So other product criteria - the minimum property value currently £70,000 with no maximum property value. Minimum loan which is pretty similar across the market actually is 10,000. And our starting age for a lifetime mortgage at LV is 60 maximum age 95.

Moving on to the Flexible Lifetime Mortgage.

So it is uniquely the only lifetime mortgage in the market with a fully guaranteed drawdown reserve. And that guarantee runs 15 years from the completion of the initial loan. As you might expect there is a cost associated with that guarantee and our interest rate is currently 5.11%. Again it is a roll-up mortgage interest rate is fixed for each tranche of the loan said the initial loan will be fixed and then any subsequent drawdowns will be fixed.

Maximum loan on this plan is a £1 million rather than £1.5 million. We are refreshing our Flexible Lifetime Mortgage and we hope to be coming to market with a new and improved drawdown mortgage in the summer. But currently minimum property value like the lump sum plan a £70,000 minimum initial loan £10,000 minimum further drawdown is £2,000 per drawdown.

And again minimum and maximum ages are the same. So please do watch this space because there's exciting things to come with our drawdown mortgage.

So just wanted to highlight early repayment charges we led the way here, we were the first equity release lender to have fixed and defined early repayment charges which we believe creates transparency and certainty for your clients. The market has moved alongside us now and there are many other lifetime mortgage contracts out there with a fixed ERC structure.

Just to go through that in a little bit more detail. Year 0-5, our early repayment charge is 5% of the initial amount borrowed. And importantly that does not include accrued interest. So where you may see other lenders with arguably a similar percentage early repayment charge, do check the small print for some of those will include accrued interest and that will cost your clients more in the long run. For year 6 to 10, our early repayment charge drops to 3% of the initial amount borrowed and again doesn't include accrued interest.

So what you hopefully can see here with this early repayment charge structure is we are providing guarantees and peace of mind compared to those variable gilt linked to our sales which could be particularly powerful for customers who may need care in the future. And one last point on here. So after 10 years there is no early repayment charge at all. And importantly for joint mortgages we offer an ERC free window which runs for three years from first death or move into long term care.

So that allows customers who have been bereaved or who have lost a spouse or partner into permanent residential care just some breathing space to think about their options and not have to incur an early repayment charge should they wish to fully repay.

So what you should see now is a slide covering our 10% ERC free repayment option. Now this currently applies only on our Lump Sum+ lifetime mortgage and we've recently made some really exciting changes to this option to allow customers to have more flexible repayments so once the plan has been running for twelve months a client can choose to make up to six partial repayments totalling up to 10% of the original loan advance completely free of early repayment charges and what we've also done is in decreased the minimum partial repayment amount from a £1000 down to £250.

So we've increased the number of repayments that will allow to decrease the minimum amount so offering customers far more flexible options there.

So I just wanted to dwell a little bit on our added value benefits. So things that LV can offer your clients that no other lender can. So first of all we have LV= Doctor Services. So this gives you your customers immediate access to more than 5000 UK medical professionals all registered with the GMC. So this is accessible via an app available on smartphones. Or there is a telephone service and we're partnered with a company called Square Health.

Again that is a non-contractual service but it is completely free of charge.

So any of your clients who have taken out any of our lifetime mortgages or indeed retirement products can make use of each services available, each service available through this value added benefit. So because it's non-contractual it can be changed or removed any time. And as I say we are partnering with Square Health.

The box at the bottom there just highlights that normally private GP services can cost around £20 a month. Second Opinion services alone can average to around £700.

So customers could save around a £1000 per annum through this free benefit that we're offering.

So we will go into the component parts of the Doctors Services offering in bit more detail. There's a remote GP service which offers telephone consultations within a fixed window. There are certain service levels attached to that but that's really allowing particularly if you think about the demographic for equity release customers that maybe cannot drive anymore can actually have access to a GP remotely in their home. There's also remote physiotherapy consultations up to five free sessions per year.

There's also some mental health counselling services as well again limited to five free sessions a year private prescription services. There's also a second opinion service and also discounted health MOTs. So all of those things there is obviously a cost for the health MOT, but it is discounted if you're an LV= lifetime mortgage customer. But you know this is a non- contractual service that you're getting that you won't get anywhere else.

So just moving on to how else we can add value to your advice process.

What we hear from advisors a lot is that we're very easy to recommend because very many customers will have either had some kind of LV= product at some point during their life, perhaps it's home insurance, pet insurance, car insurance or even one of our original funeral plans. So there is a certain amount of familiarity and trust there already with the LV= brand. However there are other key areas where we can support your advice and ultimately help you deliver better customer outcomes.

So my team in Hitchin we have a dedicated and knowledgeable desk there to provide you with any kind of technical product support and also case consulting support. So I'm sure you'll all be aware you would often get one of those very strange cases on your desk where perhaps the property might not fit anybody's criteria or the particular client's circumstance may be unusual something that you haven't experienced before. What my team could do for you is to support you and liaise with our underwriters and our new business teams to see if we can find a solution for those unique cases.

And in terms of pricing I'm sure you will have experienced unprecedented numbers of rate adjustments in the market in the last year or so. We're seeing huge amounts of rate adjustments features are changing as well. And we work very closely with our Pricing and our Proposition teams to make sure that the information that we're providing you allows you really to support your customers whatever their needs. One thing we are extremely proud to say is that we are the Most Trusted Life Insurance Provider as voted by Moneywise for seven years now in a row.

If you need any more information about our proposition how we can support you supporting your clients, there is a web link on this particular slide and if you'd like more information about Care Navigator specifically, again there is a web link there. We have got a dedicated landing page which will cover some of the information and just really help you understand what this proposition is and how you could support your customers better. And obviously if you've got any new inquiries, anything that you'd like to speak about in terms of specific cases as ever you know that you can speak to my team or email my team at any time and we'll be delighted to help.

So we're now at the point where we delivered the vast majority of our WebEx content. I just wanted to summarise what we've walked through today in terms of the learning objectives that we have displayed at the start.

I introduced you to a little bit of context around the later life market and why care funding is really high on clients agendas. I talked a little bit about the changing role of property in later life financial plans and we then had a great session from Andrew talking about the partnership between LV= and MorganAsh and how Care Navigator can really help you to support clients through what can be a very difficult and distressing time.

We gave you some information around the changing context to intergenerational support, reasons for loan and customer needs and I’ve then whizzed through our current lifetime mortgage proposition. The key parts of that, I think the most important thing for me was the value added services that we talked about at the end. We're so excited to be able to partner with MorganAsh and offer this Care Navigator system. And it's really a very logical step for us to build on our journey of a value added proposition following the launch of Doctor Services.

Thank you very much for listening today. And we're now going to set up a short pause and we will go on to mute while we have a look at the questions that we’ve had submitted. So just bear with us for a couple of moments.

Okay. Thanks ever so much for your patience. And the first question that we've had is - Will this presentation be available for us to review at late today?

Answer: Yes absolutely. You will receive an email with the WebEx recording within a week from today. So you'll be able to save that presentation. You'll be able to listen to this content again at your leisure.

We have a couple of questions for Andrew regarding the Care Navigator - If a client starts on the silver package but later needs either the gold or the platinum option, do you just charge the difference? How does that work?

Answer: Yes absolutely. So it's just the difference, so it's quite common for people to start on the basis of silver and then upgrade later on.

GO: And that's a relatively simple process to do?

AG: Yes. So I think one of the two case studies demonstrated there's actually a huge variety in what we do and no two cases are the same. So the most difficult first thing actually is to predict what the cost is going to be so the actual know the silver gold and platinum packages all helped to set expectations. But in reality everyone is different. So it's a good idea. Let's say for example the first case study whether there's an occupational therapist came round and actually we know that that was done and actually it's never a problem when we speak to people when they get involved and what the fees are and we adjusted greatly from that point of view.

GO: So it sounds like it really is truly customised experience for customers.

AG: Yes. We employ all nurses and I couldn't stop them being patient focused if I tried.

GO: Okay. Fantastic. There is another question for you Andrew which is which level of care did the second case study used?

AG: So it was actually that platinum one and we did actually an awful lot of work finding because we thought the gentleman's going to go into a care home and we did locate that and find options. So he did an awful lot of work finding out that and looking at actually that work you know obviously what wasn't needed. So the answer was yes, it was the platinum from that quantity. And it's another great example of that it's not technically what we do. It's about the empathy from that point of view. So even though you know you look at it, go well it's a disastrous outcome actually from the customer's point of view they said that we really appreciated what we did.

GO: Okay great. Thanks. So we do have some other questions which I can pick up.

GO: The first one - Is LV= Doctor Services free of charge aside from the discounted health MOT, it is completely free of charge and if you go online using the web link on one of those final slide you'll be able to see far more detail about the component parts and how that all works, but yes we are bearing the cost of that aside from the discounted health MOT.

I've got another question here about would we consider age restricted properties for an example an over 60s development where they're looking for funds to pay for domiciliary care. So the answer to that currently is yes as long as the development is more than three years old. So we currently can't lend on a brand new age restricted property there are also some limits around the lease term the service charges and any kind of sinking fund again all of that information is in our lending policy which you'll find online.

So just to recap we can lend on age restricted property but only if they meet our criteria and they were built more than three years ago. And the reason for that as a bit of background is that our experience has shown us that the value of age restricted property drops significantly in the early years. Customers are often buying those at a premium with white goods. So we have had to unfortunately take the decision that we will only land on developments that are three years old or more.

I've also had a question about the 10 percent partial repayment option. It is six repayments per year?

So we were until a month ago at one repayment per year and that has now gone up to 6.

So that gives customers a huge amount of additional flexibility.

And as I said the minimum repayment has now dropped to £250.

I've got another question here about whether a client has to have an LV= plan or a mortgage to be able to access Care Navigator. So the answer to that is - no. So you can access Care Navigator via our website.

Perhaps I can hand that over to Andrew.

AG: As long as you have done some work with LV then they qualify for the 10 percent discount.

GO: Fantastic. So yes really important point. You know actually when you look at the costs that that the example costs that Andrew displayed on his slide they really struck me as extremely good value for money and if you then apply a 10% discount on to that as a result of having worked with LV= that really is providing great support at a very competitive price for customers.

I've got another question here about is further borrowing available on our products. So if I take lump sum first. Yes. Absolutely is. It is non contractual though. So the lump sum lifetime mortgage is designed primarily to provide that one off cash injection for a customer. But if their circumstances change for whatever reason they can apply for additional borrowing. Now we will at the point at which they apply assess how much they owe on their existing lifetime mortgage.

We will look at the value of their property and their current age and look to see whether there's any headroom to advance any further funds.

But it's important to say that it is non contractual. So we don't necessarily have to agree to additional borrowing. Now if I look at the flexible lifetime mortgage I mentioned the 15 year fully guaranteed reserve.

So within that 15 year period the customer can take any withdrawals within up to. That's agreed reserve once that reserve has been fully utilized. We are then in a situation just like we are one lump sum where we could consider non contractual further borrowing. But there are no guarantees that we would make that money available. Okay. So that's got us through the vast majority of the questions. So thank you very much for your active participation.

What we will do is pick up any other questions that people have submitted directly with them after the WebEx and just a quick reminder your CPD certificates will be wending their way to you within the next two weeks. So thanks ever so much for your participation today. Hope you found it useful. We look forward to speaking to you again see

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Introduction to Business Protection - Webinar

Good morning everybody. Thank you ever so much for dialling in today. I hope it's as sunny where you are as it is here today in Bournemouth. So today's session as Jo’s already mentioned it is kind of an introduction to business protection. We're not going to talk about any technical aspects of business protection, like setting up plans or tax treatments. We're going to talk broadly about the market, market demographics, and some ideas around communicating the need for business protection to potential clients and raising their awareness.

If you do want further sessions on the technical aspects of business protection, please don't hesitate to get in touch with me directly or through your account manager. And we can arrange face to face sessions or we can do follow up remote sessions like today, where we tackle specific business protection technical subjects. So, I think it's a really good idea to start with a kind of high level basic reminder on what business protection is, and make sure that we're all coming from the same place and starting from the same point.

Now I think we have an understandable tendency as advisers and as life companies, to over complicate business protection. I mean absolutely there is a level of complexity to it that we sometimes don't come across on the domestic or personal side. But nevertheless, business protection follows the exact same basic tenant of personal protection.

When we go out and see a family, we identify three or four need areas, and we use insurance, VAT products, life insurance products, for us to be able to address those need areas. So, for instance with a family, we might look to protect a mortgage, we might look to protect an income, we might look to protect a lifestyle in the event of the main or secondary breadwinner passing away or suffering an earlier critical illness. And business protection, at a super high level is exactly the same.

We identify need areas and then we use life insurance products to address those needs areas. With business protection, it's really easy to specify the need areas. We're only ever going to look at three things. Ownership, profit and debt. No matter how complex the business you're dealing with is, no matter how complicated the ownership structure of that particular company might be. You're only ever going to be protecting one of these three things. Ownership, profit and debt. When it comes to ownership of course, we want to ensure that in the event of one of the business owners passing away, the funds are available for the surviving business owners to purchase the deceased's shares from his or her estate. We want the business to be solely owned by the surviving business owners, the people who have got the best chance of ensuring its continued success. And we want the deceased's family to be treated equitably and transparently.

Shareholder protection, partnership protection, company share buyback are all different ways of ensuring we fulfil that ownership protection. And then we've got profit or debt, which of course both come under really the key person banner. We're going to help the business owner identify a key person. For profit protection purposes we're going to help the business owner and put a value on that individual. And for debt protection purposes we're simply going to total up the level of cover that the company has, and in the event of that key individual passing away or suffering an earlier critical illness, the business has the funds to replace the profit that individual would have generated or pay off any debt they may have.

One of the ways I like to think about key person cover, and sometimes explain it to business owners if I'm out doing customer facing work is I talk about breathing space. In the event of a key person passing away, key person cover ensures that the business has got the funds available to make the right choice for its future success. Without the various stakeholders breathing down their neck, putting unwarranted pressure on them and leading to a kind of short term thinking that may not be in the company's best interest. It buys you breathing space. Interesting thing about key person cover, I'll mention it now because I'll probably forget to if I don't, is that we often think about key person cover as being for employees only, or somebody would have to be working for the business and that's simply not the case. A key person can legitimately be an owner of the business of course, an employee of the business of course, but also a third party, such as a contractor or freelancer. Your business may be wholly reliant on the work that a contractor or freelancer does for you. Even though there's no contract of employment, they are still a key person to your business and there is still insurable interest there.

I've got death-in-service on the screen because that obviously leads us onto relevant life cover. Whilst not strictly a business protection product, it's really a great little product for providing single life/death-in-service cover. And it's certainly a really interesting product to enable you to start a business protection conversation with a potential client. It provides personal cover as you all know that sponsored by the employer, which when you implement it can allow you to have a deeper conversation about business protection products with the client in question. So ownership, profit, debt. Then kind of on the other side relevant life cover, relevant life plans, a single death-in-service product.

Let me give you some facts and figures about the business protection market in the UK. It's worth about £60 million worth of new business premiums per year. The average case size tends to be 3.5-4 times the size of a typical personal protection case. So the average annual premium for a personal domestic protection case in the UK is about £350. The average annual premium for a business protection case is about £1100. And typically life insurance experience suggests, business protection cases are significantly more persistent than domestic protection cases. They stay on the books an awful lot longer. If you're not currently writing business protection or maybe you don't have a client bank that supports business protection, you’re going to have to ask yourself, is it worth the time, the effort, the energy of going out and finding the clients or introducing a new product to existing clients? And I think the simple answer with business protection is yes it is. The Case size is typically 3.5-4 times the size. Business protection is an area where your skills, experience and knowledge is appropriately rewarded.

Something else that's worth mentioning as well. I think, and I know I'm not alone in thinking this, is that business protection has a true social purpose in terms of that kind of hierarchy of protection. I feel that business protection is significantly undervalued. Simply because if we go into a business and we put an appropriate business protection/solution in place for them, whether that key person cover or shareholder protection is ever used, ever claimed upon. We're not just protecting the livelihoods of the people who own that business. We're protecting the livelihoods of those who work for that business. When we go out and look after a family, we protect one family. When we protect the business, we protect everybody who works for that business.

Obviously being a business protection manager, this is my bread and butter and I'm very, very biased. But I believe quite strongly that business protection is undervalued and undersold in the UK. It certainly doesn't get enough coverage or the requirement for it doesn’t get highlighted enough.

So, enough of my preaching. I think it's a really good idea, if we briefly touch on the different types of trading entities that we're going to come across in the UK. Firstly it's worth having an understanding of your marketplace and the terminology. When a client says that they're a partner in a partnership, as opposed to a shareholder in a limited company, it's worth having a broad understanding of what they're saying. But it also can sometimes dictate the way in which we set the policies up. And if you do want me to come out and talk about the technical stuff I'll be able to demonstrate that.

So, there are lots of other trading entities than the four we've got on the screen at the moment. However broadly speaking, for business protection purposes, these are the four different types of trading entity you’re going to deal with.

Sole traders - we don't talk that much about sole traders when it comes to business protection. And I'll talk about them a little bit later on in the presentation. But they're worth mentioning here, because they are the most populous trading entity in the UK. There's about three and a half million sole traders. They are the simplest form of trading entity. There is no separate entity from the individual. And the individual takes all personal responsibility for the obligations that are accrued, during their day to day trading activities. You can sometimes identify a sole trader, where the trading entity name will be traded. There will be a T/A trading hours. Any debt is accrued through the day to day trading, and from any contractual obligations from day to day trading. As I say the full personal obligation of the individual is required. Sole traders can have employees, and those employees will typically be full PAYE employees with all the rights that any other employee would have. Around about 13% of sole traders in the UK have PAYE employees.

We normally think of sole traders as relatively simple small operations. As they start to build a bit of momentum and grow, they inevitably develop into limited companies or something similar. If you do a little bit of digging through the Office of National Statistics, there’s some government data that comes out on businesses in the UK. There are some really complex operations out there that still trade as sole traders. And to give you some tangible evidence on that, the latest data from the government highlights that there are over 200 sole traders in the UK that employ more than 100 people each.

So while sole traders will typically be very simplistic operations that often consist of just one individual. You can and will come across more complex ones that employ a lot of people. From sole traders we move on to look at partnerships. Partnerships are relationships that exist when two or more individuals come together with a view to profit. Just like sole traders, there's no separate legal entity. So the partners will be personally liable for the obligations that accrued during day to day trading.

The interesting thing about partnerships is unless there's a separate partnership and that state's different, they will be governed by the Partnership Act 1890. The Partnership Act 1890 established joint and several liabilities. Which means broadly speaking, the partners can be held accountable for each other's relevant misdeeds.

A really interesting conversation you can have if you're dealing with partnerships is just to make sure that they understand the nature of their relationship to each other. If they do, that's great. They've made a considered decision to trade in that matter. If they don't, suggest that they go out and find out about the nature of their relationships and maybe take some guidance from their solicitor or other legal counsel. They can find out about the nature of their relationship with each other and make an informed decision about whether that's the right way for them to continue.

From partnerships we move on to LLPs. Probably the most recent type of trading entity. I think they've been around for about 15 years now. There's about 400,000 LLPs in the UK. They are a separate legal entity to that of their owners. The owners of limited liability partnerships are known as members, that you will refer to as partners.

There is no joint and several liability with LLP. That is, one member cannot be held accountable for the relevant misdeeds of another member. Which is why the LLP structure is favoured by accountancy practices, legal practices, and other forms of advice practitioners. Because if one of the members or one of the partners is accused of misrepresentation, mis-selling, poor advice, so on and so forth. The other members and the body corporate are protected from that. For our purposes LLPs have a separate legal identity. That means the body corporate, the LLP itself, can own property. Which means of course it can own a life insurance policy. So for instance in the event of key person. If you’re implementing key person cover for an LLP, the LLP itself takes out the policy of the life of another basis of the key person.

And then finally we've got limited companies. I won't waste too much of your time explaining limited companies, as I'm sure you're all relatively familiar with them. They tend to be the standard go to method of trading in the UK. They’re owned by shareholders, and managed by directors. For many of the businesses will deal with the owners and the managers, will be the same people who had shareholding directors. Like I say there are lots of other different trading styles that are used in the UK, but more broadly speaking anything other than what we see on the screen would typically have a separate legal identity to that of its owners, and can be treated in much the similar ways as a limited company, when it comes to setting up life insurance business protection cover. If you have any queries about the legal entity you're dealing with or how to set up policies. Please don't hesitate to get in touch with myself, your account manager at LV=, or many of the other life insurance companies have business protection specialists who will be able to guide you.

So as I said we're going to talk about some of the demographics of businesses in the UK. Because I really think it's worth highlighting how susceptible to significant damage these businesses are when it comes to the loss of a key person or a business owner. And one of the things we're typically going to have to do when we sit down with the business is to help the business owner realise the points of weakness in their human capital. And that's really important. So, if you were just to watch the news at 10:00am and look at the front page of the press, you'd get this impression that our economy is dominated by really big business. You know the kinds of businesses that employ thousands and tens of thousands of people. And whenever they make a change in direction or commercial mission or whatever you want to call it, it has a big impact on the surrounding economy. But that's not true. As we can see from the slide that's on screen at the moment, the majority of businesses in the UK are small businesses. Our economy runs on the back of small businesses. 90% of all businesses in the UK, employ less than 10 people. And from a business protection perspective that's really interesting, because these businesses do not have the depth of talent that big businesses have.

And that's important. Let’s picture a business, let's say we picture an architect. That seems to be the example I always use. And it's started by two architects who over the first five, six, seven years of the businesses existence do really well. They start to build up a really good little practice. And eventually they employ an office manager and they employ a contract manager, purchasing managers. So on and so forth. Before you know you've got four or five employees, all of them in what we could turn support roles. Suddenly unfortunately one of the founding architects, one of the founding directors of the business passes away.

We may have lost half our income stream. We may have lost more, if that individual had unique knowledge upon which the existing contract couldn't be completed without. But of course, our overheads are going to remain pretty much the same. We're still going to have to pay the utility bills. We're still going to have to pay staff. As I say we may incur penalty charges through an inability to complete existing contracts.

In fact it's that level of susceptibility that we need to highlight to business owners while having those business protection conversations. And of course it goes without saying. The smaller the business, the more likely they are to suffer an existential shock at the loss of a business owner or indeed a key person.

Now the smaller businesses funnily enough, the less you can rely on job title to identify the true value of a key person. Setting sum assured for a key person can be really, really tricky. And there's various calculators out there you can use based on multiples of salary or multiples of contribution to profit times by the number of years it would take to recover. And they're all really great as a starting point. But the smaller a business is, the deeper the conversation you're going to have to have with the business owner to get to an appropriate value for that key person. Job Title does not denote full responsibility. And what I mean by that is the person in a really small business of for example less than 7 employees, the person who has the job title finance director, might also do a lot of the IT support off the side of his desk. That managing director may also fulfil a HR role. And in the event of that individual passing away, it's not just their primary function we're going to need to think about replacing.

We're also going to need to take into account all those secondary functions. Because the likelihood is, the small business is going to have to bring in contractors, freelancers, or pay a monthly subscription fee to an H.R. service. So on and so forth. And all that should be taken account of when setting up key person cover. Remember our goal here is to indemnify the business against the loss of that key person. We want to return that business to the state it was, into the position it was in prior to the loss of the key person.

If you do have any queries or questions about setting the sum assured for a key person, or want some suggestions about the conversation you should be having with the business owner to ensure you get to the right level of cover then please don't hesitate to pick up the phone and have a conversation with us. Or indeed as I always say, any of the other life insurance companies who I'm sure would be pleased to help you.

So I mean it's worth talking about business owners. The typical number of business owners a company in the UK has. For a lot of us, the starting point for business protection is shareholder protection, because people including business owners are rightly concerned about the way in which their family will be treated in the event of their death. So shareholder protection, partnership protection, company share buyback could be a really compelling conversation for many, many business owners.

You need to be able to clearly and concisely explain the need for ownership protection. Many of the shareholders and partners you're going to be dealing with when you introduce this topic of conversation, will already have an idea about what they want to happen to their shareholding and I guess subsequently that the business itself in the event of their death. However, the likelihood is they won't have discussed it with their co-shareholders. And it may not even be in the best interests of their family or in the best long term interests of the business. It is our job, unfortunately because nobody else - not the banks, not their accountants, not their solicitors - in my experience ever raised it. It is our job to highlight to them the potential flaws in their existing plans, and demonstrate the way in which shareholder protection arrangement might be more effective. First thing clearly we're going to have to do is make sure that the board, the owners of the business, understand what shareholder partnership protection does. So we're going to explain to them that the arrangement simply creates and funds a transparent market for the shares in the event of one of the shareholders passing away.

It insures that in the event of death, the deceased's estate received their pre-agreed value for their shares. And the surviving owners, shareholders and partners, have the money available to purchase the shares. One of the things that I have found really, really effective over the years, is to explain to the business owners the alternatives, to having a shareholder protection arrangements in place. Actually what's going to happen if we don't put an insurance back arrangement in place. Well the shares might pass to the deceased estate, and the attention is the spouse or son and daughter comes into the business and takes over the deceased's role. Typically, and there is tangible evidence of this which I'll talk about very briefly in a couple of slides time, the next of kin who's come in to take over the deceased role will be less experienced, less engaged, less knowledgeable. It sounds awful but less trusted, less respected than the deceased themselves. That has an immediate impact on the performance of the business, and can lead to dysfunctional behaviour amongst the board themselves.

Let's say the deceased estate, have no interest in coming in and taking over a role in the business and are more than happy to sell the deceased shares to the existing shareholders. Without an insurance back arrangement, the funds aren't there to purchase those shares. So we're assuming, the surviving shareholders are willing to, and able to raise the capital to purchase the deceased shareholding. Of course, we've got to agree on a price as well. Within a shareholder or partnership arrangement, the price will be agreed in advance.

Be it, fair market value or a stated agreed value. So we enter a period of negotiation where the deceased's estate quite clearly will want to receive as much money as they possibly can for the deceased's estate. And the surviving shareholders quite understandably as well will want to get the best bang for their buck in purchasing those shares. So we have got proper old conflict of interest there.

And don't forget. All this negotiation and uncertainty, is going to be going on and on. With the deceased estate are going through the loss of a loved one and the grieving process and the administrative process of closing off the personal estate. And the company, the surviving business owners are also going through a grieving process obviously, but trying to consider the future of the business and what they can do to ensure the business isn't overly impacted by the loss of that individual.

There are lots of other circumstances that can play out here. I used the term a few months ago, ‘dysfunctional behaviour’. Typically the death of a business owner does lead to dysfunctional behaviour. It doesn't take a particularly deep Google search to find case studies where upsets like the death of a business owner have led to some really, really difficult situations. So for instance we've come across a number of circumstances where rather than the surviving shareholders offering to buy the deceased shares from the estate, they simply open up a secondary business. And take all the customers, all the suppliers and all the employees with them. But cut the deceased shares, the deceased estate, out of that secondary business. Essentially, leaving a shell business and taking the day to day trading activities off to the new business, with which the deceased estate have no power, have no role in, have no ownership stake in.

We've also seen circumstances where we talk about majority and minority shareholders. Businesses have been sold out from underneath minority shareholders. We're limited in the time today, so I'm not going to go on too much about it. But there are an awful lot of circumstances that this kind of dysfunctional behaviour can lead to the uncertainty that follows the death of a business owner. This can place significant stress on the business and the business owners and it often leads to less than optimal outcomes.

So before I hand to back to back to Jo, I just want to talk briefly about sole proprietors and soul traders. We talked about sole traders right at the start of the presentation, there's about 3 million to 3.5 million of them in the UK. There's also about a million sole proprietors in the UK right now. What I mean by sole proprietors, are limited companies that are owned by one shareholder. Maybe many of you will come across freelancers of contractors who have personal services limited company, so we are including those in those statistics. Nevertheless there's a significant number of fully trading limited companies that are owned by one shareholder.

Now it's interesting when you talk to these sole traders and sole proprietors about business protection initially. You very often get this notion or this response I should say, that well actually it's not relevant for me because if I die the business dies, is a typical response. But of course we know that's not the case. The obligations that have been accrued through the day to day trading activity, be it sole trader or a limited company owned by one sole proprietor, will continue despite that individual passing away. And those obligations have to be served by somebody. So I want to talk you through very quickly, what happens when a sole proprietor dies or when a sole trader passes away because I think it's worth understanding these circumstances, so if you do get face as the sole proprietor or sole trader who tells you, ‘oh no this probably isn't relevant for me’. You can give them all the reasons why it is.

And sometimes for a sole proprietor or a sole trader it's simply a case of having some additional personal cover, but that's fine. It's not a problem until we've addressed the need and ensure that in the event of the proprietor or the sole trader passing away, the funds are there for the family to be able to do the right thing with minimal stress and pressure during a period of uncertainty, when the last thing they need is additional problems.

So, sole proprietor, this is a limited company don't forget that’s owned by one shareholder. That shareholder passes away. What happens? Well the company doesn't see. So maybe it's a limited company. It has a separate legal identity to that of its own. In the event that the shareholder passing away, the company continues as a new shareholder, the deceased next of kin has inherited the shares. They now own a business and are responsible for it. So what do they have to do?

Well, first thing their probably going to have to do is go and see the accountant. Because, we're going to have to close off the current accounting period and value the business. They'll then have to start a new accounting period. HMRC and Company House will need to be informed that the business has a new owner. Then at some point, the estate, the next of kin, the new business owner, is going have to make a decision. Do they keep this business going, or is there truly no way they can continue to run the business without the original shareholder and do they wind it up?

As you can imagine, both of those parts have the responsibilities and costs associated with them. Let's say they choose to wind up the business. For many people this will hopefully be a relatively simple task. But what if the company has employees who have been there for longer than three years I think it is. They'll need to make redundancy payments to those individuals. Do they have ongoing contracts that they need to buy themselves out of or face penalty clauses for long delivery? Does the business have a lease on a premises that they may need to sub-let or find a way to pay off the landlord, so they can come out of the lease? Does that property need to be returned to its original state before they exit? So on and so forth. That's a really high level brief list, but there are lots of costs associated with winding a business up.

It's worth mentioning actually, sorry to jump back to key person cover and that notion of profit or loss. It's worth mentioning actually, there is a third reason for putting key person cover in place and it is this. We truly may not be able to continue running this business without the nominated, the relevant key person. So we put key person cover in place to ensure that if that key person passes away the funds are available to wind up the business in a responsible manner.

Not to replace profit, it's not to replace loss. It's to wind the business up in a responsible manner, that is as stress free as it's possible for the people who are having to deal with this. Who will also be going through the grieving period following the loss of a loved one.

What about if we choose to keep the business going? Well the list of questions and responsibilities we now have to we now have to answer and or face, are pretty lengthy maybe even endless, right?

Do we have to replace the skills of the individual who passed away or can the next of kin replace them like for like? Do we have to go out to the labour market? Do we need to promote somebody from within the business to take up some of the responsibilities that the passing of the original owner of the business has created? You know, each individual business will have different challenges they have to face. But it boils down to this.

In the event of a sole proprietor of a limited company passing away, the business does not automatically disappear. At the very least there will be an administrative burden associated with winding that business up. There may be as I've just very quickly run through costs associated with winding the business. If the opportunity is there for the business to continue trading there will be costs associated with that.

When we speak to sole proprietors in this case, ask them what their plans are for the business in the event of them passing away. What will there family do with that business in the event of them passing away? And let's try and find the way we can use key person cover, because that's what we're talking about here. Ensuring the business has the right amount of money to facilitate those plans. So if we look at sole traders, remember we're talking about individuals who take full trading responsibility for the day to day obligations they've accrued through their trading activity.

There is no set for a business, it is the individual trading in their own name. The questions we're asking are broadly similar. If that individual passes away, will the deceased next of kin be able to quickly fulfil those obligations, close them off and wind up the trading activities? Or will they want to continue those trading activities because there is an opportunity for them to draw a livelihood from them. The main difference being between a sole trader and a sole proprietor is that in the event of the sole trader passing away the deceased's estate become personally liable for the day to day obligations that have been accrued through the trading activity.

And I'm sure I don't need to tell you that can lead to some significant difficulties. We're talking about financial obligations, contractual obligations, and employer obligations. Somebody who has no previous experience of running the trading activities in question can suddenly find themselves responsible for a whole lot of stuff they are very unfamiliar with. If you deal with sole traders, and I appreciate most of them will be very simple operations that will be easily wound up in the event that the sole trader passing away, don't hesitate to remind them that these obligations don't disappear on death. And part of a really strong financial planning process, will be addressing how those were dealt with in the event of their passing. Well firstly I need to apologise. I just realised I've overrun by about 15 minutes already so I'm really sorry about. I'm going to hand back to Jo in a moment, who's going to take you through some of the aspects of the LV=business protection proposition.

I really hope you found that an interesting 45 minutes. I know we haven't done the technical stuff, but hopefully that's given him some ideas about how you can approach existing and new clients with regards to business potential. Hopefully it's giving you some extra context for some of the business protection conversations you may be having. As I always say, don't just take my word for it. The other life insurance companies have business protection managers who may have slightly different opinions, may offer you different ideas for starting a business protection conversations.

We are always happy to come out and do face to face training sessions on business protection, or further webinars if that's more appropriate for you and your colleagues. Any questions at all, don't hesitate to get in touch with your account manager or with me directly. Thank you ever so much for your time today guys and now I'm going to hand you back to Jo.

Thank you Marcus. So built within our proposition, we have guaranteed increase options. I'm not going to read to you word for word as you can see them on the screen, but as you can see they are very flexible. Which in times of future changes such as an increase in revenue, or changes within the company, we're obviously very flexible. I don't know if any of you have seen any Cover articles recently this week. But it does highlight areas of what insurance providers are doing to make it easier to write business protections. So if you have not seen the article online then, I strongly suggest you get yourself on the cover website and pick that one up.

So again in the relevant life proposition we also have our guaranteed increase option. And again that can be anything from personal change through to an increase in salary. So for those of you who have not used LV= before, all of our business protection processing is completed on our online system pathway. It's really simple and easy to use.

What we have built within Fastway is the pre underwriting tool, that means you can underwrite your clients. You've got the same access as our underwriters, who will give you an instant decision and you can always come back and review and complete and change as necessary. We've also recently introduced online trusts, making it easier for you to put the policies into trust. Obviously, there’s no need for any direct signatures. If yourself or the client can complete the trust online, we will then check everything around and manage that process for you, keeping you up to date on where we are with the online signatures to come back to us.

So as standard will all our protection proposition we automatically include LV= doctor services. The first is a remote GP. Your client has access to a network of over 5,000 GP doctors and they get five consultations, per policyholder, per year. The beauty of having that option remotely as your client could use it from the comfort of their own home. They could be at their place of work or they could be on holiday abroad.

To go hand in hand with that we also offer a prescription service. So if treatments recommended, the GP can issue a prescription and that's faxed or e-mailed to the pharmacy of the client's choice.

We also offer a second opinion service with this feature, which is face to face. Your client can physically see the specialist in that field. There are no limits to when or how many times it's used. And unlike some providers we have no exclusions.

Also we're now offering remote physiotherapy so again your client gets five appointments a year. Any props that they may need are posted directly to your client and we're also now offering remote psychological support. So things like cognitive behavioural therapy. All about mental health support. And then on top of that we're also offering 25% discount offers on health MOTs.

So what does come as standard on our business protection proposition is the LV= business care. So we give your clients access to business lawyers and solicitors. They can get advice from general running of the business from employment law, it might be a contract, it could be health and safety. Perhaps you've got a sole trader and he's completed an extension. His clients paid him an agreed amount as a deposit with the balance due on the completion of the extension. Next day they've not paid your client, so where does he legally stand? What can he do? He's got all of that access all at no additional cost.

We also give your clients access to tax and VAT advice. It's all ex HMRC employees and all of the advice given is on the new and current legislation. So not only do we offer the business/legal support but your clients also do then get the access for personal support. Again whether that's through a lawyer or a solicitor, a councillor, a nurse, giving them that moving forward. And we’ve come to the end of the webinar, so thank you very much for your time today.

As I mentioned your account manager will be in contact with you, to make sure you get a copy of your CCD certificate. Thank you very much.

Key Person - webinar

Good morning everybody. Thank you ever so much for dialling in again. Today's session as you know is going to be about identifying and writing cover to key people. Hopefully it will last around 35 minutes or so. I did say that last week, but I overran by about 20 minutes. There's a little less content today, so hopefully we'll stick to time. If you've got any questions as we go along please feel free to ask them using the on-screen facility. If we don't get an opportunity to answer them during the session, your account manager will get in touch with you afterwards.

Also worth mentioning because we didn't cover it last time. If any of you have any questions after the session, feel free to get in touch. Or indeed I am available to come out and see any of you face to face and do further training sessions on that basis. So let's kick right on. Those of you who attended the session last week will recognise this slide. I tend to start all my business protection presentations with it, because I think it's a really good reminder of what we're doing. If we ignore the death-in-service, relevant life stuff for one second. Business protection only ever comes down to one of three things. Regardless of how complicated the case you're dealing with seems at first, regardless of how complex the legal structure of the business you're dealing with is, regardless of how diluted the ownership structure of the businesses is.

Business protection only ever comes down to one of three things. Ownership, profit and debt. Ownership, we're going to look at in more depth next week when we cover off shareholder and partnership protection, and the various ways we can make sure that if a business owner dies the funds are available for the deceased estate to sell their share of the business in an equitable and fair manner.

And today we're going to deal with profit and debt, key person cover. As you all know at a really high level key person cover is about buying businesses breathing space. It's about making sure that in the event of a key person passing away, the funds are available so that the profit that key individual would have generated is replaced or that any debts the business has, or I should say and/or any tax the business may have can be paid off.

What that means in practice is that the owners of the business can then make the right choices for the future of that business, without all those stakeholders breathing down there neck. And by stakeholders I guess I mean customers, employees, investors of all different description, private equity banks, so on and so forth who otherwise might be pressuring them into making the wrong decisions.

Key person cover just buys businesses breathing space after they've suffered the possibly existential shock of losing a key individual. So let's have a look at identifying key people, you know when you put these slides together you really do it with the best intentions. And it's only when you comes to review them and start presenting them really that you notice that what you're really doing is stating the obvious on the slide.

It should be fairly evident to most of us what a key person is right. It's somebody who if we were to suddenly lose them, it's going to impact the performance of the business significantly. There's some examples on the slide, you've got there are people who by job title might be key individuals to a particular business. There's kind of three golden rules when it comes to identifying key people, and if you stick to these you won't go far wrong in terms of your initial conversations with the business owner.

Firstly, and I'll tell you something else as well, they are all pretty obvious. Firstly the smaller the business, the greater the likelihood is that one of the business owners is going to be the key person. If that is the case, if it is the business owner who is the key person, one of the things you might want to include in your conversation is an acknowledgement that that business cannot continue without that key person/owner.

So the need for key person cover may slip, may move from that profit/debt perspective to having cover in place to ensure that if that individual does pass away the funds are available to wind the business up in a responsible manner. Making sure that the funds are available so that any employees can receive their appropriate redundancy payments. So that we can subcontract any commitments we can no longer fulfil. So that we can buy ourselves out of any leases. So, on and so forth.

Yes. A headline level profit and debt for each business is individual and the smaller the greater the likelihood is they cannot survive without a key person. So, we want to make sure that the funds are available to wind the business up in a responsible manner.

The second golden rule of identifying key people and we might talk about this one a bit more when it comes discussing sums assured, is that the smaller the business that you're dealing with is, the less relevant job title is. In small businesses job title does not dictate responsibility. You're going tofind that the finance director does the H.R. role off the side of his desk. One of the salespeople is the only person in the business who's really I.T. literate, so does a lot of the computer networking and I.T. stuff off the side of their desk. When you're having the conversation with the business owner about valuing a particular key person, don't just go by job title. Use it as a starting point, but have a conversation about the other responsibilities that person does. What else do they do besides their day job? And the third rule with regards to key person is, a key person does not have to be an employer or an owner of the business in particular.

Again, especially with smaller businesses, it's perfectly acceptable to consider the idea that a freelancer or a contractor might be a key person. We've even come across situations where advisors have argued successfully, that an individual customer is a key person. Now don't forget in those kinds of circumstances where it's a freelancer, or a contractor, or a customer, or indeed a supplier that is the key person, it may be harder to prove insurable interest but that's what you're going to be working towards.

There is nothing written in any legislation or rules anywhere that a key person has to be an employee or a business owner. At a headline level, a key person as we've already said is simply somebody who has a significant impact on the performance of the business, and without them we are going to struggle to maintain business. Right, let's have a look at setting up the cover. You'll remember if you were able to come to the session that we did last week, that we talked about the different legal structures of businesses. Limited companies, LLP, partnerships, Scottish partnerships. So, on and so forth.

And one of the reasons why it's important to have a fairly good working understanding of the different legal structures of businesses, is that sometimes it can dictate how we are going to set the cover up. And that's certainly the case with key person cover. So, on the screen we've got limited company and LLP listed, but really we're looking at any kind of trading entity that has a separate legal identity to that of its owners.

So, as well as limited companies and LLP, we might want to consider this method for Scottish partnerships and for PLCs as well. So ever so simple, in the event of setting up key person cover. Be it for profit or debt, for trading entity with a separate legal identity to that of its own, limited company, LLP, a Scottish partnership, partnership, PLC and so on and so forth.

The business itself, will take out a life of another policy on the relevant individual. If you are protecting the profits and the debts of the business you'd use two separate policies, and we'll discuss that in a little more depth in a few slides time. The company, the trading entity takes out the life of another policy on the life of the individual in question. The company, the trading entity, pays the premiums. In the event of the individual passing away or suffering an earlier critical illness, if option chosen, the company receives the proceeds and clearly uses them to replace the profit the individual would have generated or pay any debts they may have. Ever so simple, just a life of another policy. There are other ways of setting up key person cover for the limited companies, which we're not going to go into today. This really is your go to method, regardless of which life company you speak to you're going to find this is the method used, 96, 97, 98 percent of the time for protecting key people.

So, let's have a look at setting up key person cover for partnerships. So, for now you'll remember from last week, those of you who attended, that partnerships do not have a separate legal identity to that of their owners. So, in the event of partners wanting to insure a key employee one of the partners can take out a life of another policy on that key employee, and then that policy would be placed under the appropriate trust for all of the partners. All of the life companies now have specific trusts to be used in this circumstance, key person trusts the partnerships. But again, relatively simple successor, to reiterate one of the partners can take out another life policy on the life of the key employee. That policy is placed under the trust with all partners nominated as the beneficiaries.

. If the key person in question is one of the partners, that partner can take out an own life policy which again is placed in trust for the benefit of all the partners. Own life policy placed in trust for the benefit of all the partners. So hopefully as you can see, setting up key person cover is actually relatively simple. Remember we're protecting the profits and/or the debts of the business.

If we're protecting the profits and the debts of the business, you should use two separate policies. One for profit, one for debt. If it's a limited company or some other form trading entity that has a separate legal persona for that of its owners, the trading entity takes out another life policy on the life of the key individual. The trading entity pays the premiums and receives any proceeds should there be a claim. If it's a partnership and we are protecting an employee. One of the partners takes out a life of another policy on the key employee and that policy is placed under trust for the benefit of all the partners.

Finally, again if it's a partnership but the key individual is one of the partners. That individual can take out an own life policy which is then placed under trust for all the partners. Hopefully that is relatively straightforward. I think it's really, really worthwhile, talking about the tax treatment of the premiums and the proceeds of key person cover.

I think this is a question that understandably comes up relatively frequently during the advice process. When you put key persons in place, business owners typically are going to want to understand the potential tax treatment of the premiums they pay and subsequently any that come from the policy.

And I'm sure all of you remember from FPC exams that's going back some time now right. FPC exams and CII exams and the Anderson principles that deal with this particular subject. So the Anderson principles were first established in 1944 by Chancellor John Anderson. He was asked the question in the House of Commons about when a company can receive tax relief on the premiums for its insurance policies. And he, I assume consulted with HMRC and returned to the house and offered them these principles.

Essentially, the premiums of an insurance policy will be an allowable expense if there is a sole relationship. If the insurance is intended to meet loss of profit. And if it is annual or short-term insurance. If you fill all three of the Anderson principles you get tax relief on the premiums. Let's take each of those in turn, so we've got a good understanding of them. When Anderson talks about a sole relationship, he means an employer/employee relationship. If the life assured is a shareholder or a partnership partner within the business, you have failed the first Anderson principle.

There is a grey area with minority shareholdings within the business. If the life assured has a sub 5 percent shareholding within the business, there is still a chance you will get tax relief on the premiums. But broadly speaking the life assured has an equity stake in the business. You failed the first Anderson principle. You're not getting tax relief on the premiums. Don't forget Anderson, it's not about whether someone can or cannot be a key person. It's about the tax treatment of premiums and proceeds.

Second Anderson principle. The policy must be in place to protect the loss of profits. If we're protecting the debts of the business we failed the second Anderson principle. Final Anderson principle was short term or annual insurance. The term of the policy must be short or annual, which is kind of suitably ambiguous.

HMRC clarified the meaning of this particular principle about 10 years ago, and what they said was the term of the policy should not outlive the individual's usefulness to the business. And what they simply mean by that is justify the term. Have a good reason for choosing this particular term for the policy. So a lovely example of that might be our life assured is 55 years old and everybody in our business retires at 63.

Eight years therefore is a perfectly justifiable term for that particular policy. Our life assured is key to a particular contract that has say ten years left to run. Therefore ten years would be a perfectly justifiable term for that particular policy. Short term or annual simply means have an appropriately justifiable term for the policy.

So if we pass/meet all three of the Anderson principles the likelihood is we will get tax relief on the premiums. If we fail one or more of the Anderson principles, we are unlikely to get tax relief from the premiums. So, the question then becomes, how are proceeds going to be treated for the purposes of taxation.

Well broadly speaking, if you get tax relief on the premiums. If the premiums meet the Anderson principles. Broadly speaking, generally speaking the proceeds are going to be taxed as a trade policy. That makes sense. Let's flip back a slide and if we got tax relief on the premiums, that must mean we were protecting the profits of the business. So HMRC are not going to be interested that your profits come from normal trading activity or the proceeds of an insurance policy.

Profits is profits is profits, and it will be treated accordingly. So if you've got tax relief on your premiums, generally speaking the proceeds are going to be a trading receipt. However just because you don't get relief on the premiums, it doesn't automatically mean that the proceeds will not be an allowable expense. And let's explore that a little more.

We could be protecting the profits of the business. We pass Anderson principle number two. We have an appropriately justifiable term for the policy so we pass Anderson principle number three. But the life assured as a shareholding director within the business owns 50 per cent of the business. We've failed principle number one. We're not getting tax relief on the premiums. However, should that policy ever go to claim, the likelihood is the proceeds will be treated as a trading receipt. We will pay corporation tax on the premiums.

Premiums and proceeds are effectively treated separately for tax purposes. At point of claim, HMRC will not refer back to the manner in which the premiums were treated, to ascertain how the proceeds should be treated. And they make it clear. They state that no assurance can be given. The future receipts will be excluded for trading income even though premiums were not allowable.

The Anderson principles as any of you who have even looked at them briefly before will know, it's not an exact science. In my experience most, accountants approach Anderson principle. with a pragmatism, that financial advice processes don't normally allow. So typically, I would expect an accountant to put the premiums on a life insurance policy through as an allowable expense, regardless of whether they meet the Anderson principles or not. And then subsequently deal with any proceeds accordingly at the other end. I.e., if there's something to write those proceeds off against they will probably do so.

For what it's worth. My personal opinion is that the Anderson principles, whilst we have to know them we have to be able to explain them to clients quite rightly so, a reflective or a different time and age. And probably if anybody in an appropriate position of authority ever looked at them again, they'd probably be scrapped completely.

The proceeds of a life insurance policy that is in place to protect the future of a company and the livelihoods of everybody who works for it, not being an allowable expense in a tax environment where change for the telephone box and the cost of calculator batteries are still allowable expenses is slightly ridiculous. And of course, we also in this debate feel compelled to point out, that whether or not tax relief is given on the premiums insurance policy, should not be particularly relevant in the vice process. The policy is there to protect the business and the livelihoods of everybody who works for it.

An interesting conversation is always had, about setting the sum assured for key person cover when it comes to, for the purposes of profit protection. And we'll have a brief look at one of the calculations that people often use for that on the next slide. But my personal opinion is that when you are trying to ascertain the true value of an individual to the company for key personal profit protection purposes. It really should be about a conversation with the company, with business owners and maybe even their accountant. Even if you're not familiar with reading a set of accounts, there's lots of different factors you can take into account when having that conversation.

So let's look at the businesses current cash position. How liquid are you? I.e. do you actually need cover? Or is there enough money in the coffers at the moment to be able to tie the business over, in the event of a key person passing away. Let's talk about the company's performance over the last couple of years. And perhaps more importantly when valuing the key person, let's look at expectations for the next couple of years and that individual's contribution to those expectations. We may have somebody who is so key to our business we can't execute our five-year business plan without them.

We should factor that in to their value to our business. Goes without saying we want to look at the impact the key person has on the day to day running of the business, the profit and loss account. For some businesses across the recruitment, especially at highly specialised roles can be very expensive. Training can be very expensive. I'm absolutely no expert in this area, but the limited reading I've done on the matter suggests that within most roles it takes between six months and a year before a new entrant, or somebody new to the business becomes fully proficient in that role.

That will have an impact on your client's bottom line. That should be considered when setting the sum assured. Location of the business is really important again, in terms of dealing with specialised industries and companies. We may need people to relocate. Relocation packages are expensive. That should be included in any sum assured. So on and so forth. Just using these headings as an example gives us a really good idea, a really good starting point, for the conversations we should be having with business owners about valuing key people and some of the factors we can include in that.

Clearly this isn't an exhaustive list and each business will be different. But there is no hard and fast calculation for putting cover in place for. There's no hard and fast calculation for getting the right level of cover for a key person. For protecting the profits, through key person cover.

That said, as you can see on the screen at the moment there is a calculation that is often used. And it works relatively well. It's fairly self-explanatory you can see what's on the screen. The one thing I would suggest, salary isn't always a good indicator of an individual's value to the business. People can take artificially low or artificially high salaries, certainly when it comes to new businesses.

People may take a lower salary to get things started. Profit is an interesting one. Do you use gross or net profit to value a particular key person? This is a really good way actually of establishing and demonstrating your credibility with a particular business owner. Ask them if the key person is responsible for gross or net profit. If your key person is perhaps a super salesperson with no management responsibilities whatsoever, they take no part in the decision-making process within the company.

That might mean that there is, the likelihood is they're responsible for gross profit. They can't impact the cost base of the company. Therefore, gross profit is logical. If the key person in question is a business owner or has some managerial responsibility, then you might want to look at net profit. They can impact the cost base of the business. Net profit is the relevant factor to use. And that of course, we times that by the number of years the business owner assumes it will take them to recover from the loss of that key individual.

The thing about key person cover, is there are so many factors that can affect the sum assured. These formulas can be a really useful starting place. Okay. But you are going to need to have a conversation with the business owner. An in-depth conversation with the business owner, picking up on some of those factors we mentioned on the previous slide, to get to the true value of that key person cover. And due to some of these complexities, due to some of these variances. Most insurance companies in my experience are more than happy to see a key personal sum assured of kind of, two times gross five times net profit based, on the proportion of profit attributable to the key individual is a good starting point. If you do have to go through the financial underwriting process.

Setting the level of cover for profit protection to key person cover, is not an exact science. One of the things that I would recommend if you have any doubts. Please get in touch with me or one of the other business protection managers at the other life companies. Or perhaps even speak to an underwriter. After you've had your first meeting with the client and get an understanding of some of the things they'll be looking for,

So, we've had a quick look through key person cover there, I hope that's been an interesting half hour or so. If you have any questions as I say, please don't hesitate to get in touch with us. I am available to come out and see you face to face if that's required. In the meantime, I'm going to hand you back to Emma who's going to wind things up. Thank you ever so much for your time today guys. I really appreciate your attention.

Hi again everyone. I think we can all agree that was very informative. So just to make you aware, you do have a wealth of support available to you from account management to face to face visits from Marcus here, but also on the other adviser site. Make good use of the tools and calculators, which are really easy to navigate. We've got lots of jargon free videos, just to run you through the things you've covered off there. And then there's much more training support available. So, make the most of it.

We also now have in place online trust. So, our new online trust tool, simplifies the process of writing policies in trust. All you need to do is answer a few questions around your client's circumstances and then it will take you to the most appropriate trust form, based on the answers that you've given. The trust form can be signed online and can be sent digitally for customers and trustees to complete quickly and easily. This is designed to remove the delays associated with visiting the parties involved, or waiting to receive documents back from the post. Our online trust tool is available on both personal and business protection policies including relevant life.

The tool is there to guide you to the most suitable trust, but should not be considered as advice. If you are unsure if the trust selected is right for your client, you should seek specialist legal advice. Thank you everyone for joining us today. I hope you found it useful. Don't forget we're all here to support you. Whether that be Marcus coming in face to face, also each of you have a telephone account manager and BBM. And if you have any questions, please do pop them in the chat box and we'll get back to you.

Thank you for your time folks. Have a great day.

Relevant Life Cover - Webinar

Good morning everybody. Just to reiterate what Jo said thank you all so much for diving in, and for those of you who attended the three previous webinars to this over the last three weeks, thank you ever so much for that as well. The response rate we've had to these webinars has far outstripped our expectations. I think it's really interesting, because it shows that there's an awful lot of demand from the advice of community to explore the potential opportunities the business protection presents.

And I know that we all want to get out there and speak to it appropriately with existing clients and speak to new clients about business protection. I think if we look at business protection in other developed economies, the UK lags far behind it in terms of introducing business owners to shareholder, partnership protection and key person cover.

And I think we can all agree there is a general lack of understanding as to how important business protection can be as I've probably said in all three or four of the previous webinars. If we protect the owners or the key people within the business, we protect the livelihoods of everybody within that business. Business protection should really be the cornerstone of any appropriate individual’s protection strategy.

And it's only intermediaries advisers like yourselves who can really get that message out there. So it's brilliant for somebody like me who spends their life talking about business protection, to see the demand and the amount of people who've signed up for these sessions.

So once again thank you very much indeed. So just to recap very briefly what we've looked at over the previous four weeks and remind ourselves that a headline level business protection is relatively simple, let's look at the four headings on-screen. When we look at personal domestic protection, typically we look at a number of predefined need areas. We will talk about protecting a mortgage. We'll talk about protecting an income. We'll talk about protecting a lifestyle. Business protection as we already knew or discovered recently is kind of exactly the same. We only have a look at protecting three or four need areas. We protect the ownership of the business and shareholder partnership protection. We make sure that in the event that the owner of the business passing away, the funds are available for the surviving shareholders to take full control of the business while the deceased’s estates are treated equitably and transparently.

We look at protecting the profits and the debts of the business, via key person protection. We help the business owner identify who the key person is. It might be the business owner themselves. It might be an employee. It might indeed as we explored be a third party, and we ensure in the event that individual passing away, the funds are available to replace the profit they would have generated, or repay any debts the business may have. In short, we give the business breathing space after what obviously would have been a terrible, terrible event.

We also discussed when it came to key person cover, the idea that perhaps we're not just protecting profit and debts, but we're ensuring that in certain circumstances the funds are available to wind up the business in a responsible manner. If we truly can't continue to trade after the death of that key person, we ensure that the funds are available to make any redundancy payments that are required. To pull ourselves out of any contracts. To close off any leases. So, on and so forth.

And then finally we've got the area that we're going to look at today - Death-in-service. When it comes to individual protection, we're talking about relevant life cover. Relevant life cover in its current format, has been around for about twelve or thirteen years now. Bright Grey as it was at the time I think were the first to bring it to the market, and whilst as we all know relevant life cover is really personal cover that happens to be sponsored by the employer.

Its employer owned. If we consider it as part of that business protection suite of products, it's really really important. Typically, when it comes to relevant life cover the case sizes are a little smaller. The shareholder or partnership protection and key person cover. But there still two and a half, three times the size of the average personal term assurance case, and looking at the business protection market as a whole, relevant life cover now makes up about 50 percent of the entire marketplace.

So, what I'm going to try and do over the next few slides is just give you a good, solid overview on relevant life. We'll talk about eligibility, we'll talk a little bit about setting the sum assured. We'll talk about tax efficiency, because as most of you will know I'm sure, relevant life is super tax efficient. And then as always, I'm going to hand you back to Jo at the end, who will take you through some of the super-duper aspects of the LV= business protection and relevant life proposition.

So, as we've already alluded to, relevant life cover is a single life, fully underwritten death-in-service plan. It's basically just the term assurance policy that provides Life and Terminal illness benefits (up to age 75 or 70 for inflation linked cover). As most of you will know, there are variants of the relevant life cover out there in the marketplace. I think one of our competitors provides a version that offers some cut down version of critical illness benefits.

Obviously, I'm not going to be able to talk about that today, but I'm sure you’re all more than capable of using Google and finding out about that particular product itself. I think one of the most interesting questions, don't come up so much anymore as the markets got more familiar with relevant life cover, but one of the most interesting questions that used to come up when it was still a relatively new product was around eligibility. And the rule of thumb is this, the life assured has to be an employee.

How do we identify an employee? Well the two easiest ways are, if they take some or all of their remuneration via PAYE rather than say self-assessment. And secondly, is there a contract of employment there? Broadly speaking, what this means is that sole traders, (Marcus Primhak trading as business protection), partners in partnerships and members of limited liability partnerships are not themselves eligible for relevant life cover. Employees of those entities are eligible for relevant life cover. When it comes to limited companies, a significant proportion of shareholding directors of limited companies will be employees and in our experience that tends to be the biggest market for relevant life cover - the kind of individuals who are in control of their own remuneration and can decide that they want the company to take out some life cover for them. A significant portion of the relevant life market was contractors, freelancers who run their own small personal service limited companies.

Some of you will be familiar with the upcoming changes to the IR35 rules, which may have an impact on that market. We're not really going to talk about it today, but at some point in the next couple of months I think we will issue some kind of short educational piece, that will reflect the changes that those IR35 rules may have on eligibility for relevant life cover.

So to reiterate eligibility for relevant life cover. It must be an employer/employee relationship that includes PAYE shareholding directors of limited companies, sole proprietors, sole proprietors’ directors and salaried partners within partnerships where there is no equity stake. As we've already established, sole traders, equity partners and non-employed directors are not eligible. We've talked already about the age range eligibility.

Important to note that as most of you will be aware, relevant life cover is written under trust and the nominated beneficiary via that trust must be an individual or a charity.

The business itself cannot be a beneficiary or a direct beneficiary for relevant life cover. One of the tough questions that comes up relatively frequently is, what happens if we have spouses who are employed shareholding directors within a limited company, can they take out relevant life cover with each other named as the beneficiary via the trust. The answer is yes of course. The deceased spouse will be receiving the proceeds of that policy as a spouse, and not as a Co-shareholder. Subsequently then of course, if the recipient of those proceeds (the surviving spouse) chooses to lend them to the business for whatever reason, that's entirely their business. The business itself is not benefiting directly.

So, for the avoidance of any doubt, how do we set cover up. Well, ever so simple. The employer is the owner of the policy. It takes it out on a life of another basis on the life assured. It's then placed into the trust, for the for the benefit of the deceased’s estate -normally spouse, children, and so on and so forth. Most of the insurers you deal with will now have online trust facilities to speed that process along and get it under trust more smoothly and more easily.

It's always interesting to talk about the suggested appropriate cover levels when it comes to relevant life cover. Don't move away from first principles on this one. This is a death-in-service product. Therefore, the sum assured should be set in relation to the individual's remuneration. So, as you can see on the screen here (and it will be broadly similar with the other providers you use), we have suggested age-based multiples based on that remuneration level.

Now as most of you know for a standard group death-in-service scheme, we tend to use relatively low multiples; four, six, eight times, and rather than remuneration we use salary. Well as you can see from the figures on screen when we look at relevant life we've got greater flexibility in terms of the multiples. And we've also got greater flexibility in terms of the types of remuneration that can be used to contribute towards that sum assured. So as well as salary, you're going to be able to include bonus regular dividends even benefit in kind to get you up to the maximum level of cover of around 10 million.

There's also further flexibility with regards to relevant life cover. Most providers shouldn't require any evidence of earnings, until you get to a sum assured of two and a half million. Essentially, we're looking at the kind of product here that should be a really useful tool for the kinds of individual we encounter in this market. Higher earners with the flexibility to be able to dictate how they're remunerated, and therefore provide flexibility when it comes to you guys advising them on setting the sum assured.

Now we've used the word suggested, on this particular slide. And that's because there are no rules within the legislation that governs the tax efficiency of relevant life cover that says you must stick to these multiples. However, I think it's fair to say that if we're going to go above these multiples, you might expect more rigorous financial underwriting. Worth mentioning this point, another question that used to come up when relevant life was still relatively new to the marketplace.

And again, I mentioned it just for concepts more than anything else because we don't seem to get this question asked very much anymore. Nevertheless, people used to ask if my client’s remuneration justifies a say million pounds sum assured today, that in ten years’ time when he or she passes away taking a lower level of remuneration from the business, will the sum assured be adjusted at point of claim to reflect their remuneration at that point of time? And of course, the answer was no. We're underwriting a point of sale, rather than point of claim.

So, it's always worth reminding ourselves why relevant life is tax efficient because let's face it that's one of the main draws for this product because as we've already said, it's just a pretty standard term assurance policy. The attraction lies in its tax efficiency.

So firstly, the premiums. Even though they're paid by the employer on behalf of the employee, are not a benefit in kind or any other form of taxable remuneration for the life assured. So no national insurance is to be paid on those premiums. No form of income tax to be paid on those premiums.

Like most other forms of remuneration, the premiums are an allowable expense for the employer. So they can offset them against a corporation tax or if it's a sole trader, taking it out on behalf of an employee against their own self-assessment, against their own income tax.

As we've already discussed. The policy is written in under trust. So, any proceeds should sit outside the deceased's estate for the purposes of inheritance tax, under current legislation. One thing that's worth mentioning, we won't go into too much detail about it today because of time restrictions and such like. Is that the proceeds of a relevant life cover plan, do not form or do not count towards the individual's annual pensions allowance.

Most death-in-service schemes are what's known as registered death-in-service schemes, and the proceeds of those schemes will contribute towards the individual's lifetime pensions allowance. So if you have clients who are part of their companies group death-in-service scheme, and they're of the kind of seniority where they could perhaps take themselves out of the company death-in-service scheme and replace it with something else if they have that option, that control over their own remuneration. You might want to look into the potential of replacing their group scheme benefits with relevant life plans, as you may be able to free up a little more headroom in terms of their lifetime pensions allowance.

But that obviously can be a quite complicated area of advice, and if it's not something you're familiar with don't hesitate to speak to one of the life companies or your own technical and compliance functions, as they'll be able to guide you on it.

It's always worth having a quick look at some kind of comparative analysis between the cost of the client taking out relevant life cover, or the client's employer taking out relevant life cover on their behalf compared to the cost of life cover paid out of net earnings.

So, the chart on the left-hand side of the screen. Savings from a rate relevant life policy, takes us through admittedly a pretty extreme example of that. So the central column headed life cover, shows us the true cost of paying for £100 pounds worth of life cover out of our net income. To get that £100 premium paid out of net life cover there’s employee national insurance contributions of three and a half pounds. . Employee income tax is nearly 70 pounds. The cost of the employer, National Insurance contributions is £24 pounds giving us a total gross cost of £196.21. Remuneration is an allowable expense to the employee so we are able to offset that against their corporation tax. We end up with a total cost of £159. That's £100 of life cover paid for out of net earnings. If we compare that to the cost of relevant life cover. the employer is paying the premium, so there's no cost at all to the employee. They're not paying the monthly premium. We know that the premium doesn't form part of their taxable remuneration, so there's no employee national insurance payments. There is no income tax in any form. However, that £100 a month as it is paid by the employer is an allowable expense. So we can offset it against their corporation tax bill, giving us a total tax adjusted cost of £81 as per the screen.

So we can see the savings, between life cover paid for out of net earnings, and relevant life cover in that example is just under £78. Now the reason I say it was quite an extreme example, was that we've used a top rate tax payer. In my experience most of the lives we're dealing with in this particular market tend not to be top rate tax payers. But even for a basic rate tax payer the savings on relevant life against standard life cover can be significant.

I would suggest if you've not played about with one before. If you Google relevant life calculator. I mean ideally you'll Google LV= relevant life cover calculator. But if you just Google relevant life calculator, it will take you to one of these calculators, and you can put in the client's particular details and it will demonstrate the savings to you.

There are also calculators online, you can see our example on the screenshot there. That we'll be able to set the level of cover for you, based on the remuneration the client currently receives.

Now we've talked about the notion that relevant life cover is simply a term assurance policy. We talked about the notion that it's a really useful alternative to group that death-in-service schemes, but I think one of the best things about if you're looking at a comparative between a group scheme and a relevant life cover scheme, is this continuation option.

So at LV=, we've got a really, really great group death-in-service scheme that as employees we all become members of.

However, if I were to leave LV=. Never going to happen just in case my manager is listening. If I were to leave LV=, the day I leave my membership of that group death-in-service scheme ceases. However, if it were a relevant life plan you have this continuation option. The client has the opportunity to take the cover on, on a personal basis if they have to leave the employer who took the plan out for them, or if their shareholding director is winding the business up.

They take personal ownership of that policy, with no additional underwriting. We don't even require a declaration of health to be signed. There's no changes to the term, the original premiums stands, the original level of cover stands, the original term stands.

We may require some information when the continuation option is executed. So for instance, we'll require a new trustee. If the payment of the premiums is being taken over by a new employer. Obviously we'll need the details of that new employer.

We're going to need new direct debit details, regardless of who's taking over ownership of the plan. But it's a really nice way for the life assured to continue cover really easily. And of course the hope at this point is that some years will have passed since the original plan was taken out. And to replace the level of cover with a brand new fully underwritten plan, is going to cost the client more because of age loadings.

So there we have it. That's our relevant life cover plan. It's a really really simple piece. But as I said it makes up 50 percent, if we include it in the business protection suite of products, of the whole market.

If you're not currently writing business protection, relevant life cover is a really easy way to get into that market and introduce to relevant or appropriate clients the idea of linking their businesses with their suite of protection products. As I said previously, thanks ever so much for joining today and for those who have joined over the past three weeks or so we really really appreciate you dialling in and we hope you found the sessions useful.

I think I mentioned previously but if you want us to do sessions on specific areas please don't hesitate to get in touch. We can also obviously come out and provide face to face training sessions and support as it's required. I don't think we're going to have time to answer any of the questions that have been asked today, so I apologise for that. But we will be in touch with you either later today or tomorrow to answer any questions you have asked. Please don't hesitate to get in touch with me, if there's anything you feel I can help with or indeed work with your account manager. And I'm going to hand you over to Jo now just to finish up.

Thanks guys. Thank you Marcus.

So with all of our protection propositions, LV= doctor services comes at no additional cost and it has six features. The first being Remote GP. -your client can have up to five appointments per year. We will also cover Remote GP to clients children up to the age of 16. The consultation is held either as a telephone call or a video conference. So the beauty of that is that your client could literally use it from the comfort of their own home.

They could be in the office at work or they could be on holiday abroad. To go hand in hand with that, we also offer the prescription service. After treatment is recommended, the GP issues a prescription which is faxed or mailed to the pharmacy of the client's choice.

We're also offering a second opinion service. For this feature we provide your clients with face to face service, so your clients can physically see a specialist in that field.

Something that we've recently introduced is remote physiotherapy. We've had some really positive feedback on this recently, and again your client gets five appointments per year. On top of that we're also offering them remote psychological support. So things like cognitive behavioural therapy. All of that mental health support which you know there's a lot more awareness about mental health now.

It's probably worth Googling some statistics around mental health impacting the business. This one I do personally feel really does tie in nicely with the business protection suite. On top of that we're also offering 25 percent discount offers on health MOTs.

So for those of you who have used LV= in the past, you would have used our online system pathway. So all the business protection processing is now processed on Fastway so you can underwrite your client before you've even produced a quote. It could give you instant decisions and it's a much smoother and easier processing system.

So what we also include with all of our business protection propositions is the LV= business care. Again this comes at no additional cost. So we give your client access to lawyers and solicitors. They have advice on things like employment law. It might be health and safety. It could be contracts. You might have a small firm perhaps where an employee has become pregnant. You know what's your clients legal duty of care for their employees. All of that advice around running a business through perhaps an unpaid contract, where does your client stand. They have all of that advice at no additional cost. On top of that we also provide tax and VAT support, so that's about all of the current and new legislation, and that is provided by ex HMRC employees.

So as Marcus mentioned earlier, online trusts is something that we have recently introduced. It makes the process of getting the policy written into trust much quicker, it's much smoother and much easier to put in place. When you complete the trust online here at LV= , we still can manually check the trust documents and we will contract the trustees and so forth for the online signature. We of course will keep you up to date in terms of progress, but what we are finding is actually getting a policy written into trust is much quicker online than what it has been historically with paper.

So just to recap, obviously as Marcus mentioned we have a lot of tools and calculators available on our advice site. Do get in touch with your account manager. They would be happy to walk you through them, showing what features are available to help you write your business protection cases. So we've come to the end of the webinar. So thank you for your attendance and I hope it's been beneficial.

Shareholder Protection - webinar

Hi good morning everybody, thank you ever so much for dialling in. Jo's away as we said, welcome to this morning's session. Today we’ll be looking at ownership protection.

If you have dialled into the two previous business protection sessions we have done already, you'll know that I'm a big fan of positioning business protection certainly initially, at a really simplistic high level. And I often talk about this idea that there are deep similarities between business protection and personal protection. Not least of all, the fact that we're simply using term assurance products to protect and identify need. With families with personal protection, as you will all be no doubt familiar with. The need areas we look at tend to focus around things like mortgage, debt, lifestyle, and obviously being LV= we're going to say income as well.

When it comes to business protection as you'll know if you dialled into the two previous sessions, we look at three key areas. Ownership, profit, and debt. That's it. Regardless of how complex a business protection case seems when you first look at it, it's only ever going to boil down to those three areas. Regardless of the complexity of the ownership structure of the corporate entity you're dealing with. Regardless of whether that's holding companies or spousal shareholdings or it's a partnership or a limited liability partnership. It's only ever going to be ownership, profit and debt - as we know, when we look at profit/debt, we're looking at key person cover.

We're going to make sure that if a key person, be they an employee, business owner or other relevant third party passes away that we've indemnified that business so that the profit that key person generated, or any debt that the business may have can be paid off. And the business has the best possible chance of continued success without that key person.

But obviously what we're looking at today is ownership. As we go through the different methods of protecting the ownership of the business, it's always worth bearing in the front of our mind what our goal is here. We are trying to ensure that in the event of a business owner passing away, ownership of the business remains fully in the hands of the surviving business owners. In theory, those individuals who are best placed to ensure the continued success of the business, protecting the business and protecting the livelihoods of everybody who works for that business.

And furthermore, we want to ensure that the deceased estate is treated equitably and fairly. That's our goal here. Ownership of the business remains in the hands of the surviving business owners. The deceased estate gets looked after properly. There are lots and lots of different ways to protect the ownership of the business, but when we're talking about life insurance, VAT solutions, we're really looking at three main areas.

Undoubtedly, ownership protection is the most complicated part of business protection as a whole. Dependent on the kind of business that you're dealing with, we may be required to either ourselves with the help of an appropriate and experienced qualified colleague to walk through the company's governance documentation. So things like Articles of Association and partnership protection to ensure that what we're putting in place doesn't contradict any other arrangements that companies might already have. Obviously unlike key person cover, where there’s really only two parties involved - the corporate entity and the life assured. When it comes to ownership protection we might be dealing with two, three, four, five, etc business owners and of course ultimately, the families of those business owners.

So, there's something else I want to point out, today. If you have no previous experience of business protection and ownership protection in particular, you are not going to come out of today's session being an expert in it. What I am hoping for, for those of you who perhaps are looking at it for the first time since you did any qualifications you may have is that you come out of this session with a broad understanding of the different methods. Something a little bit more in-depth on shareholder and partnership protection. And perhaps just the ability to going forward ask the right questions of a client and your contacts within your own business and the life insurance companies who can help you with it.

It’s also worth pointing out that if anybody does want further and deeper training or guidance on shareholder protection, LV= and the other life companies in all fairness, do have the facility to come out to your offices and obviously do longer more in-depth sessions on these subjects. So what I'm going try to do today is take you through the three main areas of ownership protection, automatic accrual, company share buyback and the fund a trust method. What we typically refer to as shareholder or partnership protection. I'm not going to spend too much time on automatic accrual and company share buyback, I’m just going to look at those in a relatively high level, because they are fairly marginal. They don't get used that often. And then we'll focus the time we've got together on shareholder/partnership protection which really is, certainly in the UK the go to method of protecting the ownership of businesses.

But let's start at the very beginning and talk about automatic accrual. So if you read CII, I think it's the J06 textbook. The one that deals with tax and regulation of businesses. They talk about automatic accrual as being a really good method of protecting the ownership of vocational partnerships. And what they mean by that is automatic accrual works really well in protecting the kind of businesses where you need some kind of existing qualification or experience to be able to practice the trade in question. So the example I often use for this is veterinary practices. You know within a veterinary practice you, if you're going to be a vet, you need to have veterinary qualifications to be able to practice your trade. And typically a veterinary practice would consist of a number of assets.

Obviously the skills and qualifications of the vets in question. Ownership of their tools of the trade. So the kind of things you would expect to be in a vet consulting room. The various surgical implements they will use. The client bank, clearly that's going to be an asset of the business as well. Possibly, some kind of shared ownership of the property the practice might operate from. Now if you think about those assets, qualifications, client banks, tools of the trade, possibly ownership of a shared building. Those are valueless, to anybody who doesn't have the qualifications to be able to practice. And this is the point the CII makes when they talk about vocational partnerships.

As a vet my share of our practice is worth a lot of money to me. But if I pass away it's kind of valueless to my accountant Y, who doesn't have the ability to continue the practice and draw an income from it. So under those circumstances, it would be far better if my share of the business, my tools of the trade, my client bank goes to my surviving partners who can work those things and continue to draw a living from it.

And that's what I'm automatic accrual agreement seeks to facilitate. Automatic accrual agreements will typically be included as part of a partnership agreement. And they simply say that in the events of one of us passing away, the deceased's share of the partnership will be automatically accrued by the surviving partners to recompense the deceased estate. Because don't forget that's one of our goals, we want the deceased estate to be treated equitably. To recompense the deceased's estate, each of the participants in this agreement is going to take an own life policy to the value of their share of the partnership, which will be placed on the trust for the benefit of their estates.

Share of the partnership through the automatic accrual agreement goes to the surviving partners. The Deceased’s estate is recompensed by the proceeds of a known life policy that sits under trust. Within an automatic accrual agreement, we might expect to see certain rules or certain guidance to ensure that it runs successfully. So we would expect to see an agreement as to how frequently we're going to value the business. Probably annually. And furthermore perhaps more importantly, we're going to perhaps lay out some guidance to when we're going to change the level of cover we all have in place, following a change in the value of the business.

So we might say. If the business is increased in value by say 10 per cent over the previous year, we're all going to increase the level of cover we've got by 10 per cent because we want our families treated equitably. Typically under automatic accrual agreements, we're all going to pay up our own premiums. So under those circumstances I would normally want to see a commitment to maintain premiums included in the agreement. Because what we don't want is one of the participants cancelling their insurance policy because they feel they're going to outlive all of their colleagues and it's unnecessary. And then of course something awful happens to them and there's no policy in place to recompense their family. So a commitment to maintain premiums. So at a very high level without going into too much detail, that's an automatic approval arrangement. We don't see them as frequently anymore. I would say they make up certainly less than 10 per cent, or probably less than 5 per cent, of all the ownership protection cases we see. But the CII still talks about them and they still present a fairly simple, effective way to protect the ownership of vocational partnerships.

So moving on, let’s have a look at company share buyback. Company share buyback, kind of operates at the other end of the spectrum to automatically accrual and is probably one of the more complex ways of protecting the ownership of the business.

It only really works for limited companies. And in my experience tends to be implemented by larger limited companies with a more complex ownership structure. You see it putting into place by family owned businesses, that are kind of in third or fourth generation of ownership. And the shareholding within the business has become really quite convoluted.

Shares are owned by aunties and uncles and cousins and so on across the piece. You have a lot of small shareholders. And typically you'll find the board want to undertake a strategy that over time is going to really concentrate those shareholdings. And they'll put in place a company share buyback solution. The complexity that sits behind company share buyback, comes from the fact that the company is going to purchase the deceased's shareholding. And the rules that govern a company purchasing its own shareholdings are detailed in the company's Act 2006, and there can be a level of complexity to it. So broadly speaking the company share buyback works like this:

The company takes out a life of another policy on each of the individual shareholders, to the value of that individuals shareholdings. The company owns the policy and pays the premiums. In the event of one of the shareholders passing away, the company, via something called a cross option agreement purchases the deceased shareholding from his or her estate.

Rather than redistributing those shares amongst the surviving shareholders. The company cancels those shares off. And as you can imagine the surviving shareholdings increase commensurately in value. And on the face of it, that sounds like a really lovely simple way of arranging protection. You know, it fills out basic requirements here. The deceased estate gets looked after properly and ownership of the business remains with the surviving shareholders.

But as I say there's a complexity to this transaction because it's governed by the companies Act 2006. So I’ll just pull out a couple of bits that will illustrate that point. Even though the company has received the proceeds of the insurance policy, the purchase of the shares would normally have to be funded by existing capital. So the company uses existing capital to purchase the deceased shares, and then that existing capital is subsequently replaced by the proceeds of the insurance company. And the reason we have to do it in that order is that we have to demonstrate our liquidity.

If we are illiquid, to the point where we have to use the proceeds of the life insurance policy immediately to purchase the deceased shareholding, then we're in a position where we can't maintain or it is assumed we can't maintain our other commitments. There are ways around that. For instance the directors and the shareholders can produce the statements of liquidity but nevertheless, we are getting some quite complicated accounting and governance aspects.

Typically, another reason for that level of complexity is typically most companies won't have it stated in their articles of association that the business is allowed to purchase its own shares. So changes to the articles will often be required via special resolution. Other aspects include the fact that the purchase of the shares by the business will be considered a distribution, and as such has to be accounted for. Typically that distribution will either be income for the deceased estate or the capital gains for the deceased estate. And that can be agreed with HMRC in advance by the company's finance, function or their accounting.

So company's share buyback is a really lovely flexible way of protecting the ownership of limited companies. But it does normally require the involvement of the company's other advisers. Their accountant or finance function if they are experienced enough and their solicitor or in-house brief, to run the scheme as a whole. For advisers, the good thing about that is when we get asked to participate in setting up company share buyback arrangements, we are typically the specialists in life insurance.

We are there to quote and apply, and then to hold the hands of the life assured through the underwriting process. We're not expected to be pseudo accountants or solicitors through this process. So from one perspective, the company's share buyback can actually be a more simplistic implementation process for advisors. However it's useful to understand the complexity that sits behind it. If any of you are interested in company's share buyback at a deeper level, more than happy to do a separate webinar or even if it's appropriate come out and see you and do it on a face to face basis.

So let's talk about shareholder/partnership protection in a little bit more depth. Because that is the kind of go to method in the UK of protecting the ownership of businesses. If we look at again the CII documentation, it's mainly taken up with shareholder partnership protection.

If you look at the documentations from the various life companies, the method that we tend to focus on is shareholder/partnership protection. It's easy to understand. It's flexible enough to deal with out of the ordinary situations, and it does exactly what we want it to do. It leaves the ownership of the business with the surviving business owners. It leaves the cash with the deceased estate. So as we go through this, I'm going to refer to shareholders and shareholdings. But make no mistake we can use this method with protecting the ownership of any privately owned business really.

So we could be talking about a partnership, we could be talking about an LLP. Obviously we wouldn't be talking about a sole trader, because there's only one owner. And right back on the first webinar, we talked about the unique protection requirements of sole traders and sole proprietors. So as we go through this, let's just remember what our primary objective here, which is to ensure that in the event of one of the business owners passing away the deceased's estate is treated equitably and ownership of the business remains with the surviving shareholders.

So, each of our shareholders is going to take out an own life policy to the value of their shareholding. Normally we would expect all shareholders to be participants in this arrangement. Therefore, the total level of cover that's going to be in place is going to be broadly reflective of the true value of the business.

Okay. That said we're not going to go into too much depth today because of time constraints. This particular method of arranging ownership protection is flexible enough to deal with situations where one or more of the shareholders can't or won't take part in the arrangement.

So for instance, if one of your life assured is an impaired life, and we can't get cover for them. We can facilitate this arrangement without them taking part. If one of the shareholders is a corporate entity, holding company and another limited company has a share in this business, we can facilitate an arrangement through shareholder protection. One of the more common circumstances we're coming across at the moment is situations where the shareholding is owned by sets of spouses. And typically one of the spouses will be active within the business, and one of the spouses won't be active in the business.

We've got a lovely elegant solution to deal with those kinds of situations. Like I say we're not going to cover it today, but please get in touch if you want to talk about it more in depth. So we've got this flexibility here. But let's talk about a relatively vanilla situation where each of our shareholders has taken out an own life policy to the value of their shareholding. That policy is then going to be placed in trust for the benefit of the other shareholders.

Shareholder A's policy goes in trust for the benefit of shareholders B, C and D. Shareholder B's policy goes in trust for shareholders A, C and D. So on and so forth.

In the event of one of the shareholders passing away, the deceased's estate will inherit their shareholding. And the proceeds of the insurance policy will go to the surviving shareholders as beneficiary. Typically they will set up a trustee bank account. So the policy is paid out, the shares have been passed on through inheritance, through the will. So there's are two properties. But for our purposes, at this point in time they are fact in the wrong place.

The shares are with the family, and the cash is with the surviving business owners. So we require a mechanism that facilitates the exchange of those products. And for that we use a cross option agreement. Some providers call cross option agreements, some providers call them double option agreements. They are typically exactly the same thing. And what they do is they provide each of our parties with an option. They provide the deceased's estate with the option to sell the shares they've inherited. They provide the surviving business owners with the option to use the proceeds of the insurance policy to purchase the deceased’s shareholding.

If either party exercises their option, the other party has to go along with it. No ifs, no buts, no maybes. If my family say they're going to sell the shares they've inherited, the surviving shareholders have to buy. If the surviving shareholders say they are going to use the proceeds of the insurance policy to purchase the shares, the deceased's family have to sell them.

Just like some of the guidelines that we talked about when it came to the automatic accrual agreement, a cross option agreement can have rules within it that provide guidance for that transaction. So for instance, we might put timeframes in place. We might say that the transaction has to take place within a month, within three months, within six months, of the debt of the participating shareholder.

We might include rules on how regularly the business should be valued, and when we should change the level of cover in respect in place, in respect of changes in the value of the business. Obviously as advisers, I think you should be reviewing any shareholder protection cases you have in place on at least an annual basis. Probably in the weeks following the submission of that company's annual accounts if there a limited company.

It seems like that would be a really good, an opportune moment to pick up the phone to the client and confirm the level of covert that they have in place is still broadly reflective of the value of their business. We might also put in the cross option or, this is a legal document don't forget, so the client's solicitor if they're following up on a bespoke basis might also put in the document some guidance as to what's going to happen in the case of funding discrepancies.

So one example of that might be if the company has doubled in value but the level of cover that's in place hasn't been reviewed, so it's not reflective of the new current value of the business. We might say for instance that in those circumstances, the surviving owners of the business will take full ownership of the deceased's shares. However they have 12 months in which to make up the difference in value to the deceased's estate at say 5 per cent interest rate.

If they are unable to make up that difference inside the 12 months, there will be a marginal return of shares to the deceased's estate. So we can put broadly speaking whatever we like in that arrangement. But most of the life insurance companies that you deal with will now produce a kind of off the shelf course option agreements. Broadly speaking, if you're dealing with a company that uses off the shelf model articles of association you should be fine using a life insurance, off the shelf cross option agreement. If the Articles of Association have any amendments at all, or if there's a separate shareholder arrangements then really, the cross option agreement should only be put in place with a full review of those associated documents. We don't want to put, as I alluded to earlier. We don't want to put anything in the cross option agreement that potentially contradicts something that might be in the company's Articles of Association, shareholder arrangement or indeed the shareholders personal wills.

If you're using critical illness within the shareholder protection arrangement you can also include a single option agreement. A single option agreement means that in the event of one of the participants suffering a critical illness, they have the option to sell their shares. But there is no corresponding purchase option for the other shareholders. This means that the individual who has suffered the critical illness cannot be forced out of the business.

The surviving shareholders or the shareholders who haven't suffered the critical illness cannot force the affected shareholder to sell his shares. He can choose to exit the business at that point, selling his shares. But he can't be forced into it. There are complexities that can arise should the effective individual choose not to sell his shares. But I'm afraid due to the time constrictions, I'm not going to be able to go into that, so don't hesitate to drop me a line and we can arrange the session.

The reason we use this option process, is because it means business property tax relief is retained for inheritance tax purposes, broadly speaking tax efficiency. If you go back 20 or so years the document that used to be used for this process was called a buy-sell agreement, it did exactly the same thing but it didn't have the options involved. It was absolute. The estate was going to sell; the surviving shareholders were going to buy. HMRC I believe felt that breached their required commerciality, in respect of these arrangements and removed business property tax relief. Cross option agreements do not fall foul of that problem. So, that's the cross option. That's the mechanism that allows for the transaction of shares and cash between the deceased estate and the surviving shareholders.

So at a high level that that's our shareholder/partnership, own life under trust method, of protecting the ownership of the business. And it does what all protection arrangements do; it puts the right money, in the right hands, at the right time. We fulfil our goals in terms of the surviving shareholders of the business retaining ownership, and the deceased's estate being treated equitably.

But one other thing we need to remember and I'm sure most of you will remember this from FPC qualifications going a long time back with CII qualifications or the other ones that you might of done recently is premium equalisation. HMRC, as I've already alluded to very briefly want this to be a commercial arrangement. And to fulfil that requirement, they say that individuals should only pay amount that is commercially relative to the benefits they or their family stand to gain. Now the best way I can explain the process of premium equalisation and this is a really good way of explaining it to your clients actually, is through an illustration. So, really simplistic but let's picture a business that's owned by two shareholders. Mr 90 per cent and Mr 10 per cent. Guess how much of the business they each own. And Mr 90 per cent is 65 years of age and in a relatively poor state of health. Mr 10 per cent is 25 and in great physical and mental shape.

So 90 per cent’s premiums are relatively speaking going to be significantly higher. The sum assured is nine times the size. That's pretty much that seems like a fairly solid starting point. And then we're going to add in those age and health loadings. Mr 10 per cent, much smaller sum assured. No age or health issues to cost in. Now think about the relative likelihood either of them has a benefitting from this arrangement. And by benefiting I guess we mean taking full ownership of the business.

Mr 90 per cent is going to pay those huge premiums, but there is very little likelihood of him ever benefiting from this arrangement. Whereas Mr 10 per cent it's going to pay tiny tiny tiny little premiums relatively speaking. And I guess he knows that all he has to do is sit back and wait for the inevitable to happen and he's going to become the full owner of that business. Now that arrangement as it stands is not commercially fair.

Why should Mr 10 per cent pay tiny tiny little premiums even though in all the likelihood, he is going to end up ultimately the owner of the business. So in that very simplistic arrangement. They could just pay each other's premiums. 10 per cent pays the big huge premiums that reflect the likelihood he has of benefiting from the arrangement. 90 per cent pays the much smaller premiums.

Now, the minute you add in a third or fourth participant into that arrangement, that process becomes significantly more complicated doesn't it. Again I'm afraid we haven't got time today to go through the equation that sits behind it, but broadly speaking just Google premium equalisation calculator. All of the providers have one online, if you put in a designation for the shareholder like a name or shareholder rate, the sum assured and the premium, the calculator will work out the equalised premium for you.

I normally suggest that it's worth printing off two or three copies of that. One for your own file, one for the client, and one for the client to pass to their accountant. Premium equalisation is a job for the councils. They're the one who will undertake the practical application of it, but it's worth advisers having a broad understanding of it so they can explain the close process to the clients. In my experience if the accounts that your client is dealing with isn't familiar with shareholder protection, they probably won't be familiar with premium equalisation. So it's a great opportunity to open a line of dialogue with them and who knows, maybe get a bit of business referred back and forth. Although of course professional connections are one of those things that life companies always say are easy but in reality are harder to establish.

In terms of payment of premiums, don't forget these are own life policies so typically we would expect the life assured to pay the premiums out of their known net income. If they do that's, well what the accountant should do is arrange for an annual equalisation payment to take place between all the participants. Shareholder A will pay shareholder B a tenner, who pays shareholder B twenty pounds and pay shareholder C twenty pounds. So on and so forth. In my experience what happens more typically, is that the company certainly for limited company, for shareholder protection arrangements. The company pays the premiums on the participants behalf.

That's absolutely fine. It's worth remembering that if your client is doing that, those premiums will form part of their remuneration. They will be a P11D, a benefit in kind. To fulfil the equalisation requirements what the accountant can do is simply equalise those P11D benefits in kind.

Right, we've overrun a little bit, so I do apologise for that guys but hopefully you can see that the ownership protection can be quite a meaty subject, and we've really cantered through it today. Hopefully if you've had no experience of shareholder protection and automatic accrual and company share buyback, what today has given you is a very high level understanding. But the ability to ask the right questions of the client, an experienced colleague, or a contact of the life company. If you do want me to run sessions on this topic on a deeper level, we can do further webinars. Picking up automatic accrual on its own, share buyback on its own and go a bit deeper on own life under trust.

Or you know if it works, I'm more than happy to come out and see individual firms on a face to face basis and provide some training. I can see some people have asked questions. I don't think we're going to get the opportunity because of time to answer them now, but either I'll come back to you directly or your account manager will by registering for the webinar we have your name through our CRM system. We should be able to find your contact details.

Thanks ever so much for your time today. I'm just going to hand you back to Jo to finish off with a quick reminder of some of the awesome stuff that constitutes LV='s business protection proposition. Jo I'm going to hand back to you now. Thank you very much guys.

Thank you Marcus. And so for those of you who have used LV= in the past and are aware we do automatically include LV= doctor services. This does come standard at no additional cost. It’s 6 features. The first is a remote GP, giving your client access to over 5000 UK doctors. Everything is done remotely by via a telephone call or a video conference. So what that does mean is that your clients can use the features from the concept of their own home. They could be at the office at work. They could be on holiday abroad. They have that access to GP.

To go hand in hand with that we also offer a prescription service. So if treatment is recommended, the GP will issue a private prescription that is faxed or emailed to the pharmacy of the client's choice. And all of that is done within a two hour window.

On top of that, we also offer a second opinion service. For this feature we do provide your client with face to face access to specialists.

We now also include remote physiotherapy. So your client has five appointments per year. Any props that might be needed is posted directly to your clients at no additional cost. We also offer remote psychological support. Again five appointments per year. And again, this is all done remotely so your clients can use this feature from the comfort of their own home. It could be that they might need some cognitive behavioural therapy or some form of mental health support.

And then on top of that we also offer 25 per cent discount offer on health MOTs. So just to recap all of these features are included on all business protection propositions at no additional cost.

So we've recently moved all of our business protection processing over to our online system Fastway, to give you instant decisions. You can underwrite your client before you've even produced a quotation. It's very simple and easy to use. You can create multiple plans for your client all within one application, which makes the whole process much easier for you and your clients.

So we also include, at no additional cost, our LV= business care. So, for those of you who have not perhaps used LV= before or are unaware of this feature. This comes at no additional cost and gives your clients access to lawyers, solicitors through a helpline. So it could be anything from you know employment law, it might be health and safety, it could be something to do with a contract. On top of that your client also has access to tax and VAT support. So that's all on the current and new legislations, all ex HMRC employees. So, they really do know what they're doing. So it's really around you know managing the business from any sort of legal advice through to the tax and VAT side of things.

On top of that it could be inquiries around employment. It could be more of a legal dispute to say perhaps the contracts are not being paid by a client. All of that support. Again is it no added cost. So we've recently introduced online trusts, which make the entire process much easier for you, as you would complete the trust online. Here at LV=, we would still check that trust for you and then we would email the trustees and so on for an online doc to sign. We'll of course keep you updated of progress. The turnaround has been much quicker than the paper trust documents. So again this is making us easier to do business there.

So we have come to the end of the webinar. So thank you all for your time this morning. And hopefully we will speak to you again next week for the final presentation. Thank you very much everyone.

LV= Doctors Services

The LV= Doctor Services app helps you look after your health.

Whatever your medical concern.

Wherever you are.

Download the free LV= Doctor Services app from your usual app store.

Enter your email address and password to log on and complete a few personal details to get started.

LV= Doctor Services gives you fast, convenient access to the expert medical services.

Let's take a look.

Remote GP

Book a GP consultation to talk to a UK based doctor over the phone or video.

You can also chose the gender of your doctor you're most comfortable with.

Choose the time that suits you and find out more about your doctor before your appointment.

You'll receive an email confirmation as well as a reminder in the app itself.

Remote GP allows you to see a doctor through your phone wherever you are.

Prescription Services

If your doctor recommends a course a of treatment you'll be offered a private prescription.

Your private prescription will be emailed or sent to your pharmacy within 1-2 hours.

Second Opinion

Get a second opinion if you're worried or unsure about a confirmed diagnosis... whatever the condition.

You'll need your medical records. But don't worry - the app will guide you through how to do this.

Speak to a UK based medical specialist best matched to your diagnosis.

Helping you make a well-informed decision about your health.

Supporting your client with Income Protection

We know that when you're recommending income compensation to your clients you want to be sure that they're getting the right cover that fits their unique needs.

That's why our range of income protection solutions have been designed to protect your client whether they're working, not working, or getting back on their feet. Our income protection is easy to understand, all the features come as standard.

So your client can access our great benefits including Parent and Child cover, Rehab Support Services, LV= Doctor Services and more at no extra cost, covering them against more of life's challenges. And we have a range of options to suit different client needs. As well as our full income protection we now offer a budget version with a 12 month time period as well as our current 24 month budget option.

This gives your clients all the same features as our full version but their claim period will be capped at 12 or 24 months depending on their chosen option. Find out more by visiting the adviser site or contacting your account manager

Income Protection: Customer Story

My name’s Chris Nicolaou. I’m a managing director at a mortgage brokers in Hampshire.

I’m married with three children, two of them pretty much left home, one’s still hanging on in there.

I took out an income protection policy some years ago. I took it out really to run along side my life and critical illness policy. It seemed a good idea that if something was going to pay a lump sum to pay of the mortgage off and I still wasn’t working, it made sense to keep the income coming in – cash being king at the end of the day.

My main hobby is motorbikes. The wife hates them. But it was something I’ve done as a little kid, always have done, and done hundreds of thousands of miles on these things.

It was a normal day, out with friends. Wife funnily enough had just come home from work, she runs her own business, she’d just came home from work . So said a quick goodbye, went up the road on the bike and we went off. It was a beautiful sunny evening, on a Wednesday, just outside of Guilford and then the dreaded thing happened where you are on a position where you’ve come of the motorbike and done a lot of damage. Air ambulances and ambulance and police and everything, it was a horrendous accident. Ended up breaking both my legs. Got rushed into St George’s hospital. The trauma ward there were fantastic, absolutely brilliant but they weren’t sure if they were going to save one of my legs, which was quite worrying at the time. But they managed to put me back together. From there I went over to, that was St Georges in Tooting, from there I was transferred to Parkside private hospital in Wimbledon, where the surgeon took a look and I think he quite enjoyed the fact that this is going to take some putting back together. We had pins and new ligaments put in that they grew from stem cells and they just did a fantastic job.

I had seven operations in all, in and out of hospital really for the last eighteen months, last one was last November, sorry last September was my last operation and all being well that should be it for now apart from physio.

One thing I didn’t know was that the NHS will not help when it comes to physio and the costs of it.

The claims process was fantastic with LV=. We had a claims manager who looked after me, he told me the information that was required and we sent it in and he basically looked after me all the way through. If I had any questions he was always on the other end of the phone. It was just nice to deal with a person as apposed to a computer system that may have said yes or no.

I would advice any adviser, to talk about this more to their clients. It’s so important to actually have this policy in place. I think what we’ve done in the past is maybe looked at critical illness and that’s used up the budget, and because of that the income protection side has fallen by the wayside. But we are there to advise our clients because our clients don’t know what they don’t know. And if they need to find just a few more pounds just to put something in place, whether it be the budget or full blown IP, Income Protection plan, then we need to be talking to our clients about it and let them make the decision as to say ‘well no, I don’t want this’ as apposed to us not talking about it.

What I would say to other advisers is just run through, perhaps show them this story. Just show that things can go wrong and they go wrong really quickly – there’s no lead up of it will happen tomorrow or next week, it just happens and it happens in a flash! And all of a sudden your life is upside down, so talk to your clients about it.

Income Protection: Objection Handling

If you’ve not got income protection, take it! It really is the most important thing.

Well I’m Chris Nicolaou. I’m a managing director of a mortgage brokers in Hampshire.

You know things can go wrong, and they go wrong really quickly. There’s no lead up of it will happen tomorrow or next week – it just happens and it happens in a flash and all of a sudden your life is upside down. So talk to your clients about it.

One thing you don’t this is that it’s going to happen to you so you always think it’s other people, and ‘I don’t get ill’, ‘I’m not going to have an accident’, ‘what’s the chances are?’ and I think the same, I thought the same. You know it’s one these policies I left and I thought, ‘shall I keep it going?’ ‘I thought, oh well, it’s not overly expensive, we’ll leave it there.’ And blimey! It was such a life saver to have it.

I’ve ridden a motorbike, it’s just for fun, it’s a toy, and I’ve had them for years, done hundreds of thousands of miles on these things and we were out on a Wednesday evening. Beautiful summers day with friends and it was one of those days that all of a sudden change your life.

It does happen, things do go wrong and when they go wrong the first thing that gets hit, apart from obviously the family life, is the income. It needs protecting!

And when I actually took the income protection out, one of the things that I did really, was that I took out just enough – so I didn’t take out as much as I could, but I took out enough to see me through. But it paid the bills and it kept the family unit safe.

So all insurance comes with a cost but sometimes I think ‘well it’s maybe easier to find a few pounds a month for an income protection policy than trying to find a mortgage payment when you’re not earning.

Had I taken out the budget income protection that would have paid me for two years, well I claimed on mine for 18 months, so it would have fitted that. However, if my operation had gone slightly the wrong way, I could have claimed on it to the age of 65, but it’s worth having quotes on both.

I wasn’t surprised I didn’t get any state benefits because the state benefits are really non-existent and if they are there, it’s such a small amount of money.

If you’re employed, I think it’s normally three months or six months full pay, then half pay – it will stop after a time. One of the LV= obviously you can always use the deferred periods to match that and then it’s down to company discretion. I don’t know many employers that will actually pay when they don’t have too.

One of the things with any income protection, one of the myths are they don’t pay out, they do! And over 90% of the time. I know that because I’m in the industry. But you do still have that little bit of worry when you put a claim in, ‘I wonder?’ But LV= did, they did what they said they would do and they continue to do that.

When you start to recover, a lot of people said to me in the past, ‘well as long as I can pick up the phone, I can run my business’. I thought that myself. I can still speak to my clients, so long as I have a use of an arm and talk, everything will be well. That’s just so not the case. When you’re on a huge amount of painkillers, morphine, such like, just to keep the pain at ease, you’re in a position where you cant actually focus that well.

My wife ended up taking some time off to look after me. I had to get different things in the house because I was in a wheelchair for several months. So by the time you get a hospital bed downstairs, that was about £1000 to hire, and then about £200 a week to hire. And then plus all the other bits: I had to buy a wheelchair, ramps to be able to get outside in the case of emergencies. All these extra costs and the impact that has when your not earning any money, the impact that has on the business as well as your savings - you know the bit you actually get from somebody like LV= is an absolute lifesaver because it just tops up, it makes up that bit where you would really eat into your savings and so quickly.

I still look back at the policies we’ve sold and it’s so heavily weighted towards the life and critical illness side of things and really talk about income protection as almost like an add on to that. Almost to a degree that it’s almost an afterthought. Actually it should be so the other way around. In an ideal position like I was, I had the life and critical illness and the income protection was to run along side that. Because, as I say, if you pay of your mortgage, if you heaven forbid, you had a critical illness or diagnosed with a critical illness and that paid off, you’ve still got to replace that income. That’s done its job with no mortgage, the bills will still keep coming in: you will still have your food bill; still have the on-going utility bills to pay for, you’ll still need to run the car. None of that goes away so what can happen without the income protection is that you don’t actually use all that money to pay of your mortgage off with the critical illness. You tend to pay maybe part of it off and then use some, which will eventually run out in time, to actually keep you going on a monthly basis. Whereas a policy with LV= took me to age 65 so, well even I’m you know it takes me to retirement well the mortgage will be gone by then.

The impact of not having any cash is an horrendous thing because it actually stops you getting better as well because you start to worry about money, how much things are going to cost; the impact it has on your family and your children - so it’s an incredibly important policy and something that I think would be, almost an injustice really, not to actually talk to our clients about this policy and make them aware, really make them aware, of how serious this can be. It certainly changed my thinking.

Business Protection: Key Person Cover

Business as usual can suddenly become very difficult if one of your key employees, someone the business heavily relies on, dies or suffers a serious illness.

How long could your business survive without them?

Different types of businesses will have different key people.

They could be your best performing sales person, a software engineer, one of the business owners.

And the risks associated with losing a key person can include:

Production being stopped

Sales targets being missed

the loss of important business contracts

the business might have to pay large penalties if goods or services aren't delivered

and your bank might lose confidence business loans can be repaid and demand the debt is cleared

Key Person cover is a type of insurance that can protect the survival of your business.

It pays out a lump sum if your key employee dies or is diagnosed with a critical illness.

You can use the money to:

or clear business debt that would have to be repaid due to the loss of a key person

help cover recruitment costs

make up any loss in profits and keep the business running whilst you're looking for a replacement

Key Person cover can give your business the breathing space needed during a period of instability and uncertainty.

To find out more, please speak to your financial adviser.

Business Protection: Share & Partnership Protection

What would happen to your business if one of the owners suddenly died or suffered a serious illness?

Could you afford to buy their share?

If not, the affected owners family might sell their shares to a competitor or someone else completely unsuitable.

This can be disastrous for the long term survival of the business you've worked hard to build.

Business owners are usually the life-blood of the firm, with staff relying on their experience and knowledge.

Their sudden loss can heavily impact morale, leaving staff worried about the future of the business and their jobs.

Shareholder and Partnership Protection is a type of insurance that gives surviving business owners the money needed to buy the affected shares.

It can help ensure you keep control of the business and give staff confidence that their jobs are safe.

The money also ensures that the deceased owner's family are looked after and receive full market value in exchange for their inherited share of the business.

You probably already protect many of the important things that keep the business running smoothly, like property, fleets and stock.

So it makes sense to insure your most valuable assets, your business owners.

For help with setting up Share or Partnership Protection, please speak to your financial adviser.

How smoothed funds can support anxious clients through the emotional journey of investing

In the January edition of our quarterly webinar series we explored how our smoothed funds support anxious clients and updated listeners on the latest fund performance.

Download the slides for webinar with Columbia Threadneedle Investments

Kirsty Wright (KW)

John Grundy (JG)

Matt Rees (MR)

Steve Armitage (SA)

KW: Good morning. Thanks for joining us. My name is Kirsty Wright. I'm the senior proposition manager at LV= and I'm responsible for the Smoothed Managed Funds proposition. Many thanks for joining our webinar this morning.

If this is your first time, we run these webinars quarterly with Columbia Threadneedle to give you a chance to hear directly from the fund managers about our Smoothed Managed Funds. If you’ve dialled in before, welcome back.

Today's agenda is up on screen now and we will be we'll be running through that shortly. The webinar is CPD eligible and certificates will be sent out at the end of the session.

We're collecting questions throughout the session and we will try to answer as many of those as we can as we go. Anything we don't get to by the end of the session we will pick up directly with you afterwards.

So, we'll be looking at some particular aspects of our Smooth Managed Funds today client suitability, our smoothing mechanism and then three key aspects of investing in the funds. Downside risk, long term performance and volatility. Then we'll hear from our investment experts, our partners at Columbia Threadneedle: Matt Reese and Steve Armitage.

And after we've heard from Matt and Steve, we'll go back and start looking at different ways that we can add value to your pension investment advice process. And please stay tuned in because we'll also be having details of a new special offer that we're launching soon.

Just to reiterate if at any time you have a question please use the facility on screen to ask it and we'll monitor them throughout the session.

Before we move on to the main objectives of the session I'd like to introduce Jon Grundy, our Partnership Development Manager here at LV=, and put him on the spot by asking him to give us his ‘in a nutshell’ or ‘elevator pitch’ on the benefits of the Smooth Managed Fund proposition.

Jon over to you.

JG: Thanks Kirsty. Good morning everybody. My sort of 10 or 15 second pitch about this proposition for clients, I think I would describe it as sort of wonderfully unexciting in many ways. You'll understand more about that as we work through the presentation. But these funds I believe and we believe are perfect for those customers that want a peaceful tranquil unexciting investment journey. Those clients that are more concerned about potential losses than potential returns. That's how I would sum it up quite succinctly.

KW: Lovely, thanks very much Jon. Okay. As I've mentioned the session is CPD eligible. So, here's a note of the webinar objectives and to give you an outline of what we'll be going through today.

So, a bit of an introduction to our Smooth Managed Fund range. For those of you that are familiar with the funds, you'll know we have three risk-rated funds: our Cautious, Balanced and Growth funds. They're available through our pension, our ISA, that was launched in the summer last year, and our Flexible Guarantee Bond. The funds are actively managed to our mandate by Columbia Threadneedle and we have two levels of investment protection within them; a unique smoothing mechanism, which Jon will cover often a bit more detail later, and the option to provide a capital guarantee. Details on that guarantee vary slightly by product and we'll be available from your local retirement consultant.

Our new strategic asset allocation was fully implemented at the end of last year providing some greater diversification and driving growth whilst maintaining our same levels of risk and the low volatility that we feel is so important. And now I'll hand back over to Jon to talk us through some key aspects of client suitability, risk levels and how our approach to smoothing can really help.

JG: Thanks Kirsty. So, let's have a look at the type of clients that the Smoothed Managed Funds could be suitable for. Primarily we're looking at low to medium risk-rated clients who are uncomfortable with financial uncertainty and have a more cautious outlook to investment. While suitable for any age of investor, it is the risk profiling and obviously the emotional concerns of the client that truly matter for those close to retirement, or have a clear retirement date in mind. It's likely you're going to be more cautious about sudden market volatility.

The clients in that life stage are likely to be concerned about sudden investment losses, given the limited time that they have to recover those losses, especially if they've got a date in mind as I previously mentioned, the investors in these funds are likely to be prepared to forsake some investment growth in return for some more security. And if they are faced with losses, they'll want to minimize them as much as possible. So that's a quick throw away to my wonderfully unexciting type of client that these would be suitable for at the beginning of the webinar.

I think Kirsty has already mentioned that they are risk-rated. They’re risk-rated by two of the leading independent fund analysts as you can see on the screen; Defaqto and Dynamic Planner. The risk profiles are three, four and five and we're quite proud to say I'm pleased to say again to give some more confidence in the clients that have invested in these funds and will in the future, is that they've maintained those risk profile things during what we believe and I'm sure you've experienced have been difficult trading conditions over the last 18 months to two years or so.

So given that the built-in smoothing mechanism is the feature that's most crucial to make the makeup and profile of these funds, let's have a closer look at how it works. On the screen in front of you, you can see that the green line as the behaviour of the underlying or the unsmoothed price within the funds; the blue line is the smoothed price.

A new investor enters the fund on the underlying price and after a period of 26 weeks then moves on to the smooth price automatically. As each day moves on, so just a 26 week timeframe of the smoothed price and the smoothing mechanism. Very simplistically to understand, it works by averaging the daily price for the preceding 26 weeks. It's simple, it's transparent and it's based on actual performance rather than trying to predict the future. The smoothing mechanism provides a more consistent investment journey and this volatility management is the key to the success of the fund and key to providing your clients with the comfort and security that they crave.

So, let's have a look at a real life example showing the value that smoothing can bring to an investment portfolio. 2018 was a turbulent year in the markets. The FTSE 100, as shown here went on a bit of a rollercoaster journey and ended up 8% down. By comparison throughout the year, the balanced Smoothed Managed Fund stayed above the water.

Obviously, this is just one year in a long retirement journey for clients but from a practical point of view it does illustrate the impact the market movements can have on a pension fund.

Still looking at this graph, consider the client taking their annual income, if in a drawdown contract, at the end or start of the tax year in April or the end of the calendar year in December. The extra units that they have to be selling to provide them with the income level required thus having fewer units it would have an impact on the future growth potential when the markets rise.

One of the values of these smoothed funds if people are taking an income from their pension is that it greatly reduces the risk of timing those withdrawals also known as the risk of pound cost ravaging. I think this graph quite simply and plainly illustrates how valuable it can be to have a smoothing process at that stage of your retirement journey

Effectively what the built-in smoothing mechanism is guarding against is downside risk. As we saw in a previous slide, markets can decline over extended periods but it can also be illustrated by looking at the comparative biggest daily decline. I'm not going to read through the slide, the bullet points on here, but you can see the information, but I'm just going to go off piste a little bit in terms of what we did some work and some research on these funds at the back end of last year, I think it was about November time, comparing these funds to the FTSE 100.

Now I know it's not a like for like comparison but in real life quite often it's the News at 10 headlines around the FTSE that stir your customers emotions and get their worries and concerns about how their investments are performing, and probably when there's a big News at 10 headline and the markets have crashed so to speak, perhaps many of your clients have been on the phone the following morning worried about what their portfolio is doing, so we just had to look at that.

As I said because it's the emotional security that many people crave in these funds. I just want to ask you a question just to think privately amongst yourselves at the moment or opposite the desk if you're in an office listening to this with other people.

But in the previous five years which was 1,331 working days, how many days do you think that the FTSE actually fell?

I'm looking around the room our guests here and the investment guys are - the investment guys are raising eyebrows and breathing inwardly.

300. 300 on to my left and the other office in the room 150. All right I'm sure we've got we probably got hundreds of people dialled into this and a wide range of answers but out of those 1,331 days the FTSE fell on 638 of them. So almost half, 48% to be precise.

If we have a look at how our Smoothed Managed Funds performed over that same period on the smoothed price, the Cautious fund fell for 21 days, the Balanced fund 37 and the Growth fund 59 against, just to remind you, the 638 of the FTSE 100.

Just a little anecdote there some work that we did but hopefully that’s just to demonstrate over a five year period it's a pretty tranquil investment journey for the clients that were invested in these funds and that should be maintained moving forward.

The other figure that's on the slide here is you said in that since the Brexit or the day after the Brexit vote in June the UK markets fell by 3.2% in one day! The biggest single daily fall in any of our funds on a smoothed price since the launch of 2011 is actually 0.09%.

As you can see on the screen. So that's the biggest single daily drop being less than one tenth of 1% of the fund. The unit price I should say.

So I just think that that illustrates how consistent the performance is and how flatlining if you like the excitement of the investment journey is it gives people a calm, a comfort, and a less anxious investment journey, which is exactly what these funds are designed to do and those types of clients for who they're applicable for.

So obviously alongside the protection against market volatility, the investment performance is also crucial. It's key to manage expectations here as far as the Smoothed Managed Funds are concerned. Performance is not designed to shoot the lights out. To be honest we're really happy with that and that's the mandate of/ the objective of the funds because we think that if they were designed to shoot the lights out, then that gives an implication that there's higher risk and therefore the higher potential investment loss for those clients which is not what we want to deliver.

You can read the numbers on the screen I'm sure, but if you look across the screen from the Flexible Guarantee Bond 10-year performance - we've got 10-year performance for the bond, we've got 5-year performance for the pension - they both went through the respective anniversaries last summer. But I think if you look at those funds a 65% return, 77% return, 87% return, for ease of referencing the top line. I think if your cautious clients and the clients that these targeted for were receiving returns of circa 5, 6% per annum I think they'd be satisfied with that.

And this is a slide that we've used before and I'll just touch on again because we think it demonstrates the point about volatility management fairly well.

The vertical axis is performance, the horizontal one is volatility for clients in these funds. You want to be top left somewhere. And as you can see that's where they sit at the moment. So that's just a bit of evidence from FE analytics bang up to date for us off the 3rd of January that these funds sit exactly where we want them to sit in terms of their volatility management and the performance in that respect.

So, to summarize these funds are suitable for clients that are worried about investment losses and want to protect against the downside risk. The smoothing mechanism delivers this through its volatility management and they provide steady consistent returns. The word I've use quite a few times through this if you combine all of those four bullet points I think it gives your clients comfort in their investment journey. They're not applicable for every single type of client. We're not saying that they are but for the appropriate risk profile and for the people that are concerned more about losses than gains, these fit perfectly and deliver what we think takes risk off the table and deliver some consistent performance.

So that's it from me. But just quickly before I hand over to Columbia Threadneedle, I think we've got the vote results of the poll come through. Piece of paper being handed to me as we speak. Live bang up to speed. We've got two thirds of people said that their clients are more cautious in light of recent political events. So, I think these funds for those two thirds of the people who voted are probably well worth investigating if they're new to you from this webinar I'll be back later on to close.

KW: I've got one question that's been raised.

Jon already just before we hand over to Matt and Steve and you've touched on it already but can these funds be used in a drawdown environment.

JG: Absolutely yeah, absolutely. Whilst they are suitable for accumulation and deaccumulation, we are seeing a lot of business because of the volatility management and the consistent returns being used for the drawdown arena. Absolutely.

KW: Lovely. Thank you very much. And now we can hand over to Matt Rees and Steve Armitage from Columbia Threadneedle to tell a story, a view from the fund managers’ perspective.

SA: Kirsty and Jon thank you very much.

My name's Steve Armitage - delighted to be here along with Matt Rees. Obviously one of the portfolio managers for the FG funds. Just very quickly wanted to say how delighted we are to be the managers of the underlying funds, I work so closely in partnership with LV= on those and actually you’ve chosen the right person in me to ask the questions of Matt today because I too am wonderfully unexciting. So anyway, over to a couple of questions for Matt.

I think it's probably right to start with a little bit a rear-view mirror gazing. I know you never want to look backwards too much but quite clearly, you've already highlighted a couple of bits Jon, in terms of how the smoothing mechanism works by looking back over the past, but 2019 was an interesting year. You know it was pretty strong in equity markets. You know we saw some decent returns across a number of them. Does that mean that they're actually going to start to take a little bit of risk off the table maybe perhaps, Matt?

MR: Well you see 2019 was a great year for equity markets and certainly the left hand side of the slide shows the world mark world equity markets up 30% UK up 20% when Bonds returned about 10% for the year.

But what you're forgetting is that when you look at this kind of data is that how bad or poor Q4 2018 actually was. So, you suffered some markets were down, in terms of equities were down 20% over that quarter. And so, the chart on the right hand side kind of illustrates how if you run it run a kind of return spectrum over five over those five quarters, you're looking around 10% of returns cumulative over that period for both bonds and equities so there's not a great deal to choose between.

So yes, that specific calendar year period was a stellar year but volatility is included if you add one more quarter to that. And so yeah, we certainly think there's space for risk assets to perform and the point here is that maybe it wasn't quite as stellar optically.

SA: Well there are lies, lies and damned statistics as people often say isn't it in terms of where you're looking at things, and our audience out there will know that very well in terms of all the research that they do when they're looking at funds and indeed products that they use.

And so, it's an interesting point as Q4 2018 was indeed quite painful actually especially for a good quality growth house like ourselves where we're looking for companies with sustainable opportunities of growing their earnings and keeping that going but obviously that was slightly out favour in 2018. But that's interesting. So, what you're saying effectively I think is that actually although optically looked fantastic and in everyone's going to go all over the world is expensive from an equity perspective. Clearly there are some significant opportunities.

So, talk us through those for 2020.

MR: Well exactly - the background environment is okay. Yeah, generally speaking we were expecting modest economic growth but again not super or not stellar, in terms of the monetary policy backdrop. The central banks appear to be on the cusp of easing again.

The Federal Reserve, we're looking at another cut coming from them this year, and our interest rate team actually is expecting two to come from the Federal Reserve. And with this week we saw softer inflation data out of the UK, some GDP a bit softer as well, and there's talk of the MPC reducing bank rates again at some point in this year as well.

So monetary policy is certainly still on the positive side for risk markets. The ECB is doing QE and there's a good strong technical flow specifically for the investment grade credit that these funds are invested in so that's it that's a good positive.

And in terms of equities and corporate earnings on the slide on the left hand side we're looking at, for your domestic markets, we're looking at, well we are forecasting rather, high single digits earnings growth out of equities which is pretty okay really.

SA: Yeah, so the corporate world is in good shape basically.

MR: We’re certainly not forecasting a shoot the lights out year but in terms of sense of growth since the financial crisis, I think only two years have earnings actually been better than these kind of high single digit numbers in kind of lots of years where they've been zero or negative earnings when you look globally. So, this is this kind of environment is pretty good. So, if equities earn equities make these earnings and we have to see know kind of valuation adjustment then it will be a decent year.

SA: Interesting. So that's good news obviously, hopefully for everybody else that's out there listening in as well. Obviously, environment supportive. That's great monetary policy there's lots of talk about fiscal policy being supportive as well. Clearly, we've got a little bit. It gives me a little bit more political stability shall we put it. I know that was touched upon earlier in terms of the cautiousness of clients because of the political uncertainty that we've seen but that's now sort of out the way.

MR: That directly played into our positioning in last year. In terms of middle of last year so that the chart showing now is our asset allocation grid. And in the middle of last year equities, we downgraded to neutral for a number of reasons. They performed very well in the first half of 2019. The so that they were looking a little bit rich from a valuation perspective but also the trade war was very front and centre and we were worried about this but since we've had pretty much a Phase 1 deal agreement in December but that backdrop has improved, the valuation isn't quite as testing.

I spoke about how equity earnings are looking pretty good. And other factor is forward looking indicators around the middle of last year in terms of economic growth such as PMI’s were that we were largely predictors to fall coming into Q3 and there's a bit of a slowing environment whereas now it seems that we're seeing the pickup kind of globally, or at the least a basing and so on PMI’s.

SA: On PMI’s? So basically, they're all above the line of 50 right?

MR: So not necessarily all above the line of 50

SA: that's when you own it that's where you know you're in expansion.

MR: It's also the change in the level right the PMI effects as well. So, if it's falling… but if we're stabilizing or building back up which we seem to be generally at the moment then that's another positive for equities. So, this is this is why last week we raised our equity outlook and score on the grid from neutral to favour.

SA: Yes. Yes, I was going to ask you about that because that's good because it sounds like that the stool or the legs of the stool are all in place in terms of supportive for equity. So, we've gone as a house back to favouring. Is there any specific areas that clearly are very interesting?

MR: Certainly, we still like Japan and Asia and we have and regular listeners will recall me talking about these previously. Japan has a structural story of improvement for governance of companies and Asia, we see good quality companies there enjoying good growth but the key one which you're kindly teeing up is certainly a U.K. equities and the election result that we saw which was well as any possible, going into the elections scenario seemed to be a possible outcome really. We could have had a Corbyn-led coalition or a small Tory majority or we ended up with a large Tory majority and for equity markets in the UK, finally, you have a stable government for a five year period. It’s a large enough maturity for Boris Johnson not to need to pander to the DUP or even the extremity of the Conservative Party. He can literally choose his own line and so equity markets and not having to worry about ‘will the Prime Minister last the week?’ ‘Will a whole new government come in?’ and the Corbyn risk has gone.

So, the big tax increases or the nationalisation agenda is off the slate now.

SA: And markets obviously don't like uncertainty so that's the great thing isn't it.

MR: And the key thing about UK equities is clearly Brexit. Now we're not saying Brexit has gone away. There's a lot of stuff to work through but Boris Johnson has a mandate now. And if you look at the two charts here I'm showing now. They're both PE ratios of the FTSE 100.

The left hand side is versus the MSCI World and the right hand side is versus the European market, the Eurostoxx600, and they both they both show that since Brexit how the valuation, this PE measure of equities, has cheapened versus both global equities and also Europe. Now you might say world equities, well they've been dominated by US tech. It’s been such a strong performer that anything versus world that isn't US tech is going to look like this.

But the key point on the right hand chart if you look is the average difference between UK equities and Europe and the Eurostoxx over a decent 12 year period or so is roughly half a point, if you like cheaper, and we're currently trading one and a half cheaper and that is a significant valuation opportunity evaluation opportunity which exists and we put the majority of this down to the Brexit risk.

Given this stable environment we have in terms of government leadership for five years and Boris Johnson having such a good backing from his party and the large majority there is, we think that there's a tactical opportunity for this gap to close over the coming months.

SA: And that's great as well because you know something else that’s not on here but you know I was chatting to our Head of Equities, Richard Colwell the other day head of UK equities sorry, Richard Colwell. He was talking about the UK market being the cheapest it's been versus the US for over a hundred years which is phenomenal as well really. So you know there's a real opportunity I think for UK equities moving forward from here. We're certainly out there banging the drum in terms of, in terms of the capability that we have because you know you've got access to the underlying building blocks for LV= you've got great access from large cap income growth to small caps

MR: on select funds

SA: Yeah, absolutely.

So you've got you've got real breadth on the UK side of things. So that's really you know that's a real opportunity I think and it's great that we've moved that way. You know I think bringing it all back together in terms of the FG funds and everybody that's on line you know what does that what does that actually start to look like now in terms of these opportunities that are presenting themselves in terms of these underlying building blocks that you can access within the framework of the strategic asset allocation within the FG funds what's the opportunity set moving forward for everybody within FG.

MR: So, there's two parts to answering that question. So the first one being our tactical asset allocation and quickly looking back to our asset allocation grid you can see how we are tactically positioned, we are favouring equities and we are favouring credit, and we are underweight government bonds so versus the strategic asset allocation of each individual FG fund then we are overweight equities, we’re overweight credit and we're underweight government bonds, and to an extent underweight cash at the moment. Property we're currently neutral in the grid and so we're maintaining a neutral position there as well.

I mean you may say to me credit spreads, they've rallied a long way through last year, are they not looking a bit tight at the moment? I would agree of that but there is as I mentioned that's a good strong technical from the ECB going on at the moment, so we're forecasting kind of, or expecting sideways-ish moves in yields and spreads. So credit should pick up its pick up its yield but you don't expect too much into the extra capital.

SA: Bit like property I guess property. But you probably pick up his yield in rental income. But capital is a little less safe.

MR: Certainly the strong areas of property such as industrials and offices I think the outlook is pretty good for both. Yeah retail sector everyone is struggling as I’m sure listeners are fully aware of. And then in terms of – so this is our relative positioning - but then in terms of the SAA in this strategic asset allocation of the funds.

Now this chart on the screen shows the original SAA and the new SAA.

SA: Which Kirsty referred to as being belly down at the back end of last year.

MR: Yeah. So we migrated to this over a few months and there's a few key points to mention: one that was added was the Dynamic Real Return Fund which is a diversified growth fund vehicle run by the asset allocation team, run by Toby Nangle, who is the lead on that.

And so that's been put in as part of the SSA. It's 5%. So what I'm showing here is the Balanced fund. It's just a balanced fund.

SA: Yeah. But it makes the point that so those other levers and the other two are the changes you can see here represent the other two. And then the other changes are essentially a diversification. So in bonds, the government bonds are diversified out of gilts into gilts and U.S. Treasuries.

The credit section which used to be just pretty much UKIG has moved into the U.K. global IG and high yield as well. And in equities which was very U.K. heavy, it's now that U.K. section has decreased somewhat and the E.M. equity has expanded as well has Europe Japan and the US as well. So if we've had diversification within asset classes and by the addition of the Dynamic Real Return Fund, we've had diversification across asset classes as well because that that would be an alternative asset.

SA: Yeah. Well there's a lot of breadth in there now isn't it. Many more levers to pull.

MR: Exactly, by increasing the weight in the SSA of areas like Asia adding things like Treasuries, it just gives us further scope of areas to underweight. So increases our tactical ability too.

SA: Brilliant and then deliver those returns for all of the clients there that can then be smoothed out along that journey, as was referred to earlier. Well thank you Matt. We're obviously here for some questions after as well but I’ll hand back to Kirsty.

KA: Couple of questions that have come in so we'll pick those up now. First question Matt; it's been 12 years since the last market crash, can markets continue to grow for much longer without a big correction?

MR: We think the rally does have some legs in it still, and in terms of time we do have a chart which I didn’t include in the pack which shows how, yes the it's been a very long rally, probably longest in history, but the extent of it in terms of how five rallied up is not that extreme and current valuations, whilst one could argue equities are mildly on the rich side before, you know, crashes that were referenced in the question, valuations tend to get very silly.

And so, we're wary of selling too early because in your in last move up of a bull run you tend to get some very nice returns which you know you obviously don't want hold of the whole way through, but we're also wary of saying too early, so the answer is yes we do think on the kind of returns that have been accumulated over the last 12 years that we can't continue for another year or two.

KW: Okay great. And then one final question for you at the moment; do you have the same property fund issues as some of the other fund managers in the market in terms of liquidity?

MA: These funds did sell as you can see from the SSA slide, they did they did sell a large chunk of property over a number of periods and we were very closely with the property guide to manage liquidity and make sure we can do it effectively. In terms of the actual property fund itself.

SA: Yeah. So we're very comfortable with the liquidity that we have we have a sort of corridor of a range of cash within the fund.

We are firmly within that corridor and flows which is obviously what everybody is worried about are very stable actually - some days positive and some days ever so slightly negative. So in terms of cash, in terms of you know our transactions that we're doing within the property fund the whole team is very comfortable with that. And it was you know as Matt referred to what was really helpful is these changes in strategic asset allocation that LV= had you know for the benefit of the FG funds over the longer term, we worked really well with the team on that as well so, touch wood you know we are in a decent position as we currently stand.

KW: Lovely! Thanks Steve. Thanks Matt. Okay. I have a couple of questions for Jon. You want to cover those now? So, one of the questions that has come through. At LV= do we allow you to allow monthly tax free cash payments?

JG: Yes, we do, is the short answer to that. Via a monthly cash plan facility through our Flexible Transitions Account which we introduced to the pension proposition or middle of last year or some time but I have an answer to that question, yes we do. Yeah.

KW: Thank you. And sum this one up in a nutshell if you can, how does the LV= smoothing process differ from others in the market? For example, the Pru there.

JG: In a nutshell, quite simply we base our smoothing process on the events on unit prices that have actually happened. So our competitors, including the Pru, predict what's going to happen in the future and then that's why they apply the EGR rates to their products. There's a very strong proposition at the Pru, don’t get me wrong, but as we all know have seen they have had to make adjustments from time to time.

It's a really strong proposition, but the way ours differs is basically because we process ours on events that have actually happened, not predicting the future.

KW: Thanks very much. OK. We'll move on. And I'm pleased now to be able to share with you some headline details of a special offer that we're about to launch to market. This is in relation to our Flexible Guarantee Funds, so the funds that are available through our pension wrapper. And we'll be launching next week on the 22nd of January.

So, we will be waiving the first year's pension wrapper charges for cases where clients invest 100% of their money into our Smoothed Managed Fund range. So we've got some details on the screen there about our charging. Obviously we've now got a proven track record of performance over five years which we we're very pleased to announce the results of last year and an online quote and apply process available through the funds. So this offer will be available through the pension fund version and so not specifically on the bond or the ISA but to run to the end of the tax year. So starting next Wednesday and for all applications received up to the end of the 5th of April this year.

Also gives us an opportunity to talk a little bit more about how we, as a mutual company can provide some benefit back to our members in terms of mutual bonus. So just moving on and looking at that for a moment as a mutual we don't have shareholders. We're owned by our members and as a result of that we allocate back a proportion of our profits to those members in the same way that proprietary companies would pay dividends to their shareholders. So each year we look at adding a mutual bonus to the value for members with eligible policies.

The Smoothed Managed Fund range through the FGF version and the Flexible Guarantee Bond are eligible to receive that mutual bonus and that bonus gets declared on the 31st of March each year. Over recent years it's varied between the product set and the series that we have of between around 0.2% and 1% depending on market conditions and the profit levels of the business. But since 2011 we have declared £182million of bonus to our members in this way - quite a substantial amount, I'm sure you'll agree. And we'll be looking at confirming the level of that bonus that we'll be paying this year on the 31st of March.

As well as the mutual bonus, all LV= members get free access to our Doctor Services and details of that will be available through your Retirement Consultant. They also get access to a 24/7 legal helpline and discounts on various LV= general insurance products.

So putting all of that together you can see that our members are getting much more than just a pension plan. And at that point I'd like to hand back over to Jon and he'll talk you through how we can add real value to your investment advice process.

JG: Thanks Kirsty. Yeah. Again I'm not going to dwell on everything that you can read on the slide but what I'd like to draw your attention to is the bottom two bullet points that the new pieces of material support that we've got for you which will be available for you through your Retirement Consultant, so contact them or if you're not sure who that is please give the details of that in the feedback at the end of the webinar and we'll make sure that somebody contacts you to talk things through. But what we have recently produced and is available, and I actually used for the first time yesterday at an appointment, is our new adviser guide to the Smoothed Managed Funds. That contains all of the information that we've gone through today, together with a lot more detail for those of you that we'd like to dig under the bonnet a little bit more.

It was well received in the appointment I had yesterday, and I certainly think it's a really useful document for those people who are, whether you're new to the Smoothed Managed Fund proposition or whether you just liked to refresh and have something on file to keep you up to date with all of the recent changes in performance, etc.

The other thing that is coming soon that will land shortly is the Investment Principles Practice and Governance brochure, which I'm sure when it's in publication will be extremely valuable to all of you for your due diligence be it, for those of you that are using us already or for those of you that want to consider adding us to your investment solutions for your clients as part of your governance and due diligence. So watch this space for that one but please contact your Retirement Consultant for news and updates on everything that we've talked about or if you want copies of the Smoothed Managed Fund adviser guide

KW: Okay so just to summarize what we've covered today; we've talked you through our Smoothed Managed Funds and the risk-ratings for those funds.

We talked to you about the choice of investment vehicles that they're available through; our pension; Flexible Guarantee Bond and the newly launched ISA.

Jon’s taken you through some bits around client suitability. So, looking at those low to medium risks, those wonderfully unexciting clients that are uncomfortable with financial uncertainty.

We've looked at three key investment criteria; the performance of the funds; the volatility and the downside risk protection that they provide.

You've heard directly from our fund managers. Thanks again to Steve and Matt from Columbia Threadneedle, and hopefully you have got to understand a little bit more around our award winning investment strategy.

And obviously we've talked you through our special offer and just touched a little bit on the mutual bonus and the support for the advice process

So just a reminder there of the objectives and the aims and subjects that we've covered today - you can see those on screen so I'm not going to go through them line by line.

I'd like to thank you again for attending. A reminder that CPD certificates will be sent out at the end of the session and any questions that we haven't covered as we've gone through the session today we’ll be picking up with you individually over the course of the next few days.

So thank you very much, we'll be looking to hold the next one of our quarterly webinars in three months and look forward to welcoming Columbia Threadneedle back to join us on that session and for now thank you very much for your time.

Explaining Smoothing for clients

Looking to grow your investments but worried about the ups and downs of the market?

The LV= Smoothed Managed Fund range could be what you’re looking for.

Smoothing helps reduce the stress of investing to offer you more tranquillity.

It gives your investments the potential to grow while helping protect what you’ve saved so far.

We use smoothing to average out the short-term ups and downs that come with stock market investing, so your money is better protected against sudden market volatility that can often induce anxiety.

Smoothing won’t protect funds against sustained poor market conditions, but it helps give stability and more peace of mind.

Here’s how it works.

After 26 weeks investment value moves to a smoothed averaged price, which is an average of daily fund prices from the past 26 weeks.

When markets are growing, smoothed prices will increase at a slower rate than the underlying prices. When markets are falling or fluctuating, the smoothing mechanism will help protect your investments against sudden volatility.

This is why the LV= Smoothed Managed Fund range is ideal if you want to reduce the risk to your investment and help protect the money that you’ve accumulated so far.

Our Smoothed Managed Fund range can be accessed via our:

Pension (Flexible Guarantee Funds),

Bond (Flexible Guarantee Bond),

And ISA (LV=ISA) products.

To find out more, speak to your financial adviser.

The Smoothed Managed Funds are stock market related investments so you aren’t certain to make a profit and may get back less than you invested.

Introducing the LV= ISA, part of the Smoothed Managed Fund range

This summer we launched our new stocks and shares ISA as part of our Smoothed Managed Fund range. In this video we share the feedback we've had from advisers.

What have advisers been saying about our new ISA?

Richard Humphries, Retirement Consultant

My advisers that I've been talking to have been more than excited about the launch of the LV= ISA.

Everybody has been really receptive. It's landed really well and they think it's a fantastic addition to what we do alongside you know as being part of this Smoothed Managed Fund range here at LV=

Louis Marasco, Retirement Consultant

I've got a lot of advisers who currently use us for the smooth funds, so it's been a welcome addition.

Aimee Hughes, Retirement Consultant

I think that we already had a really strong proposition on the retirement side of it and also the investment bonds. The fact that the ISA is now launched is just giving us the opportunity to look at those business models with the advisors and being able to plug into retirement, investments and the ISA as well.

Connor Williams, Retirement Consultant

Diversification is key and the advisor will now and obviously this now does give that next, that other option was before they might have been only able to go down the one route in this area.

Isaac Iheanacho, Retirement Consultant

It's good that we can have different avenues to go down with it being a pension or a bond or now in an ISA, and I think for IFA's the ISA is the bread and butter of investments so being able to offer that through LV= now you know we're already very popular with advisers so it's good that we can have something that's a popular investment proposition in our Smoothed Managed fund range.

What have advisers been saying about the Smoothed Managed Fund range?

Richard Humphries, Retirement Consultant

My advisers that I speak to on a regular basis are really receptive and real big fans of the smoothing that we have in place within our Smoothed Managed Fund range. It's very clear and easy to understand.

It's very straightforward and very easy to put across to the client so they know exactly what's going to happen.

Louis Marasco, Retirement Consultant

What it does do is allow them and their clients to have everything under one roof which helps with just consistency. I think a lot of clients do like everything in one place if they possibly can have that and that we're able to provide that it's gone down really well.

Richard Humphries, Retirement Consultant

Well as we know Columbia Threadneedle, who manage the Smoothed Managed Fund range for ourselves are extremely well-known. They're very reputable and very trustworthy. I think there's also a real level of respect that we find when we speak to the advisers and they're happy that we work alongside Columbia Threadneedle and they've got the security that they know such a well housed fund manager is looking after the Smoothed Fund Range

What’s the best feedback you’ve had from advisers?

Connor Williams, Retirement Consultant

The fact that it is actually easier to place business with us in the ISA because it's a personalised illustration which is two pages long on an online form to get a quote done, and it's a case of scrolling down and doing your application form there and then that's exactly what advisers need.

Louis Marasco, Retirement Consultant

So the best feedback on the ISA so far from our advisers has been the literature we've been able to produce and able to send out to them and the clients when they sign up with an ISA with us.

Aimee Hughes, Retirement Consultant

The best feedback I've had on the LV= ISA is an adviser saying to me that he's got a list of clients that he wants to see.

Richard Humphries, Retirement Consultant

With all of the funds and all these things that are set to come as well in the future.

I think this stands in good stead to keep building fantastic relationships with all of our advisers

Hear how LV= and Columbia Threadneedle Investments collaborate closely in the management of our Smoothed Managed Fund range.

Hello, I’m Alex Lyle, Investment Manager & Head of Managed Funds at Columbia Threadneedle Investments.

We are a leading global asset management company, part of financial services group Ameriprise Financial, with more than 2000 employees located across 17 countries around the world, including 450 investment professionals .

We have a very long and deep relationship with LV=, one of our largest strategic clients, and over many years have collaborated closely to ensure that the funds within the LV= Smoothed Managed Fund range deliver the outcomes required to help achieve the expectations of LV= policy holders. The funds are split into three risk categories: Growth, Balanced and Cautious. These categories are determined by the extent of investment in equities, which carry a higher level of risk, compared to bonds, which are lower risk.

The asset allocation for each of these risk categories is modelled using views of expected returns and volatilities. The modelling involves thousands of asset allocation scenarios and the results are subjected to analysis and due diligence to reach the optimal allocation.

The underlying investments in each fund come from our extensive range of pooled funds, each with its own specialist, dedicated management.

We strongly believe in the merits of selecting in-house funds as it allows deeper risk analysis, keeps costs down and ensures greater consistency of strategy. Our investment philosophy and process are built around collaboration: we emphasise teamwork and integrated research. We aim to deliver superior returns for our clients through:

An active approach that takes advantage of market inefficiencies

Our perspective advantage – the combination of macro and micro analysis to establish our view of the global economic environment.

The appropriate allocation of risk

Our aim is to deliver consistently strong real returns over the long term, whilst carefully managing risk within each fund. We believe our long-term track record demonstrates our ability to add value through both stock selection and asset allocation, backed by the unique investment philosophy which underpins our business.

This involves a strong process, based on extensive teamwork from a wide group of experienced professionals.

If you’d like more information about LV=’s range of Smoothed Managed Funds, please speak to your LV= Retirement Consultant.

Introduction to Flexible Guarantee Investments

Investing money can be stressful, especially when faced with a range of options to consider how to fund ones retirement - it's crucial to make the right choices. Thankfully LV= is here to help. We've created a set of funds called the LV= Flexible Guarantee Investments to help take some these worries away.


I’m Jon from LV=

Investing money can be stressful for your clients.

In 2014 the Chancellor introduced the revolutionary pension freedom and choice changes, which means your clients now have access to a range of options when thinking about how they can fund their retirement.

But of course it’s crucial that you can help your client make the right choices, especially when it comes to their investments.

Thankfully, LV=’s here to help.

We’ve created a set of funds called the LV= Flexible Guarantee Investments to help take some of these worries away.

We selected leading fund managers, Columbia Threadneedle to manage these funds for us so we can help provide the potential for your clients to grow their investment, whist also offering protection from market volatility.

Let’s take a closer look…


With our Flexible Guarantee Investments, you can choose one of three risk-rated, multi-asset funds that all offer a unique average price mechanism. This helps to smooth out the peaks and troughs of short-term market uncertainties.

The smoothing process is transparent and simple – Let me show you

Your client invests in the underlying price and this is used to value their investment for the first 26 weeks. After this the smoothing mechanism kicks in so it’s now valued at the averaged price from here on.

This has the benefit of absorbing and reducing the effects of short term market volatility.

The mechanism is tried and tested – it even operated normally throughout the credit crunch!


The funds have the added benefit of an optional capital guarantee which your clients can purchase at any time.

This makes it possible to guarantee a known value at a known point in the future regardless of what happens to the stock market in the meantime.

What’s more, the guarantee can be switched on or off at any time, which means your client can lock in any existing investment growth, whilst still benefitting from any potential future increases in value.


These features may make the LV- funds the perfect choice for you and your client, especially if they’re looking for investment growth but are concerned about the impact of stock market volatility.

The three funds invest in a mixture of different assets to offer a choice of risk levels – to suit different attitudes towards investment risk.

Clients can invest in the funds through the LV= Flexible Guarantee Bond, or as part of a personal pension.

Both options feature competitive charges- including a loyalty discount which acts to reduce the annual management charge after a qualifying period.

And don’t forget, with LV= your clients also have access to our range of member benefits, including discounts on home, pet and travel insurance, and 24/7 access to our member care line.

To find out more about the LV= Flexible Guarantee Investments, please contact your usual retirement consultant, call our Retirement Desk on 08000 850250 or check out

LV=, County Gates, Bournemouth, BH1 2NF, UK