“The people I talk to full into one of two categories, either you’ve built up some money and want to hang onto it, or you are looking to .”
That was our opening gambit when we met with prospects. I learnt the script in 1984 and still wonder at its simplicity. It sums up financial planning succinctly.
I became an “adviser” shortly after the abolition of Life Assurance Premium Relief in April 84. Many then were wondering whether anyone would buy insurance products without the incentive of tax relief on contributions.
Salesmen are quick to adapt (as they are doing today) and within a few months we had re-grouped and were busy selling universal whole of life plans which for £25 per month could provide a “huge capital reservoir” to help you cope with any financial problem that came your way.
The firm I worked with was one of the first to christen their salesmen “consultants” an unfortunate trend that continues to this day.
But one of my colleagues, Damola Aboaba, was insistent.He would pick up the phone and chortle
“Hello, I’m Damola and I sell life insurance”
People responded well to this straightforward approach.
Damola did not feel it was his job to teach people how to save and had no pretensions to understanding investment. He saw his role as helping people to insure against the consequences of living too long, dying too soon or being unable to work from sickness or disability.
After 30 years , many financial advisers are now returning to Damola’s simple vision. A friend has chose to sell “protection” rather than insurance (not the kind you buy in pub toilets). The commercial driver is that insurance still pays salesmen commission , unlike investment products and you don’t need an alphabet soup of qualifications to explain things the way Damola did.
This reversion to selling the “solid value of insurance” may be one of the happiest consequences of the Retail Distribution Review.
Although many people get protection from work-based “risk benefits”, private provision is almost always a good idea. It’s still protecting you if you leave or lose your job. This was not lost on Damola.
Damola used to sell his policies with an eye to “whole of life” affordability. He once told me that he used to ask his clients whether his client would be able to afford the payments (he didn’t use the word premium) even if he was out of work.
He wouldn’t sell them a policy he felt they couldn’t afford – used to joke that he couldn’t afford to pay back commission every time his clients lost their jobs!
Annuities which insure against extreme old age are extremely unfashionable (the most put upon of financial products). But they are a brilliant way to explain the value of saving.
Damola use to discuss the idea of “buying a pension” rather than saving for a pension.
Even though we weren’t allowed to sell annuities, Damola taught his clients a rule of thumb that they needed to have 10 times as much in savings as the minimum pay they needed (to get by). Times have moved on and that figure is now 25 but we’d do well to follow this rule as we approach retirement.
Damola loved to quote Winston Churchill
If I had my way, I would write the word “insure” upon the door of every cottage and upon the blotting book of every public man, because I am convinced, for sacrifices so small, families and estates can be protected against catastrophes which would otherwise smash them up forever.
Many financial advisers would do well to think about Damola’s self-branding and ask whether they might not be better off selling insurance.
Come to think of it, many of us who claim to be promoting “financial education” might learn a bit from the best insurance salesmen!