Business Protection The Opportunities

A recent study conducted by Legal & General the number one insurance provider highlights the current business protection gap as approx £1.1 trillion.  This research highlights the reality of how many businesses are prepared to handle an event such as the death or critical illness of a key person or business owner.  The research more importantly highlights how the vast majority of businesses are not prepared.

Who should be responsible for getting in front of business owners to highlight their corporate protection needs? The bank, the adviser or the provider?

The recent research that has been conducted has been based on the responses of over 1000 firms and their members.  This groundbreaking research has revealed that the gap includes:

• Corporate Debt  of just under £300 billion
• Shareholder protection of over £400 billion
• Key Person of over £400 billion

The finding of the research illustrates the opportunities available in this market and provides a fresh insight into the views of business owners and highlights;

*The agreements business have in place in the event of the death or critical illness of a director or partner.  *The number of key individuals within a business who heavily contribute to the profits of  the business and the number of those individuals that are adequately protected.

• How long the business could survive without these key individuals.
• The level of corporate debts
• The security agreements that are in place

The research suggests that up to 98% of business had at least one key individual and 46%of  firms confirmed they had unprotected corporate debt. A staggering 44% of business owners expected to be out of business within 12 months of the death or critical illness of a Key person.  Only 4% of those surveyed had shareholder protection in place all of which are quite alarming stats and reconfirms the need to educate small business of the reality and risks of  leaving their business unprotected.

The barriers and reasons why business owners have not protected either the key person, corporate debt or shareholders where the following.

• Too expensive
• Never got round to it
• Not interested
• Thought it wouldn’t impact me or the business
• Don’t see the value
• Not sure of the cost involved
• Not in contact with a financial adviser
• *Didn’t understand the risk
• *Too Busy
• *Too complicated

More than one in four respondents said they thought business protection was too expensive.  This again highlights the opportunity for advisers to get in front of their corporate clients, to discuss the real need for protection and calculate the real cost as it has become clear that the majority don’t have an accurate idea of the costs involved.

So as an adviser where do you start?  If you already have a corporate client base and have not yet discussed their business protection needs then there is no better time to do so.  However going back to a client to revisit a need that should have been address previously may not seem an easy task at first but if you don’t there is a risk that you will lose the client altogether if they are approached by another adviser that highlights this need.
Providers are all keen to work with advisers and support any shortfall in technical knowledge but the first steps in wanting to diversify in what has been revealed to be a very lucrative market is in your hands.

Key opportunity identifiers within your existing client bank

• Have you provided advice to any directors or business owners for their person financial needs?
• Have you arranged commercial loans for business owners or company directors?
• Have you sold any family protection, pensions or investments to business owners or company directors?
• Do you have any links to GI brokers who arrange commercial property or public liability insurance?
• Do you have any high income or asset rich clients?

You should then be able to identify where you are already dealing with business owners,  if you have already advised business owners on their personal financial matters you should be able to incorporate business protection to your advice services and in turn benefit from a lucrative opportunity to increase your revenue.

If on the other hand you do not have a corporate client base but have the desire to take advantage of the revenue opportunities that lay within this sector here are some hopefully useful prospecting tips for you:

Planning Stage:

It is crucial to have an effective business plan in place to enable you to evaluate, set your objectives and strategic goals, identify how your strategy will be implemented and ways in which you will monitor your progress.  Recognising the need to change your plan will be easier if it has been clearly documented and this will maximise the likelihood of success.

Business points to consider

Current strengths & area of business – Consider your business expertise and capabilities.  Is there anyone within your firm that has dealt with corporate clients in the past or is this a new area to you and do you require some training.

Company Brand

Your current trading name, do you need to consider adding a Company name to your license that incorporates Financial services?

Resources

A review of your current resources may be required to up skill your current back office support for report writing and some training may be required around understanding the business protection market and dealing with corporate clients

Marketing strategy

Do you have a current marketing strategy?

Can you incorporate online marketing to attract the right clients/business
Does your website incorporate business services, this is something that you may need to adopt.  This is an important factor to consider as any potential new clients or professional connections will look at your website to see how you promote your services.

Literature

Sounds simple but business cards, business fact finds suitability letters etc will all need to be amended to reflect your business services.

Clients

You will need to spend your time developing brand new contacts and clients? Perhaps setting up seminars or networking events, this can be a lucrative way of pulling potential clients together in one place and getting your message across to a large number.  Exhibitions can also be a useful place to attract business clients.  Exhibitions are full of businesses selling their wares and services so what better opportunity to speak to them in a convivial atmosphere.

You should consider targeting small to medium size companies as they are more likely to have a board of directors of 2 or more and these are organisations that are more likely to be reliant on the skills of  a key individual that is typically contributing heavily to profits of the firm therefore, require key person protection.  Other factors to target specific new clients are

• Turnover range
• Profits
• Number of Employee
• Industry they are in
• Location

Timing of approach

You should also consider the above factor as it is clearly not ideal to target new clients when they could be facing the end of the tax year or financial year so avoid these periods as it will be less likely to secure an appointment during these busy times.  Getting in at the right time can be crucial and these periods tend to reflect changes in business and just after these periods can provide a perfect opening for you to offer advice and support.   Some external research tools may identify takeovers, mergers and management buyouts, a change in the board of directors or key individuals so be prepared to seize the opportunity.

Professional Connections

Putting some time and effort into building a good relationship with a solicitor or accountant can potentially be very rewarding for your business.  It can also generate a  great deal of reciprocal business and lead to long term profitable arrangements.  These relationships will take time and effort to cultivate and therefore require long term commitment.

Some useful websites

• www.keynotes.co.uk – Market research publisher providing business information
• www.applegate.co.uk – Free link to identify businesses by postcode
• www.yell.com – Source for searching businesses
• www.companieshouse.gov.uk – Provides comprehensive company information