Financial planning for business owners is a complicated affair. Very few business owners realise the extent and complexity of their financials. This is demonstrated by research that shows that less than a third of business owners have the three most important business assurance needs addressed, namely contingent liability, loan account redemption and buy and sell. Business owners have also made it clear that they find it very difficult to engage with financial needs relating to the business if it can’t be put into perspective of how it fits the business as a whole.
One of the main reasons why clients are unaware, is that very few intermediaries specialise in this field. Most life insurance companies, and the intermediaries supporting them, focus on addressing the personal needs of individuals, and this has served them well; but, in the process, very few skills have been developed to serve the broader needs of the business owner. The situation is further complicated by the fact that business owners are notoriously difficult to access, and very sceptical about insurance companies and intermediaries. Advice in this area is complex and often needs the assistance of legal experts. These factors have made it unfeasible for intermediaries to make this the core part of their practice.
All doom and gloom? Not quite. Most of the life assurance companies are working hard at overcoming this challenge. Sanlam, for example, has developed a set of solutions specifically aimed at the business owner, called Cobalt Solutions for Business Owners. As part of this set of solutions, for example, advice processes are made available that not only help intermediaries to identify the more holistic needs of the business owner, but also assists them to build credibility with business owners. The process is called the ‘Business Fitness Assessment’, and provides a business owner with a high level overview of potential risk areas in his/her business, including cash flow management, strategy, marketing and financial planning. It doesn’t stop there – the process also includes a debrief discussion with the client which is facilitated by an independent business adviser. This not only unlocks significant potential for the client, but also provides the intermediary with the opportunity to build his own business acumen and improve his ability to engage business owners. This service available free of charge to the client! Intermediaries following this process have indicated that this cements their relationships with their clients forever, because this brings a value add in an area what counts most in their lives – the health of their business!
To overcome the complexities involved in giving financial advice to business owners and the advice risks associated with it, most companies are developing advice tools to assist their intermediaries. Momentum has a programme called ‘Fulcrum’, Old Mutual recently released a programme called ‘Bernie’ and Sanlam has ‘Cobalt 1-2-3 of Business’. The latter, for example, provides a seamless, web-based process that identifies the business assurance needs, but then also develops recommendations and documentation that are FAIS compliant and serves all requirements for record of advice purposes. Lastly, it provides the tailor-made legal contracts required to enforce the insurance solution. Again, the purpose of this process is to ensure clients’ needs are identified and addressed properly, whilst in the process equipping and developing intermediaries to become more capable to work in this segment.
The business assurance segment is arguable the last under-penetrated segment in the financial needs space, and it is clear from the actions of the life insurance companies that business owners can look forward to being served more appropriately in the future.