The myths and misconceptions of protection: part 6
Robert Betts, Market Development Manager at Legal & General, discusses the gap between spending perception and reality, and the prevailing need for a budget planner.
Legal & General’s recent Deadline to Breadline report revealed six common myths and misconceptions around protection. In our previous blog we looked at how to help clients understand their own financial realities. In this post, we look at how you can help clients appreciate the buying power of their earnings, and why they should protect it.
I could cut back on spending
If a family’s Income stopped due to illness, injury or death, 8 out 10 would be willing to cut down spending on their daily coffee, socialising, eating out, buying clothes, and going to the gym.
That’s according to findings published in our recent Deadline to Breadline research. But in reality, when push came to shove, would they want to, and would it even be enough? Most people say they would like to retain all the good things they currently enjoy, making life as comfortable as possible.
The research mirrored these thoughts and demonstrated that there is a reluctance to cut back on the necessities of life. The biggest resistance came from 68% of respondents, who said they would be unwilling to give up or reduce their broadband capability. 58% said it would be difficult or impractical to cut back on heating or lighting, and just over half would look to cut back on food spending. A third of people would want to keep their media streaming subscriptions such as Netflix, Disney+ or SkyTV.
Look for the ‘bear necessities’, and then some
By focusing on the necessities of life, plus the value and benefit that people get from these, advisers can assess what could realistically be cut back on and focus on a plan that would allow clients to maintain it as much as possible.
You may think a budget planner is a bit old hat, but, used in the right way it can really help clients visualise the cost of their own lifestyle. I’m not talking about giving up a coffee a day to afford this policy. I’m talking about sitting down on a Saturday night with a glass of wine and filling one out from memory. Then on Sunday morning with a coffee, go through it in the light of day with bank statements, and compare perception with reality. The question then becomes, what of this modern lifestyle expenditure would your client give up?
By helping your clients appreciate the buying power of their earnings and talking to them about their preparedness for the loss of an income, you can reveal the vulnerability of their lifestyle and the things they enjoy. Advisers can really help a family plan for a more comfortable future by using a range of protection solutions to cover the financial impact of losing an income due to death, illness or injury. In other words, put your client in an informed position so they can base their plans on reality and not a perception created through myth and misconceptions.