The Professional Insurance Broker T h e o f f i c i a l m a g a z i n e o f t h e P r o f e s s i o n a l I n s u r a n c e B r o k e r s A s s o c i a t i o n

Issue 28 • Spring 2010 Chairman’s Remarks

By Michael Hoare

Shooting Our Own Soldiers sabotaged a recent attempt to merge, having initiated the process via An old colleague of mine told me his story one day. It was about an intermediary, should subsequently expend such energy on wooing 1990 and we were working together in Lifetime, the then newborn the PIBA membership. Flattering, but ultimately futile! baby of the Bank of Ireland Group. My friend had spent time in the US during the ‘60’s and, as he admitted, he was a bit slow about While all this unseemly activity plays itself out, I am extremely returning to Ireland so he failed to dodge the draft! He ended up concerned that our guns are trained on each other. Mortal wounds can doing a couple of tours of duty in Vietnam and his experiences had a be administered when weapons are loaded and we may damage one profound impact on the rest of his life. One intriguing statement that another, even if it is accidentally. The point that is being completely he made remained with me — most of the soldiers in his battalion missed is that all Brokers need to be better prepared and more who lost their lives were shot by friendly fire, mostly while nervously adequately represented with the Financial Regulator, the Ombudsman, navigating their way through thick foliage at night. One can only the insurance companies and others. Channelling scarce resources imagine the fear that these brave soldiers endured. towards having to defend our territory is a complete waste of time, energy and money. Unsightly skirmishing amongst professional What has this got to do with anything, I hear you ask. PIBA is in its representative bodies diminishes all who are involved and ensures that 15th year and the Association has done a superb job during that time the juggernaut of fresh financial regulation will roll right over the top of of representing professional practitioners to all of the stakeholders us. I call for a sensible approach to resolving this phony war. As concerned with the smooth functioning of our sector of business. independent associations, we must focus our minds on how we can Imagine my disquiet, then, when the IBA approached our membership engage in a more productive and positive way with the new regulatory en masse for the second year running with a ‘loss leader’ bargain environment. We must attempt to cultivate a regime in which Brokers basement offer encouraging our members to jump ship from PIBA in and regulators understand each other’s positions more fully so that order to join the ranks of the IBA. It did not work last year and it will more often than not a win-win outcome is achieved when the two not work this year because the two organisations, as they are currently parties interact. At present, all too often the outcome is win-lose, with constituted, represent different constituencies. Each in its unique way invariably the Broker coming out of a process battered and bruised, understands the nuances and idiosyncrasies of their memberships and and feeling that the cards were stacked against him or her. So, what never the twain shall meet while the respective associations are in place does shooting your own soldiers have in this scenario? As they their current form. It is mind-boggling that an organisation that would say in the States, go figure … Contents

Sharpening the Sword – The new Graduate Diploma programme 5 Understanding your Customer's Needs is the Key to Underwriting Success 7 Retirement Planning 8 In Focus … The Benefits of a Financial Planning based Approach 9 Drink, Speed and Beauty — Non-conventional alternative investments 11 Pensions may not yet be Mandatory, but all Taxpayers are already making a Pension Contribution 12 The only way is up!! 13 ‘The Magnificent Seven’ 14 Finance Bill 2010 15 PIBA Meets … Anthony Brennan, CEO, Zurich Life 16 Are Absolute Returns a better bet than Managed Funds for 2010? 18 From the Great Floods to the Ice Age — The Weather grips the Insurance Industry 20 Exploring New Revenue Streams in a Tough Market 21 Sales to Vulnerable/Older Consumers 22 Publicity and PR — A Recession-proof means of generating New Leads? 24 Diversification 101: Using Alternative Asset Classes 25 Getting your Income Protection cases Over the Line 28 Book Review 29 PIBA Update 30 Industry Roundup 31 Crossword 32 Editorial

By Emer O’Flanagan

The words on everybody’s lips must surely be that a week is long in politics, especially if your name is O’Dea! The recent dramas in Kildare Street have succeeded in shocking even the most cynical members of the public. The ramifications of decisions made (or not made in some cases) are felt immediately by Brokers and financial advisors – the effects are painful and sometimes irreversible.

The stumbling and fumbling nature of the departure of Willie O’Dea, as well as the quieter resignation of Green junior minister Trevor Sargeant and the loss of Martin Cullen due to health reasons, offer the Taoiseach an opportunity to revamp his team, and this should mean finding a new home for the Tánaiste, Mary Coughlan. The possible turning of political backs on 300 jobs in Dublin Airport is beyond belief.

Unemployment among the under-23s is at its highest since the 1980s and those who choose to emigrate may never have anything to come back to. The very public row between Michael O’Leary and Mary Coughlan is all about playing bad politics … with workers caught in the middle.

Mary Coughlan has now become the single most important personnel issue for Brian Cowen. Her failings as Tánaiste when dealing with Dáil questions on Thursdays have been well documented — but it is her ministerial role that causes most worry.

Michael O’Leary, Ryanair’s Chief Executive, ran rings around her over the past weeks but to no avail. The Tánaiste does not want to lose face by giving him what he wants: the use of Hangar 6 in Dublin Airport, where he has promised to create 300 jobs.

Protecting the semi-state Dublin Airport Authority and the formerly state-owned airline Aer Lingus seems to be the most important issue here, and consequently O’Leary is deemed to be the enemy rather than one of the most successful businessmen in the history of this country.

O’Leary runs one of the world’s most successful airlines and has !2.5 billion in the bank, despite the recession. He is not looking for state support or tax payers’ money, so why should he give the Tánaiste a business plan? And if he did, would she be able to give a critique? Would it be read? The handling of FÁS is still fresh in our minds!

What is very clear is that the Taoiseach regards Minister Coughlan’s loyalty and friendship as more important than her lack of ability to carry out the duties of one of the most important ministerial posts, i.e. Enterprise, Trade and Employment. This does not say much for the current state of Irish politics.

Committee Members Sub-Committee Chairpersons Michael Hoare Chairman Life Paul Cullen Jarlath Jordan Vice-Chairman General Maurice Harnett Tom O’Keeffe Secretary Mortgage Jimmy Cumiskey Michael Leyden Treasurer Legislation Anne Hession Anne Hession Jimmy Cumiskey Maurice Harnett Paul Cullen Liam Carberry Chief Executive: Diarmuid Kelly

The Professional Insurance Broker

14B Cashel Business Centre, Cashel Road, Crumlin, Dublin 12 • Tel: (01) 492 2202 • Fax: (01) 499 1569 • e-mail: [email protected] • Website: www.piba.ie Chief Executive: Diarmuid Kelly Editorial Group: Donal Milmo-Penny, Jack FitzPatrick, John Hogan, Karl Deeter, Edel Morey. Editor: Emer O’Flanagan Publisher: Salient Print Management, Naas, Co. Kildare. Tel: (045) 866057 & (087) 254 3463. Design: Salient Print Management, Naas, Co. Kildare. Tel: (045) 866057 & (087) 254 34637 Views expressed by contributors or correspondents are not necessarily those of PIBA or the publisher and neither PIBA nor the publisher accepts any responsibilty for them.

T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r 3 Sharpening the Sword – The new Graduate Diploma programme

By Diarmuid Kelly, Chief Executive, PIBA

The past few months have been difficult for the financial From an investment perspective, the theories of investment services industry in Ireland but the international economy is management are explored to the point where participants can emerging from the ‘Great Stabilisation’ and as a small open confidently: economy Ireland won’t be far behind. There are always business ✦ Construct suitable investments/pensions portfolios for opportunities in times of change and this time is no different. clients, with consideration as to how best to blend different There is a greater perceived need for protection. The savings funds and managers rate has hit the roof. There is a need for a more scientific approach to investing to encourage investors to back out of ✦ Compare and assess the merits of direct ownership of deposits. And the population is continuing to age rapidly, making assets (equities/properties and bonds) as against asset accumulation and management the business to be in. professional managers Customer relationships are also shifting, so how can you best ✦ Critically appraise fund managers’ style and performance capitalise on these turbulent times and take advantage of these ✦ Better understand and interrogate product suppliers. opportunities? Content on different personality types, and the implications for Development of any business normally involves product decision-making and communication styles, was particularly developments, advances in technology, and people relevant given the nature of our business. When allied to the development. I have no doubt that fund managers and insurance scientific research on influencing behaviour simply by changing companies will continue to develop and make available to us the way in which we present information, the usefulness for innovative products. It is inevitable that technology will continue relationship management strategies is immense. to advance the efficiency of our industry. This leaves us with people development. Research indicates that a commitment to One of the other key benefits of the programme is that it is a education is inextricably linked to earnings level, no matter the recognised pathway to becoming a CERTIFIED FINANCIAL profession. It is also true to say that, in difficult economic times, PLANNER™ professional. This is an internationally recognised education is often one of the first costs to be curtailed, even professional designation for financial planners, with provision for though research indicates that businesses that take the holders to have their qualification recognised in 23 countries; the opportunity to ‘sharpen the sword’ are better positioned to UK, US, Canada and Australia included. The CFP® certification is emerge more quickly from recession. the pre-eminent globally recognised certification for financial planners and has only recently been introduced to Ireland. In September I, along with 170 of your peers, enrolled to take a newly introduced financial qualification — the Graduate Diploma The Graduate Diploma in Financial Planning is a Master’s level in Financial Planning. The programme is challenging but practical. programme, and UCD estimates that each module involves a It is a ‘Level 9’ or Master’s Degree level course. To give you a time commitment of approximately 200 hours in order to flavour of just some of the immediate benefits taken away by the progress successfully. The programme consists of six modules, participants, let me pose the following: delivered by lectures over an eighteen-month period (or longer if desired) as follows: ✦ Have you ever waited a week or more for an EMV (estimated maturity value) on a pension from a life office 1 Principles and Ethics of Personal Financial Planning and found that they did the wrong calculation or the client 2 Asset Management wanted more options explored? 3 Tax and Estate Management ✦ Has a client ever asked you to tell them how soon they would repay their mortgage if they increased their monthly 4 Retirement Planning payments? 5 Financial and Risk Management ✦ Have you ever scratched your head when asked to advise 6 Integrated Personal Financial Planning whether choosing an escalating, rather than a level, annuity We rightly pride ourselves on being professional Brokers, and in represented good value? my view this qualification is ideally structured to enrich that ✦ Have you been asked to demonstrate how long a client professionalism. With the added possibility of CFP certification, it would need to live to make an ARF a better investment is an exciting development for the industry. than an annuity? Further information on the Graduate Diploma in Financial Being able to deal with and answer these questions easily and Planning is available on the LIA website (www.lia.ie) and full effectively, without resorting to technical support areas, is just details regarding CFP certification may be accessed on the one of the immediate benefits. website of FPSB Ireland (www.fpsb.ie).

T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r 5 Understanding your Customer's Needs is the Key to Underwriting Success

By Mark Cree, Underwriting Manager, Friends First

Because every person is different, each new customer or case can require physical examination, which includes blood pressure, height and weight, tailored underwriting. Consequently, steering your client through the and urinalysis, pulse and lung function. underwriting process is ultimately easier when you have a number of underwriting options at your disposal to suit clients’ individual Nurse Medical Service: Better prepared means better results circumstances. Why it works for your clients: Experience tells us that while some customers are happy to divulge their ✦ Appointments at the time and place they choose (weekend and personal information via traditional methods such as paper proposals or evening appointments available) online processing, and medical evidence such as independent medicals ✦ No time off work (IME) or medical attendant’s reports, many prefer the newer options available, such as teleunderwriting or nurse medical exam. ✦ No travelling ✦ No cost We in Friends First are constantly reviewing the value of medical evidence and the development of alternatives to traditional evidence in order to ✦ Confidential, discreet, secure and effortless. underwrite our business, provide more options to clients and aid Brokers Why it works for your business: in securing new business. Focusing on obtaining less evidence while retaining accuracy of underwriting is a key deliverable for all insurance ✦ No waiting for clients to make GP appointments companies in the current economic climate. ✦ No delays in GP returning test results The launch of the first Nurse Medical Service in the Irish market has had a ✦ Faster turnaround means less opportunity for clients to change their very positive impact on our turnaround and sales since we launched the mind (contact to issue is only four days) service in May of last year. We have been offering a number of underwriting ✦ Shorter time to policy issue options over many years, such as teleunderwriting and GP medicals. ✦ Happier clients make for better business. Innovation is key to gaining an advantage in the Irish market, where ease of doing business and quick turnaround is vital to securing business. Many What clients are saying about our Nurse Medical Service: other insurance companies are following suit and this is a positive step. “She was lovely! Totally knew what she was doing and was done in 30 Nurse Medicals minutes. I was amazed by her digital pen — the results went straight from the paperwork to her Blackberry in seconds (I had never seen anything We had been investigating the idea of a nurse medical service for some like that before!). I was well impressed — made a huge difference that I time, particularly in the light of factors below that were impacting our (and didn’t have to leave the house — wish they all could be like that!” your) pipeline: 1000 + Nurse Medicals carried out ✦ Control of medical evidence Since our launch in May our nurses have carried out over 1000 ✦ Ever rising medical costs examinations nationwide, reaching all clients without restriction. All ✦ Over dependency on doctors requests for examination are processed within one day. ✦ Lack of doctor agreement on scale of fees The turnaround from request to completed examination is under four ✦ Poor quality of reports in general days, which is a significant improvement on standard medical ✦ Slow turnaround of reports examinations and removes the barrier of postal delays as examination results are sent electronically direct to our underwriters. ✦ Motivation and willingness of clients to attend for medical examination. Future Plans and further Innovation We saw an opportunity to address these issues by launching a unique We have expanded our existing teleunderwriting service, which has been Nurse Medical Service to replace the traditional independent doctor led in operation for several years, to use on a wider scale in the Broker medical examination, with the added feature of a home or office market, which gives you another option to aid business completion. We appointment with our experienced nurses and the technology of a are investigating the viability of using our medical underwriters to carry out paperless process. some telephone risk assessments and the expansion of our existing underwriting helpline service. In addition, we are also looking to expand Why opt for a Nurse Medical Examination? the nurse medical service further with a view to replacing existing For the majority of cases when a medical is required, your clients no independent examination entirely and extending the use of blood and longer have to visit their GP or medical centre for a medical exam. saliva testing. Instead, a dedicated medical nurse will visit them at home or at work and We are endeavouring through these enhancements to provide a more carry out the exams there — free — in just 20 minutes. Exam results are simplified underwriting process, ensuring a smoother and faster immediately and securely relayed to our office electronically via digital pen procedure for clients, and making it easier for Brokers to secure new technology, so your client’s policy application can be processed faster business. than ever before. The nurse makes contact with the client and arranges a place and convenient time for the examination. The exam itself consists For further information, log on to www.brokerfirst.ie or call our of specific questions regarding the client’s medical history and then a Underwriting Helpline on 1890 545 484.

T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r 7 Retirement Planning

By James Caron, Pensions Specialist

I have always said that any client who thinks that they can importance of diversification. Clients must be risk profiled to assess successfully navigate their way through the retirement planning their attitude to and aptitude for risk. Armed with this information, maze unaided is deluded. The role of the advisor in retirement the advisor constructs a portfolio that seeks to achieve the best planning is critical in ensuring that the client gets all the retirement possible returns relative to that particular client’s stated (and planning advice in order to make an informed decision. documented) attitude/aptitude to risk. There is no one size fits all - each client is different. What do I mean by “all the retirement planning advice”? A recent article in The Sunday Business Post (31/01/2010), quoted There are a number of different but interlocking decisions to be a survey of 23 countries and their pension funds. The largest loss made by the client in respect of retirement planning. No one was in Ireland – 37.5% in 2008. Comments were also made on decision can be made in isolation as they all form the basis of the how Irish pension funds invested about two thirds of assets in retirement planning process and each requires specific advice. It is equities. The article referred to managed funds but, of course, not all vital that clients are made aware of this; as many have the naïve pensions were invested in managed funds. In addition, any clients view that retirement planning merely consists of picking a pensions investing in a managed fund with about two thirds invested in product. This is a fallacy that must be tackled head on by advisors. I equities should have been aware that they were investing in a would recommend breaking the retirement planning process into medium/high risk fund. three separate areas:

1. How much should be contributed? This raises a number of questions. Are the needs/priorities of a 30 year old and a 55 year old different in respect of retirement 2. Where to invest? planning? Of course they are, and as such they would/should have 3. What product? been given different investment advice. Why were so many in the same managed fund? These are three different decisions and in my opinion must be approached in that manner. Let’s take a look at each one For those clients already making contributions a simple question is individually. needed: ‘When did you last review your investment decisions to ensure they are on the right track to meeting your 1. How much should be contributed? aspirations/expectations?’ The retirement planning concept is very simple and an example best illustrates this. A client begins his/her working life at age 20 and 3. What product? wants to retire at age 60, i.e. a 40-year earning period. Assuming an There is a bewildering choice of pension products in the market. average life expectancy of 80 years the situation would be as Clients need to be aware of Personal Pensions, PRSA’s, Executive follows. The client has to accumulate sufficient income during a 40- Pension Plans, SSAP’s, Self-Directed Pensions, ARF’s, Annuities, year working period to deal with both living expenses during this QFM’s etc. Which is the most suitable? There is no simple answer; it period and provide for living expenses in retirement. If the client depends on circumstances and the pros and cons of each product. makes no provision then retirement at age 60 is not an option, as The ‘product’ is a receptacle for the advice given. Advice first, product the state pension is not given until 65 at the earliest. second! That being said the product profile must match the client profile. For these clients already making contributions a simple The state pension single element currently stands at !11,975 per question should be asked: ‘Does your existing pension product meet annum; with an adult dependent this rises to !22,703. If the client your expectations in terms of flexibility, fund choices, charging is happy with this level of income in retirement then there is no structure etc.?’ need for retirement planning; but if they are not happy what then? In conclusion, retirement planning has never been more For clients already making contributions a simple question should be complicated, and so the role of the advisor has never been more asked: ‘are contribution levels sufficient to match your important. Clients must first be educated about and then guided aspirations/expectations?’ Too often clients don’t know the answer; through the different steps required to arrive at an informed or their initial funding decision was based on tax planning rather than retirement planning decision. Clients need the help of a trusted retirement planning. advisor and their input will guide the client through the retirement planning maze. 2. Where to invest? It has been remarked that “diversification may prevent you making a killing but should stop you from being killed.” This is a vitally important message and clients must be made aware of the Contact details: (087) 994 7496

8 T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r

✦ The only way of meeting her retirement objective at age 55 scheme as part of the employee retention strategy. would be by selling the company, again conflicting with her stated objective of retaining it for her son. Beyond implementation, review meetings were conducted, initially every three months, eventually moving to six months. Two years ✦ She would have sufficient investment assets to retire at age later, the client came to the realisation that her lifestyle was not 60 without selling the company, so long as the cash funds what she wanted for herself and her son. The long hours and days were invested in a growth-oriented portfolio (the calculated away travelling were taking a toll. Armed with the knowledge target rate of return for the portfolio was 5%). gained in our earlier meetings, she asked to revisit her objectives ✦ She needed to plan her exit from the business: did it from the perspective of the business being sold. In short, upon the involve recruiting a managing director, or a mentor for her sale of the business, she was able to enjoy the early retirement son etc. that she had initially aspired to. There was no trade-off required in ✦ If she became ill and was absent from the business for a terms of her standard of living. The one trade-off was that her son prolonged period, this would have a significant impact on did not get to manage his father’s business, but as economic her lifestyle and also the continuity of the business. circumstances later transpired, perhaps this was a good thing! ✦ There was a risk that a key employee would leave the Summary of fact-find business because of disgruntlement over a perceived Further Information (fact-find information) failure to deliver on a promise of a shareholding in the business. His position within the company was such that ✦ Age 47. this would impact on the company’s profitability, which ✦ Recently widowed, the money for investment is the would in turn impact on her own personal objectives. proceeds of a life policy. ✦ If she were to die, the value of her assets would transfer to her ✦ Prefers to keep the cash on deposit. Is risk averse. son, albeit with an inheritance tax bill. Estate planning would ✦ Principal residence worth !750k, no mortgage. minimise the bill, but there was still a potential issue in terms of the availability of free cash to satisfy the tax bill (on the ✦ She has one 16 year old son. presumption of there being an investment into growth assets.) ✦ She also inherited her late husband’s company, valued at ✦ And finally, there was no guarantee that her son would like !1.2m. The company imports materials from Europe for to get involved in the business in the future. onward supply to the construction industry. The company has been very successful to date. Subsequent meetings ✦ She intends running the company herself. There are three Careful consideration was given to the ordering of the key employees, who between them have knowledge of the presentation of these issues to the client. Subsequent meetings company’s providers and key clients. afforded the client an opportunity to develop an understanding ✦ An executive pension plan had been recently set up for her; and awareness of the implications of each issue for long-term the annual premium was !40,000. financial planning. Over a period of meetings the client became more certain as to her desired route of planning. Conclusions ✦ She does not have any life insurance or PHI cover. that were drawn: ✦ She is drawing a salary of !50,000 per annum from the company, which meets all of her lifestyle needs. ✦ We would work on the basis of her retiring at 60. This in turn would reduce the pressure to divert significant ✦ Professionally, she is a university lecturer, and was earning !50k amounts of capital from the company to her retirement p.a. doing this, prior to taking on the management of the company. plans. It also kept open the possibility of her son becoming involved in the company. ✦ In line with this, the cash lump sum would be invested into Paul Grimes is a consultant and has worked in the a growth portfolio rather than cash. private banking and wealth management industry ✦ A savings plan was created to help fund her retirement: for more than 20 years. His particular area of one part being pension planning, the other being the expertise is developing financial planning solutions retention of cash in the business until there was final clarity for high net worth clients and their businesses. Paul as to the client’s exit strategy. qualified as a financial planner during his career in Australia, and has also studied Accountancy (CPA ✦ It was agreed that the risk of ill-health impact on future Ireland), and Taxation (AITI). plans had to be managed. In recent years Paul has developed and delivered financial training ✦ After all estate planning options were considered, it was programmes for professionals in Europe, Australia, the Middle East, Africa agreed that a vehicle needed to be created to provide a and East Asia. He has also lectured on a number of post-graduate certain capital sum to cover the potential tax liability. This programmes internationally. needed to be easily realisable. He is also involved in projects such as: ✦ Finally, the risk posed by the potential loss of a key employee needed consideration and resolution. The ✦ The design and delivery of training programmes for international solution to this issue involved working with the client’s banks, private banks, independent wealth managers and planners, accountant to develop reward structures based on the professional bodies and regulators. notion of ‘phantom shares’. ✦ The development and enhancement of financial planning and wealth management delivery channels for banks and independent wealth Where did it all end? managers. The implementation of the plan involved the use of investment, ✦ The development and delivery to market of financial planning savings, PHI, and life and pension products, including a group software

10 T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r Drink, Speed and Beauty Non-conventional alternative investments

By Donal Milmo-Penny, Mylife.ie

Beyond conventional investments one will find a group of For those of a bookish inclination there is also an unending peripheral investments classes such as wine, classic cars and amount of knowledge to be acquired, which in its own right can fine art. The taint of pride and vanity must be looked at be a most interesting and rewarding hobby of a completely alongside returns and the ability of these items to act as different nature to that normally associated with investing. diversifiers. So, the question is this: are these items that the conventional investor should consider? Classic Cars

In simple terms it is fair to consider the three aforementioned ‘asset classes’. Indexes have been developed to track the performance of each and the market in each is real and substantial. There are drawbacks in becoming involved, broadly for three reasons: transaction costs, storage and holding costs, and liquidity. Consideration must also be given to the advisory element and the expertise needed to prudently select a particular asset whether it be a case of wine, a painting or a car.

As with all investments, risk is a major consideration. It would not be prudent to acquire an asset without considerable research and consultation with a reputable expert. This can be morally hazardous territory: the art and automotive worlds are littered with stories of the devious and corrupt. At the end of August 2009 the Financial Times published an Liquidity is a major issue. It may be difficult to quickly realise the article highlighting the fact that classic cars have proven to be value of an asset. Transaction costs will generally be high and will virtually the best performing investment since the start of the vary depending on the route to market; however it would not be downturn. The market is tracked by the HAGI index, which tracks untypical to pay 10% in and the same out. The same is true of 11 marques and 38 models. The market rose by 39 per cent storage and holding costs. An investor must give careful from its launch at the beginning of 2008 to the end of July 2009. consideration to these points when considering getting involved. Whilst there are many fine and enjoyable classic cars beloved by Wine marque enthusiasts, a similar rule applies as does to wine, in that Wine is probably the most only certain vehicles have true investment potential. Cars with established market of the three. interesting histories supported by a strong provenance, especially The market is measured by the of competition nature, or very early or pre-production models, Liv-Ex 100 index and is relatively tend to be especially interesting. Certain cars have performed broad. There are many reputable particularly well in recent times; for example a good usable and long established Brokers who example of James Bond’s favourite, the Aston Martin DB5, could are happy to facilitate the would have been yours for !25,000 in the late ’90’s. Today you would be investor, such as UK based be looking at closer to !200,000. Unless you are very Berry Brothers and Rudd or online experienced it is always a good idea to have a reputable marque Brokers Fine & Rare Wines. In professional inspect a vehicle prior to purchase. Ireland we have a number of domestic merchants capable of Fine Art supplying investment grade wines, such as Green Acres in I will limit myself to the world of fine paintings in this regard. Wexford. There is also an active auction scene with many More so than any of the two preceding assets this is a difficult auction houses running wine sales. Sotheby’s, arguably the area, in that values are considerably more subjective given the world’s leading auction house, have a dedicated fine wine unique nature of any particular asset. The need for genuine department and hold monthly auctions. expertise in assessing the quality of an asset is most pronounced in his field: take advice from a reputable expert! As with all things, what you buy is critical. The reality of the The accumulation of distinguished collections has been the wine market is that there are only a limited number of truly pursuit of the great and good through the ages and many a investment grade wines. Broadly speaking these are the top wealthy man has become more so through an interest in the Bordeaux and Burgundies. The vintage (year) is of critical art world. Possibly one of the most interesting aspects of importance. Many top wines are exceptionally long lived, some lasting over 100 years. continued overleaf …

T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r 11 ! investing in art is Min Investment Index that there are investment quality Wine 3,500 Liv-Ex 100 paintings catering Cars 20,000 HAGI for a diverse range of tastes, from the Art 10,000 Artprice.com grandeur one would associate with an Conclusion Old Master to the unequalled style of An investor should carefully consider their motivation for the impressionists to the more abstract modern. becoming involved in any of the above. There is always a Indeed there is a considerable body of investment pleasure temptation and if pleasure is the motivation it should be quality Irish art from the likes of Roderick O’Connor, stated without the cloak of investment. Such assets should be the Paul Henry, John Lavery or more recently Louis le preserve of those who already hold a conventional diversified Brocquy. Art is a matter of taste. Investing in it is a portfolio and should only represent a very small proportion of total matter of judgement. Artprice.com’s index tracks the assets. In the medium to long term a well constructed portfolio of market. The art market is large and diverse and the such alternative assets can provide meaningful returns as well as performance of one sector may vary greatly from increased diversification to a broader portfolio. Interestingly, they another. An investor may adopt many strategies, from also are not generally closely correlated to equity markets. Such looking for a sector with a strong growth story to alternative assets tend to be at least medium term holds given looking to buy a contemporary work of art in the the drag of transaction costs. In conclusion, if you can match up a hope of future glories. Transaction charges may be decision to invest on a rational basis with the factors limiting the high especially at auction and reputable specialist appeal of these alternative investments then you may enjoy advice is essential. decent returns … along with a little pride and pleasure.

Pensions may not yet be Mandatory, but all Taxpayers are already making a Pension Contribution

By Kevin Fitzsimons MPMI, MIIPM, QFA, FLIA, RPD Pensions and Area Development Manager, Canada Life

It is interesting that debate around the causes and possible enterprises and semi state entities (e.g. ESB and CIE) that solutions to the current economic recession all too often operate funded occupational pension schemes. descend into pitting the private sector against the public sector and usually result in emotional and highly charged exchanges. It is of little comfort to private sector workers, who in the vast Some of the comparisons made are, of course, highly valid and majority of cases either find themselves in defined contribution relevant but some are just unfair and ill-informed. A healthy schemes or indeed with no private pension provision at all, that private and public sector are essential to any modern economy. they are the very people underwriting the defined benefit guarantees for the public sector. Public sector pensions are never far from the fray in such debates. As well as the cuts in public sector earnings announced Be that as it may, some financial advisors have successfully by Brian Lenihan in the December budget, the Finance Minister turned this irony to their advantage, by focusing their clients’ also announced that he intends to introduce a new pension attention on the fact that their income tax is, at least in part, scheme at the end of 2010 for new entrants to the public sector. funding other people’s guaranteed pensions benefits: a This new scheme will operate as before, on a guaranteed situation few are happy to learn of. The good news is that the defined benefits basis, but the pension will be based on career antidote to such a distressing revelation is that the initiation of average earnings as opposed to final salary, resulting ultimately in an approved private pension arrangement gets some of that a much reduced pension benefit in the future. same tax into the clients’ own pension fund and not the pension fund of a complete stranger. All state schemes operate on a pay as you go basis, with Social Welfare and public service pensions paid for each year from the There is no one in the country, therefore, who pays tax that public sector’s own pension contributions, PRSI contributions is not making a pension contribution. The only question is and tax revenue collected in the same year. Public service whether that contribution will find its way to their own fund pensions are largely unfunded, (although the members do or to somebody else’s! Amazingly, if left unchecked, this contribute towards the cost) and are paid by the Exchequer out problem can fester over an entire working lifetime. “Where of general tax revenue, although there are some state do I sign?”

12 T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r The only way is up!!

By Rachel Doyle, Mortgage Manager, PIBA

A recent survey from DKM economic consultants and EBS showed that it now only takes 13.4% of a couple’s wage to repay a mortgage: this is down from 26% in December 2006. With mortgage rates at an all time low and house prices creeping back in line with the average industrial wage, is now a good time to buy?

It is quite apparent that affordability has increased and according to the ptsb/ERSI house pricing index properties are now down 31.5% from peak; which means that there are some good bargains to be had in the property market. Historical rates remind us of a time when although property The recent daft.ie survey on rental prices showed an prices were lower these were invalidated by the elevated increase of 1% in the average national rent in January 2010. interest rates. In April 1975, the average mortgage interest rate While we cannot predict future rental prices from 1 month was 11.25%, in 1985 it was 13%, in 1995 it was 7.85% and figures, this increase may be a sign that rental stock is in 2005 it was 3.47%.** The last average mortgage rate depleting. This is not surprising seeing as the number of statistic available from the CSO is for March 2008 when the RIP’s purchased in Q4 2009 has decreased to 480 from average rate was 5.46%. 2,020 in Q4 2008. At the moment we are experiencing historically low rates and Another area that potential borrowers have to consider is the only way that these can move is UP! whether rates are due to increase, which may negate the percentage they will save by waiting for property prices to The impact that rate increases will have on mortgage holders decrease. already struggling to meet their monthly repayments may be detrimental to the mortgage market. While most home owners For Example: could sustain a small increase, an increase of 1% may put them into financial difficulty. If a property currently costs !200,000 — For Example: ✦ A mortgage of 90% LTV = !180,000 over 30yrs @ 3.86% (AIB current 5yr fixed rate) Currently the repayments on a mortgage of !230,000 over ✦ Monthly repayments will cost !844.88 25yrs at a variable rate of 2.65% would cost !1,049.28 per ✦ Cost of credit over the term of the loan will be !124,156.80.* month. ✦ If the rate increased to 3.65%, that would mean a monthly ! If say in 6 months the property fell by 5% to 190,000 but the fixed repayment of !1,170.02, an increase of !120.74 per month. rate increased to 4.86% (90% LTV = !171,000 over 30yrs) — ✦ If the ECB then decided to increase rates this year, even by ✦ ! Monthly repayments would now cost 903.39 0.25% pushing the rate to 3.9%, the monthly repayment ✦ Cost of credit over the term of the loan would be !154,220.40.* would be !1,201.36: that’s !152.08 per month of an increase. * Presumes the fixed rate quoted will stay the same for life of the mortgage For current mortgage holders it is imperative that they In January, we saw the raising of mortgage interest rates by investigate the option of fixing their mortgage rate for the next permanent tsb, which in turn fuelled a debate in the media five years. In some cases the difference between a borrower’s about lenders increasing rates. It is inevitable that the lenders current variable rate and a fixed rate is as little as 1.21%. are going to increase their rates; with the number of arrears and tracker mortgages on their books it will be no mean feat If interest rates revert back to the 1985 levels of 5.46% for Irish lenders to attain funding at a low enough cost to (!1,406.91) being on a fixed rate of 3.86% (!1,196.32) maintain current rates. could save mortgage holders !210.59 per month.

As consumers, we are appalled at the thought of lenders who With all this uncertainty in the market it is more imperative than have taken substantial funding from the government increasing ever that the mortgage Broker channel continues to exist, to mortgage rates, but with a higher cost of funds it is only a advise clients who need their impartial expertise more than ever. matter of time before other lenders follow permanent tsb and increase rates. ** CSO, Ireland, http://www.cso.ie 15th February 2010

T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r 13 ‘The Magnificent Seven’ Recognition of the Modern Mortgage Broker

By Steve White, Head of Compliance and Training, British Insurance Brokers Association

UK based insurance Brokers have just ‘celebrated’ five years of regulation Possible change of UK Government — There will be a general under the Financial Services Authority (FSA) and yet the current election in the UK in spring 2010, with most commentators predicting a regulatory agenda is busier than ever. The following is a quick resume of likely Conservative Party victory. The Conservatives have already set out the key agenda items - what we at BIBA have titled ‘The Magnificent their high level plans to change the financial services regulatory system Seven’. should they win. These plans include ‘abolishing’ the FSA and replacing them with a combination of the Bank of England and a newly created Client Money — The FSA has made the protection of client money one Consumer Protection Agency. BIBA has met with Mark Hoban, the of its main supervisory activities since 2005. Much has been said of the Conservative Shadow Chief Secretary to The Treasury, who is leading the complexity of their client money rules but that does not excuse non- development of these proposals, to ensure that insurance intermediaries compliance five years after these rules came into effect. The FSA are not forgotten in the process. conducted a review of compliance with these rules in 2009 and published a report into its findings in January 2010. The report does Compensation — The UK has a complex system of compensating make good reading and the message going forward is clear – failure to customers in the event of a failure of a financial services business. This comply will no longer be tolerated. involves a significant degree of cross-subsidy between sectors – meaning that UK insurance intermediaries are potentially liable for the failure of Fees — It’s a well known fact that insurance intermediaries in the UK pay banks! No other EU State exposes insurance intermediaries to any higher annual fees to their regulator / supervisor than any of their degree of cross-subsidy, a point we have been repeating to politicians European peers. The FSA has recently published a consultation paper on both at home and abroad since the current funding model came into redistributing its costs which will lead to the introduction of a minimum being in 2008. BIBA is now actively involved in the FSA’s fundamental annual fee of £1,000. BIBA has responded strongly on behalf of our review of our Financial Services Compensation Scheme, where we hope smaller members to see if this change can at least be introduced over a to be able to achieve a fairer mechanism of funding compensation. few years and not just overnight. Insurance Premium Tax (IPT) — If the above six issues were not Transparency, disclosure and conflicts of interest — Readers will enough to keep us fully occupied, Her Majesty’s Revenue and Customs no doubt be aware of the almost worldwide debate amongst regulators (HMRC) announced on the 9th of December that, with immediate on how best to deal with these issues. The FSA agreed last year to effect, IPT is now due on Brokers’ fees when dealing with private ‘Industry Guidance’, whereby commission must be disclosed on the customers. To say this has caused a storm in the UK would perhaps be request of the commercial customer and where the intermediary should the understatement of the year! BIBA has met several times with HMRC give a prominent statement reminding the customer of their right to ask in an attempt to get this piece of tax-avoidance legislation rewritten but in for the information. BIBA continues to promote the guidance and to the meantime we continue to take numerous calls from worried encourage members to adopt it. However, we are not a quasi-regulator members, insurers, software houses and the trade press! or an agent of the FSA so our involvement does not stretch to measuring, monitoring or policing these issues. BIBA also runs regular informal compliance forums around the UK and publishes a quarterly compliance newsletter, Compliance Rules, where Revision of the Insurance Mediation Directive (IMD) — BIBA is an we keep our members updated with the latest developments on these active participant in the European Federation of Insurance Intermediaries and a number of other compliance related matters. (BIPAR). BIPAR is preparing the ground for the forthcoming revision of the IMD by working through the key issues that the revision will address. These include the legal framework, scope, professional standards, transparency and reducing the administrative burden, amongst others. BIBA is actively involved in this important European dossier and will be keeping its members updated as more details emerge.

14 T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r Finance Bill 2010

Pensions season 2009 saw a significant change to normal practice. available to clients are the main key points that are still under the With profits down for both companies and individuals, the main thrust microscope. of business came from advisors seeking to maximise clients’ tax free cash options, investing the balance of clients’ pension funds in post Consequently, many advisors still must consider how to best manage retirement products, and clients asking how and where they can clients’ current and future pension planning needs … continue to fund. 1 Will there be a new tax relief regime? This change will undoubtedly provide financial advisors with the 2 If yes, how will this affect clients’ current planning? opportunity to again sit down with those clients, in particular company 3 Will there be reductions in the maximum amount of tax free cash directors, who have taken benefits recently or in the past and are still available to clients? If yes, should I take my pension benefits now? working in the same employment. Some of these opportunities And if I do take them now, am I allowed to continue to fund and include: if so, in what products am I allowed to fund? ✦ Employers investing contributions into the ARF 4 Will Approved Retirement Funds be made available to DC members? ✦ Employers investing contributions through a PRSA 5 Will the Standard Fund Threshold be reduced? How will this affect ✦ Employees investing contributions through a PRSA. my future funding levels? It is important that advisors can maximise these newer market Today, clients can still avail of the many benefits that apply to pension opportunities and life companies, such as Irish Life, will support with funding, in particular for company pension contributions. funding calculations, technical information and sales aids where necessary. However, the Finance Bill did have one very important announcement. The Life Assurance Levy of 1% that was introduced in the Budget of April Since the Commission on Taxation Report was first published back in 2009 and went live on the 1st of August 2009 has now been removed September 2009, the pensions industry has been waiting with bated for Company Pensions, AVC’s, Personal Pensions, PRSA’s, PRB’s Pension breath for possible changes to pension legislation. The Commission’s Term Assurance and Annuities from the 1st of January 2010. report made a number of high profile recommendations for changes to tax relief on pensions and pension lump sums. The industry lobbied The Finance Bill was not clear when published whether ARF’s were strongly to the Department of Finance to keep current legislation and exempt from this 1% levy as ARF’s are not specifically listed as ‘pension tax benefits open to clients, as potential reductions would have a business’ in Section 706 of the Taxes Consolidation Act 1997. The detrimental effect on pensions. good news is that the Department of Finance and the Revenue Commissioners have clarified their position and confirmed that the levy Irish Life, with the assistance of Moore McDowell, commissioned a will not apply to investments in ARF’s and AMRF’s. survey at the end of 2009 to look at the pension industry; and some interesting facts were revealed: Introducing this levy to pensions would have made it even more difficult for clients to fund for their retirement needs; effectively ✦ The true cost of pensions tax relief is not !2.9 billion as per the increasing the premium charge on a Standard PRSA by 20% from 5 to 2006 Revenue figures (and the Pensions Green Paper), but is 6% potentially. substantially lower than this figure. In summary, the good news is that clients can still avail of the many tax ✦ Contrary to the widely expressed view in the media, the main benefits available across all types of pension plans. My advice is that it beneficiaries of pensions tax relief in the present structure are not has never been more important for financial advisors to re-confirm high earners, but those with middle incomes (!45,000– these tax benefits to help their clients reach their retirement goals and !70,000). dreams. There is no doubt that there will be change in the coming ✦ The proposed change to a flat 30% rate would mean that anyone years — probably sooner rather than later — and the consensus opinion earning over !35,000 would face a reduced incentive to make is that these changes will likely reduce the above opportunities. pension contributions. This incentive declines for increased earnings, before disappearing at about !130,000, and thereafter is actually negative. For more information on funding opportunities for both pre- and post Even though these changes were not enacted in the Budget for 2010, retirement clients, you can contact me at [email protected]. Kenny there is no doubt that the maximum tax free cash and the tax relief Mellor, Senior Pension Development Manager, Irish Life.

T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r 15 PIBA [ DIARMUID KELLY, CEO ] CEO Meets … Anthony Brennan Zurich Life

Congratulations on your appointment as Zurich the life and pensions Against this backdrop, the role of the independent Broker has Q Life's CEO. How are you settling into your new role? market. While the total come to the fore. With people struggling to put money aside market was down 26% for the future and losing trust in financial products, Thank you, Diarmuid. So far, so good and Michael Brennan over 2009, if we independent Brokers offer invaluable one-to-one guidance on has certainly given me a hard act to follow! One of my key exclude ‘investment maximising returns on savings and the importance of financial aims is to provide continuity of our successful business only’ business, it had planning. Clients increasingly value the personal service and strategy. Our focus remains on providing a top class service to been down 44% in the reassurance that a Broker offers, which goes far beyond the independent Brokers and customers alike, and maintaining first quarter and had limited service banks can provide - particularly with branch our excellent long term investment performance. Continuous improved to 9% down networks shrinking. development of our superior online capabilities and range of by the fourth quarter. quality products is central to this strategy, while we continue Our own success at Zurich Life in building market share is to build market share and grow the business. With regard to without doubt built on the partnership we have established pensions, the removal with independent Brokers. As a result, Brokers trust us as a of the 1% premium reliable home for their clients’ business and our success is Zurich Life's end year results show that you have levy on pension pol- based on your members’ success. Q significantly outperformed the market in 2009. To Diarmuid Kelly (CEO, PIBA), Anthony Brennan (CEO, Zurich Life) Anthony Brennan (CEO, Zurich Life) icies in the recent what do you attribute this? Finance Bill was a Do you expect to see consolidation among life We produced an excellent set of year-end results, our Irish competitors, while contributing to Zurich's cross- welcome decision, and this should give the market a much Q companies over the next few years? outperforming an overall decline in the market. Our sales were border growth strategy in Europe. Ireland is now at the very needed boost, given the relatively low level of pension coverage down 11% on the previous year, compared to a market fall of heart of Zurich's strategy in Europe, which is recognition of that exists in this country. In the current climate, the need for There has been speculation of consolidation in our industry 26%, and we have increased our market share by 19%. the unrivalled service track record of Zurich Life in Ireland, pension planning has never been greater and the outlook for sector in the past and I am sure this will continue as the market built up over several years, and is a further strong statement Brokers with the requisite skills and experience is very strong, in continues to be a competitive and challenging environment. With As I have said in the press, there’s no trick here, just good old- of Zurich's continued commitment to Ireland. my opinion. However, much still depends on the Government’s the market falling so dramatically over the last two years, this fashioned hard work and a lot of help from our partners in the future decisions on tax relief. As you know, in a recent survey we leads to even more pressure on the existing players. Broker community. The foundations for our success have been undertook with PIBA, 86% of those surveyed believed that taxing laid in the last five to ten years. Our strong investment in Q Zurich Life has won the PIBA Service Award for an cash pension lump sums would have a significant or catastrophic Zurich Life in Ireland is part of the global Zurich Financial Broker supporting online technology, the development of our unprecedented seven years in a row. To what impact on the pensions market. Services group, which is ranked as one of the five largest investment team and investment processes, and the fostering factors do you attribute this success? insurers in the world, according to the latest market of a strong service culture delivered by a motivated, quality The savings and investment market has been dominated by the capitalisation figures. Zurich has been operating in Ireland for This is an award we value very much, and we are very proud staff, have been the key components of our continued out- banks since the credit crunch began, thanks largely to the attractive over ten years, and as I mentioned previously, now holds the to have won for the last seven years. I believe the main reason performance of the market. deposit rates that they have been able to grow as a result of the European Manufacturing Hub for Zurich’s Global Life cross- for our continued success is that we do not let complacency Government guarantee. There has been a significant increase in border business. Furthermore, in the current climate, the financial strength of an set in. And this is evident in the fact that we came first in every the national savings rate and the amount of money now held on insurer has become a major factor for clients when choosing a category in the 2009 PIBA service survey. As I mentioned, deposit in Ireland. However, with improved equity performance, We are now at the very centre of Zurich’s plans for growth in life company. And as a member of one of the largest and providing the very best service to independent Brokers forms a we can expect increased investment in these markets if that Europe and the development of the European Hub is a very strongest insurance groups in the world, we have certainly core part of our business strategy. We understand that in order growth continues. Concerns exist over the unfair effects of the life strong statement of Zurich’s continuing commitment to Ireland. I benefited from this. For example, a recent survey by Oliver for us to be successful as a life company, we depend on assurance levy on investment products and the introduction of the think we have benefited by concentrating on growing organically Wyman consultants ranked Zurich as the global insurer with Brokers to be successful. And it is with that in mind that we National Sovereign Bond, which has the potential to take savings through the Broker market over the last few years. the most stable returns over the past five years. allocate considerable levels of time, effort and resources into away from life insurers, due to its tax advantages. It is therefore supporting the independent Broker market. important that key organisations like PIBA continue to work with us In 2010, PIBA celebrates 15 years in existence. How to campaign for a level playing field. Q Q Can you explain a little bit about Zurich's cross Over the last two years, we have made significant do you think PIBA has contributed to the industry border European hub, which has recently been enhancements to our Broker online offering, such as the In terms of protection, I expect continued growth in the personal in that time? established in Dublin? introduction of our expert underwriting system, the facility for protection market this year, as people continue to prioritise the PIBA’s development as the largest Broker organisation in the printing in Brokers’ offices, reflexive underwriting and financial welfare of their families. Also, with clients becoming Last year, Zurich established a European Manufacturing Hub country has been tremendous and this is testament to the electronic signature ePads. These developments have more cost conscious in the group risk market, I see more in Ireland to develop cross-border life products. The Hub PIBA leadership and the engagement of PIBA members. enabled Brokers to process business faster and more opportunities for Brokers to help them review their current currently manufactures and services life products for the UK Zurich Life continues to have a very strong relationship with efficiently. This has given us a leading edge in technology, as arrangements and secure better value. and selected mainland European markets, including Italy and reflected in recent PIBA service survey results. PIBA, built on our shared value of providing excellent Germany, and we expect further expansion in due course. customer service. Brokers’ share of the overall market increased The Hub is already delivering excellent results, having created PIBA is now clearly a major voice across the wider financial What is your outlook for the Life Insurance Market Q significantly in 2009. To what do you attribute this 30 jobs in 2009, and there are plans to recruit an additional services industry, making key contributions. PIBA has played a Q in 2010? increase in market share? 30 new roles this year. I am confident that this Hub major role in financial events in recent years, and I look development will strengthen the market leading IT and The economy is expected to return to growth in the second half The crisis in the banking sector and the economic downturn forward to working with you and your members to continue service standards that have consistently given us an edge over of 2010. We have already seen a slowing in the rate of decline in have impacted negatively on job security and income levels. this valuable role into the future.

16 T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r 17 Are Absolute Returns a better bet than Managed Funds for 2010?

By David O'Brien, Investment Sales Manager, Standard Life Investments

Which asset classes should fund managers choose for the coming year? There are many options. It could be emerging markets, with commodities that China needs dominating, or perhaps a stall in global growth will dash the fragile confidence of investors and high grade bonds will shine.

Managers looking for diversification will be aware that extraordinary uncertainty exists at this point in the economic recovery and much depends on the decisions of the world's central bankers, regulators and politicians. This is why we believe that the investment outcome for a properly diversified fund should We think better diversification can be achieved. For example our not be totally dependent on how 2010 turns out. diversified global absolute return fund when run through the same theoretical scenarios is expected to return around 8% in the central The term balanced or managed fund conveys a comforting sense of scenario, 3% when averaged across all scenarios and almost 6% if diversification; perhaps they will cope with many of the possible we give the central scenario a 60% probability. versions of 2010 that lie ahead? However, this is unfortunately not the case. The average Irish managed fund has a weighting of around 75% Having considered the options we think that while the average balanced in equity markets, which is extremely concentrated. This means that fund is expected to deliver a small positive return in 2010, balanced we should not expect such funds to do much more than deliver funds are not really very balanced and are ill-equipped to cope with the slightly diluted stock market performance. enormous uncertainty that still lies ahead.

Given that we expect global stock markets to rise modestly in 2010, we would expect the average balanced fund to deliver a modest Performance Report – Performance 12.06.2006 to 12.02.2010 positive return. But that is just the central view. It is more prudent 40% from a diversification viewpoint to consider how funds will perform in a variety of possible economic scenarios, including the central 20% one.

We run our diversified absolute return funds through a range of 0% scenarios, from 'bleak', i.e. future stock markets falls substantially and the world again teeters on the brink of deflation, to 'rosy', where -20% SL Synergy GARS confidence rebuilds remarkably quickly and equities rally strongly. Average — Managed Balanced -40% When we apply this analysis to a typical managed fund it says that it 12-06-2006 30-10-2006 19-03-2007 06-08-2007 24-12-2007 12-05-2008 29-09-2008 16-02-2009 06-07-2009 23-11-2009 will deliver a return of around 2–3% in 2010 on our central Presented by: MoneyMate Limited. scenario. However the simple average return across all the future The figures shown are based on the following: Local Currency, Offer to Offer, Gross income re-invested scenarios we consider is a worrying -8%. Even if we assign a on Ex-dividend date. probability of 60% to our central scenario being correct, we still get Past performance is not necessarily a guide to future performance; Unit prices may fall as well as rise. © MoneyMate Limited 2008. All rights reserved. MoneyMate ® an expected return of -2.5%.

18 T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r From the Great Floods to the Ice Age

The Weather grips the Insurance Industry

The Irish Insurance Federation has estimated that the cost of claims arising from the November 2009 floods and the January 2010 freeze stands at !541 million. To put the enormity of this scenario into perspective, the cost of the two weather events has far exceeded the total cost of all claims made for serious weather events that had occurred in the previous ten years (!353 million).

Although it seems losses through claims are capable of being absorbed at the moment, with 60% of annual premiums being used to cover the cost of claims, how long is this likely to last? With the increasing frequency of supposed ‘one in 800 years’ weather related events and the fact that November ’09 floods in Cork claims were following an upward trend since 2008, it is likely that home insurance premiums will increase. Some insurance companies have already notified Brokers of increases in home insurance excess levels — the amount of a claim for which the consumer is liable — to take effect shortly.

PIBA would advise people to take independent advice from a Broker on their policy. A Broker can explain the policy terms, conditions, warranties and level of excesses to their client, in addition to assisting with the claims process. An independent Broker can also help negotiate the best available January ’10 cold snap in Dublin rates to suit the individual circumstance.

Looking Out For You — Aviva’s flood response

For two weeks towards the end of November, Ireland that our representatives could make rapid payments on account experienced its most significant flooding on record. This resulted to customers suffering hardship to help them as quickly as in distress and hardship for thousands of homeowners, business possible. This initial payment was a crucial stop-gap for many owners and motorists as their properties were damaged or customers while we processed their main claim, and covered destroyed. For Aviva this was a moment of truth when we could both homeowners and business insurance customers. live up to our brand promise and deliver peace of mind. In any issues management situation, information flow and During the flood event the insurance industry helped over 8,500 provision of advice is crucial to enable consumers to understand customers with claims, with counties Cork, Galway, Clare and what is happening and, more importantly, what is being done to Dublin being most impacted. For Aviva the response was rapid help them. Aviva’s communications team stepped in and and comprehensive. The Aviva response was a combined effort immediately implemented an incident communications plan. involving claims teams in the company’s call centres and on the This was a fully integrated approach that involved website ground teams involved in roadside rescue. updates, press releases to media and advertising to help customers and others understand the scale of the event and the Aviva’s action plan had already taken shape within 30 minutes steps to take. As well as consumer updates, the communications of the floods starting. As soon as the initial reports began to team also ensured that local political representatives in impacted surface, Aviva had doubled the capacity of our claims notification areas were advised of the issues and on the steps we were team in anticipation of increased calls following the downpour. taking to help constituents in their area. This early action was a core part of our plan and was central to maintaining our customer service levels despite the The November floods, the cost for which totalled !244m for unprecedented influx of claims. Just eight hours later, the Aviva the entire insurance industry, had consequences mostly in team had handled the equivalent of one week’s claims Munster, the West and the Midlands. The three counties worst notifications in just one day! hit were Cork, Galway and Clare with property insurance claims ! Aviva also rapidly deployed its roadside rescue patrols to between commercial and household property of over 141m, ! ! impacted areas with instructions to help any consumers who 23m and 16m respectively (note: the Cork figures were were stranded in the flood waters regardless of whether they impacted by significant commercial property claims). were Aviva customers or not. The arrival of our patrol vans was warmly welcomed by many, many hundreds of motorists. Aviva’s actions to live up to its promise were a moment of truth and we remain proud of the response we provided and the A major initiative undertaken by Aviva was the launch of an support and help we delivered to customers across the advance payment option for customers in hardship. This meant impacted areas.

20 T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r Exploring New Revenue Streams in a Tough Market

By Leonard Mills, Business Development Manager, AVAFX

As many of you are painfully aware, it has been a tough 18 months for the Broker market. However, there are always opportunities in every market condition. Some Brokers are adapting well to the current economic climate by diversifying their client offerings and building new income streams to keep the wolf from the door.

Many of these new services are not only complementing their core businesses: these Brokers are establishing themselves as one stop professional advisors delivering solutions to many of the issues their clients are currently facing. In effect, they are getting a bigger piece of the pie and giving themselves opportunities to re-connect with their clients and develop new and fresh marketing campaigns.

Some of these additional services are in high demand, such as money management, debt restructuring and business coaching. Getting up to speed in these areas is not rocket science but does involve educating yourself to become competent in order to provide the best advice possible. AVAFX has recently launched in the Irish market and is actively seeking new business partners. As one of the world’s leading It is crucial to start thinking beyond the traditional methods of online forex-trading Brokers with over 50,000 registered generating income, start planning for the uncertainty that lies customers worldwide, AVAFX has trading volumes of more than ahead and implement a new business plan to provide $20 billion a month. Founded in 2006 by a team of financial alternative revenue streams; as no one knows when a recovery professionals and experts in Internet technology, Ava is in the financial services industry will take place. dedicated to creating the ultimate online trading experience. Ava FX is backed by a major financial institution that has over If you are not in a position to provide a particular service directly $17 billion in assets under management and is rated “A+” by due to a lack of industry specific experience, or if you don’t an S&P affiliated rating agency. AVAFX (Dublin) is regulated by have the level of monetary investment required, an alternative the Irish Financial Regulator. strategy is to source business partnerships to extend your service offerings. The most important considerations with these There is no onus on the partnering Broker to provide their relationships are to ensure that you maintain client ownership client with any advice in relation to their trading decisions, and that there are no potential conflicts of interest.These so partnerships are open to general, financial planning and business partnerships are in effect referral arrangements, and investment Brokers. Your clients will be provided with an there are many opportunities to explore in the marketplace. unparalleled service which includes trader technical tools, They will allow you to leverage your existing customer base in a training, market reports and 24x7 phone support to ensure new way and help you grow your business and develop new that their trading experience is both enjoyable and revenue streams. profitable.

One such business partnership worth considering is with an This type of partnership can be a significant long term income online FX trading company. A client can trade from their own generator for an introducing Broker based on the frequency and home through an online trading platform and place positions level at which their client trades. There are many attractive on foreign exchange, commodities (such as gold and oil) and packages available depending on your needs. many of the major market indices.

In today's turbulent global financial markets, investors are looking for innovative ways to generate returns. FX trading offers If you would like to explore this income stream further, you can investors exciting opportunities. The market for private FX contact me on (01) 436 5204 / (087) 903 7396 to discuss, or trading is growing by over 500% annually. In the past, private alternatively e-mail [email protected] for further details. traders were at a disadvantage in relation to banks and other large financial institutions that were armed with powerful Please note that this article is intended for information purposes only and is not to be considered a recommendation by PIBA for any company and/or service or trading tools that the private investor had no access to; this is product. You should, at all times, use your professional judgement as to whether this no longer the case. service or product is suitable to either you or your customers.

T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r 21 Sales to Vulnerable/Older Consumers

By Elizabeth Smith, Compliance Manager, PIBA

The Financial Regulator recently published the findings of a four part examination of selected credit institutions, life insurance firms, and investment and stockbroking firms in relation to the suitability of investment products sold to older consumers. Its findings highlighted concerns regarding the sale of inappropriate products to older consumers by some institutions, for example, cases where the product could not be accessed for up to six years, which was clearly unsuitable given the age profile of the client.

These findings reiterated points made in an Industry letter from the Financial Regulator in June 2008 and concerns raised in recent Financial Services Ombudsman (FSO) reports, which highlighted the need for additional control measures when advising on products for older or vulnerable consumers. Firms are already required to adhere to the Consumer Protection Code’s Knowing the Consumer/Suitability requirements, but members should ensure that their firms have additional controls and procedures in place when conducting sales to older consumers.

The Financial Regulator has indicated that the benchmark for the definition of older consumers is 60. This benchmark is clearly a guide and depends on the individual client involved. PIBA issued guidelines to members in July 2008 on how to integrate additional controls into the sales procedure for older consumers. A summary is outlined below:

✦ Particular attention should be drawn to the needs of older consumers such as: • The need for greater capital security • The need to have access to cash to cover ordinary living expenses, health care needs, and emergency funds Term or time period of the investment • INVEST MENT AD The accessibility to encash investments if required VICE CH • ECKLIST PLEASE • The impact of early exit penalties and charges. TICK

Third ✦ It is recommended that a third party be present when a party , fami ly mem Prod ber, policy is sold (or that an attempt is made to have a third party uct Bo or adv oklet isor p and C resent Curr ustom ent an er Info present). In practice this means seeking to have a family d pot rmati ential on No Eva incom tice ex luation e requ plain member or professional third party present, and noting on of ot ireme ed her as nt Exp sets to lanatio ensu ye n of t re inve the file when the client has refused this request. ars) he lon stmen g-term t is ap natur propr Na e of in iate ture a vestm p nd lim ent po ✦ A checklist is recommended as an additional control when roduc itation licies t s of a (min 3 ny gua -5 A rantee advising on investments. This would indicate that particular ssessm s that ent o are in f attitu cluded R de to in the isks at risk focus is given to certain issues. It is recommended that tached to inv Re estme stricti nt this checklist should be signed by both parties and ons on encas Exp hment lanati approved by someone at a senior manager level. on of encash Exp ment lanati penal on of ties ap impac plying ✦ Exp t of ge , if ap Both the Financial Regulator and FSO highlight the need lanati aring, propr on of if app iate marke ropria Exp t value te to record verbal advice in the sales process. PIBA lanatio adjus n of s tment tock m s, if ap Expl arket propri would recommend that members make anatio volatil ate n of ‘w ity orst c Expla ase’ sc nation enario contemporaneous notes of client meetings and whe of wh if inve n inve at hap stmen stmen pens o t doe t can n dea sn’t pe phone calls, which include material information not Exp be enc th —w rform lanatio ashed arnin n of ‘ g on f wrapp und va ed’ pr lue, a recorded on the fact-find or the Statements of oduct, nd Addit if app ional N ropria otes ( te Suitability. e.g. an y spec ific qu estion s raise d by c ✦ Senior management oversight is imperative in the lient) sale of policies to vulnerable/older consumers.

CL ✦ Be sure to fully explain the nature of the IENT D ECLAR I am ATION satisfi underlying investment and what guarantees, if ed tha t the a bove i tems h C ave b any, the life office is providing. lient een a ddress ed by my Ad Third viso Party r

PIBA has developed a checklist (reproduced) as a Adviso r/Seni or Adv safety measure for ensuring that the highest isor professional standards are maintained with regard to the sale of investments, particularly to vulnerable/older persons. By using this checklist you can rest assured that you are providing the best service for your client whilst complying with regulatory requirements. PIBA guidelines for sales to vulnerable/older consumers are available in the ‘Members’ section of the PIBA website.

22 T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r Publicity and PR A Recession-proof means of generating New Leads?

By Joe Charles, Marketing Manager, Caledonian Life

Brendan Behan famously said: “There’s no such thing as bad yours has an angle that makes it different from the rest. It publicity, except for your own obituary!” could be as simple as using an interesting and successful case study of a client (with their permission of course), Unfortunately, maybe not quite so true when applied to all taking an angle on a topic (ETF’s versus active fund matters financial over the last two years! There’s no doubt, management for example) or just accompanying the however, that publicity and PR can be an excellent way of article with a good photograph. getting the name of your Brokerage out to potential clients. You’re not just gaining column inches, you’re also saying to Standing out from the crowd makes your Brokerage readers that your Brokerage has professional status and is appear dynamic and innovative, which is obviously a good newsworthy. More importantly, good local press coverage is a place to be when potential clients think about who to great way of developing new leads. approach with their business.

So how to start? A good place to begin is to find out the name 3. Position yourself as an expert of the relevant journalist or editor of a local publication and If you can successfully position yourself as an expert, make a quick introductory call/email. Or indeed, just arrange to journalists will come to you for your opinions. For meet up for a coffee. Your starting place could be as simple as example, if you have been working in the business letting them know that you’re available for comment on life assurance field and have developed an expertise in this and pensions matters. It’s important to remember that it’s in area, let them know! A journalist may then turn to you the their interest to cover stories relevant to their readership. So next time they need a comment with a partnership this will often be an initial conversation they’ll be receptive insurance focus. Or why not consider writing an “Ask the towards. expert” personal finance feature in your local paper? Of course, making good contacts is only part of the process; Needless to say, being seen as an expert in your field is you have to ensure that your announcement, comments or always an excellent reputation to have when people press release are tailored to what the publication wants. Here decide who to turn to for financial advice. are some quick tips to follow when trying to get publicity and PR coverage for your Brokerage: 4. Timing is everything

1. Know your audience Give journalists what they want, when they need it. Journalists work to deadlines so find out when they are Journalists in any type of publication are ultra focused on and make sure your story will be relevant on the their audience. If the people they are creating content for publication date. If you know that there’s going to be a big want to know about specific subjects or areas of interest, industry announcement/issue at a time near the that's what they will write about. In this sense it’s publication date, write your piece ahead of time and be important to tailor your message to them. So, if you’re the first to comment on it. It makes sense. Isn’t late August approaching a local newspaper, make sure that your or early September a better time to write about pensions message has a local slant to it. For example, if you are than say, Christmas time? If your article is ‘of the moment’ based in an area with a large number of self employed you’ll have a much better chance of having it used. people, an article or comment on the benefits of pension term assurance may be of interest to your local Most of these ideas are good old fashioned common sense. publication. But applied regularly and diligently, they could have very positive benefits for your Brokerage. Of course, if you have any 2. Stand out from the crowd questions or feedback on any of the ideas in this article, just Most commercially successful businesses find a way of email the Caledonian Marketing team at differentiating themselves from their competitors. It’s no [email protected] — naturally, and con- different when pursuing publicity. Journalists receive an sidering the focus of this article, we’ll be delighted to hear from abundance of bland corporate style stories so make sure you!

24 T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r Diversification 101: Using Alternative Asset Classes

By Graham Fox, Investment Development Manager for Brokerage, Irish Life

One of the core fundamentals of building a portfolio is diversification. Hedge Funds — Hedge funds are special types of managed It is an easy term to talk about; however to actually build true diversity funds that have much broader investment strategies. into an investor’s portfolio can be extremely difficult. Historically, a Traditional managed funds buy equities, property, bonds and portfolio consisting of equities, property, fixed interest and cash was cash and tend to hold on to them. They are said to be ‘long’ thought to be diversified and capable of weathering all types of in these assets, and rarely if ever go ‘short’, which means markets. This approach seemed to work until the recent market crisis selling shares that they don’t own to make money in a falling revealed the strength of correlations (how these asset classes moved market. As a result of this managed funds lose money when together), exposing a structural weakness within what was considered markets fall. As a result of the broader investment strategies a a well-diversified portfolio. Diversification in today’s world means hedge fund could decide to ‘short’ an index or share and providing access to the traditional assets above together with an make money from the fall in price because it could potentially exposure to a new range of alternative asset classes described further buy the share for less than it sold it for in advance. below. Commodities — Basically commodities are raw materials that If you take a step back and look a little deeper into the concept of are mined or grown, and used in construction and diversification, you will find correlation as a key component. In basic manufacturing. The definition of a commodity is any material or terms, correlation is really about how different asset classes move produce that is consistent in quality and type. Commodities by together. There is an ever increasing list of new asset classes to themselves are a risky asset class; however by combining them choose from, and getting access to the correct blend coupled with an with traditional asset classes they provide strong diversification. understanding of what they do is the challenge for today’s investor. Private Equity — Private equity now accounts for a very Proper asset allocation requires knowing the degree to which different significant part of the total corporate sector in the US and UK. asset classes move with one another. A correlation of 1 means they Private equity ‘houses’ raise money from pension funds and move in perfect tandem; for example you would expect global equity insurance companies, typically in the form of closed-end funds. markets and emerging market equities to have a high correlation. If Private equity funds tend to have a target life, by the end of global markets are down significantly on a day, you would reasonably which the money in the fund is returned to investors. The main expect emerging markets to be down. Negative correlation is where the objective of these funds is to improve the profits of a particular assets consistently move in opposite directions. Cash and equities set of businesses and sell them on. would be considered to be negatively correlated. To build a truly Venture Capital — Venture capital refers to early stage diversified portfolio, it is important to invest in a mix of assets with a investment in smaller companies. As a result of its perceived high level of negative correlation. The chart below looks at the importance in generating future industries, private investors have correlation of a range of different asset classes. been encouraged to put money into venture capital by various tax incentives. Access to new alternative asset classes The main alternative investment areas are private equity, venture Managed Futures — Managed futures provide a diversified capital, commodities, hedge funds and managed futures. The good investment opportunity where traders can participate in more news for today’s investors is that the wide-ranging benefits of than 150 global markets; from grains and gold to currencies and alternatives are fast becoming more accessible. stock indices. They have virtually no correlation to traditional assets. Furthermore, they generally perform well during adverse economic or market conditions for Gov Global Hi-Yield Emerg Mkt Private Corp Irish Gov stocks and bonds, thereby providing good Cash Bonds Equities Equities Equities Infrast Equity Commods Bonds Bonds Property Forestry downside protection in most portfolios. Government Bonds 0.04 Brokers and financial advisors are now focused on implementing new portfolio building Global Equities -0.32 -0.26 techniques that use alternative sources of High Yield Equities -0.07 -0.06 0.67 diversification that seek to deliver consistent risk- Emerging Mrkt Equities -0.34 -0.23 0.84 0.45 adjusted returns for clients. As a core part of an investor’s portfolio, a fund with real diversification Infrastructure -0.29 -0.01 0.66 0.52 0.62 provides a strong base against which an investor’s Private Equity -0.35 -0.17 0.80 0.50 0.77 0.59 long term growth objectives can be achieved. Commodities -0.13 -0.21 0.38 0.16 0.44 0.27 0.39 Corporate Bonds -0.24 0.69 0.10 0.08 0.16 0.40 0.22 0.06 Irish Governt Bonds -0.01 0.92 -0.18 0.05 -0.15 0.08 -0.01 -0.14 0.71 Property -0.40 -0.08 0.73 0.58 0.70 0.70 0.78 0.38 0.35 0.05 If you would like to know more about diversification, correlation or investing in alternative asset classes Forestry 0.33 -0.01 -0.09 0.01 -0.03 -0.03 -0.09 0.02 -0.08 -0.02 -0.10 please contact your Irish Life Account Manager or Hedge Funds -0.25 -0.19 0.48 0.02 0.62 0.44 0.63 0.36 0.26 -0.10 0.55 -0.08 myself at [email protected].

T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r 25 1995

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PIBA AGM PIBA ANNUAL BROKER CONFERENCE PIBA 15th BIRTHDAY CELEBRATIONS Thursday May 27th, Radisson Blu St. Helen's Hotel, Stillorgan Road, Dublin 4

For further information relating to tickets and sponsorship opportunities, please contact Edel Morey at [email protected] or on (01) 492 2202 ADVERTISEMENT Growing Commitment from Generali

importance to the Generali Group because of its pivotal role in executing their Variable Annuity strategy in Europe. This rating also recognises the significant role we play in the business success of the Generali Group through the design and delivery of specialist financial products across Europe.

High Net Worth Clients One of GPE’s key business lines is as a provider of specialist financial vehicles to high net worth individuals, enabling these clients to proactively manage preserve and grow their accumulated assets. There has been much change in legislation Artist's Impression of Generali's new Head Office in Navan, Co. Meath across Europe relating to this area of business and it is currently an area of focus and flourishing redevelopment within GPE. As of the 1st of January 2010, Generali PanEurope Limited (GPE) opened for business as a provider of Group Risk business A Global Player for domestic companies in Ireland. We are now pleased to In its 175 year history, the Generali Group has acquired and announce a further positive development for our organisation — nurtured a wealth of knowledge and experience and a global in collaboration with the IDA, GPE has commissioned a new insight that it can call upon to develop local solutions by adapting bespoke Head Office in Navan Co. Meath. to the needs and demands of specific markets such as Ireland. For Irish Brokers that have not dealt with GPE in the past it may While the current market in which we operate is a challenging come as a surprise just how big a player the Generali Group is on one, identifying opportunities that exist and how we can grow the world stage. Its annual revenues in 2008 placed the Generali our business in line with these opportunities is a key driver within Group among the top 50 companies in the world and as a Top 5 our organisation. insurer (Fortune Global 500, 2009). It has assets under ! We have had a presence in Navan since 1999, and since then management in excess of 390 billion as of February 2010 and our operations have grown significantly and employment has a credit rating of AA- Stable Outlook with Standard & Poor’s. increased fivefold. Generali employ over 100 people in Navan Group Risk and it is envisaged that the numbers employed will continue to increase over the coming years, solidifying our long term The core group risk offerings that are available through GPE are commitment to Ireland and reflecting our growth plans. Group Life, Long Term Disability, Accidental Death and Dismemberment, Total and Permanent Disability and Critical Pan-European Employee Benefit Solutions Illness. We have been successfully marketing and selling these covers on a pan-European basis for a number of years now. We A growing area within the organisation presently is our ability to are confident that we can offer an appealing alternative for provide companies that have employees located across a Brokers and compete effectively in the Irish domestic market number of European countries with a single employee benefits using this tried and tested business model. solution, allowing them to reduce the burden of employee benefits administration and to benefit from a competitively priced We have been talking to many Brokers in the last twelve single contract. months, and from these discussions it is clear that we can bring a new dynamic to the Irish group risk market. It’s important that Due to EU legislation in place, namely the freedom to provide in the current environment we have the ability to be flexible cross border services pursuant to the Third Life Insurance and adapt to specific Broker needs. Our experience in the Directive, using Ireland as a base, we bring the benefit of this employee benefits market and the financial strength of the legislation to our corporate clients. Recent market conditions Generali Group enables us to do this. For example, for a Broker have seen interest and demand for this solution grow who may have a particularly challenging case, it is more than significantly. likely that we have experienced a similar case in the past and Variable Annuities have the capacity to provide a fitting solution. Variable Annuity products are of strategic importance to the We have in place all the necessary Generali Group. In 2009, GPE was selected as the central sales and administrative support hedging company for Variable Annuity products distributed by required to service the group risk the Generali Group in various European markets. The dynamic business in Ireland to the highest hedging programme carried out by us involves actively standard. We have recently rebalancing a portfolio of derivative financial instruments to appointed Marian Conway, who ensure that asset and liability (cost of guaranteed option) risk will be joining us from Friends exposures are closely matched at all times. First, as new Head of Sales Ireland. Independent S&P Rating

GPE has recently been awarded an AA- rating from Standard & Chris Ennis, Head of Employee Poor’s. Standard & Poor’s consider GPE to be of strategic Benefits, Generali PanEurope Getting your Income Protection cases Over the Line

By Brian Grimes, Head of Protection, New Ireland Assurance

Income Protection underwriting is different … … and so the sale of Income Protection needs Perhaps the single biggest difference between income protection to be different. (or PHI) and life underwriting is the proportion of lives who don’t This difference in underwriting outcomes requires a different qualify for standard rates. We surveyed three of the major re- approach to the sale of income protection. A client’s insurers to get the broadest possible experience and the commitment to protection can sometimes be a fragile thing consensus is that typically up to 10% of people are declined, and can be damaged by surprises such as extra premiums or 30%-40% attract some sort of rating or exclusion, and some exclusions. There is no doubt that a significant number of good 50%-60% qualify for standard rates. In contrast, approximately income protection applications do not go ahead because the 90% of lives qualify for standard rates for life assurance. client is surprised by an underwriting decision. This is hugely frustrating for both the customer (who has gone through the This is logical. Who should qualify for standard rates? At its recommendation and underwriting process) and the financial simplest it’s someone whose medical history doesn’t include advisor (who has made a perfectly good recommendation for anything which would indicate a higher than usual probability of which he or she will not be paid). a claim. Income protection pays out on far more medical conditions than other benefits. Back pain can keep you out of However, forewarned is forearmed. We can see huge work, but as your mother often told you, you’ll live. Therefore, a differences between financial advisors in terms of the history of back pain does make you more susceptible to proportion of their customers who proceed from proposal income protection claims than most but has little or no effect stage to issue stage. Those financial advisors who got the on your mortality risk. This means it won’t affect your life highest proportion through had the same mix of exclusions assurance terms but, depending on the severity of the and rated lives as others. We asked them how they condition, it may affect your income protection terms. The approached income protection differently from life. It came same is true of many other conditions. down to the following:

HOW TO MAXIMISE YOUR ISSUE RATE FOR INCOME PROTECTION 1 Secure the strongest possible buy in for the benefit Income protection has an advantage here over other protection products. The customer can visualise what it will mean to have income protection on a monthly basis. Make sure that image is as strong as possible.

2 Prepare the customer for the possibility of a rating or exclusion Perhaps use the back example to explain the principle. Even if you’re using a tele-interview it is good practice to ask if your client has a history of illness or injury. It will help if a client understands from the start that (for example) his recent knee injury may lead to an exclusion. By bringing this out up front you will be able to counter any objections and re-affirm how valuable income protection is even with that exclusion.

3 Position your quoted price properly First of all, make sure that the occupation class is correct. Refer to your product producers’ guide or call the relevant help- line. Then make it clear to the customer that this quoted price is the price that applies to someone with no medical history. Explain that the premium might be higher if he or she has an adverse medical history. Remind your client that tax relief will apply to the whole premium and that you can always adjust the benefit amount to reflect affordability.

Remember, 90% of people seeking income protection will be offered terms. You have the biggest influence on what portion of your clients will take up those terms. Please contact your Broker consultant for a copy of the comprehensive Broker sales pack developed to support the sale of New Ireland’s market leading income protection product.

The content of this document is for information purposes only and does not constitute an offer or recommendation to buy or sell any protection product or to subscribe to any advisory service. Terms and conditions apply. Protection benefits are subject to underwriting and acceptance by New Ireland Assurance. New Ireland Assurance Company plc is regulated by the Financial Regulator and is a member of the Bank of Ireland Group.

28 T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r Is it Just Me or Has the Shit Hit the Fan? Your Hilarious New Guide to Unremitting Global Misery

From bank bailouts to enviro-copouts; from Tory politicians they say ‘The banks fell over like listening to The Jam to celebrity credit crunch 'victims' Grant fat Labradors running over a wet Bovey and Anthea Turner; from BNP coppers to Christian kitchen floor.’ theme parks to middle-class shoppers banging on about budget supermarkets … funny, sharp and timely, Is it Just Me Ireland comes under fire for our or Has the Shit Hit the Fan? asks the crucial questions of the building boom, as does Bono for new age, like: why are the people who screwed the world still wanting debt forgiveness in the running the world and screwing the world until we're all Third World yet moving his screwed more than we've ever been screwed before? company to Holland to pay less tax — the irony being that for a country After two hard years in Brokerage this book has been a to be able to afford to write off the welcome change to my regular reading, because quite frankly, debts of other nations it needs as even when things are tough, it helps to read something that much tax as it can collect in order to takes the mick out of the whole situation. This book does it stay afloat itself (which definitely perfectly with quotes like ‘This historic meeting, the G20, applies to Ireland in particular!) was so-called because there were twenty-four countries represented, suggesting that the inaccurate and, some This book offers no answers or solutions; what it does provide would say, corrupt maths that had created the problems are well placed jokes about the economy and some reasons was not exactly being tackled root and branch.’ for laughter: nothing wrong with that!

While there is a UK-centric theme to the book the stories are familiar to us all and the analogies are priceless: on banking

The little book of Bull Moves in Bear Markets By Peter D. Schiff

Peter D. Schiff is a seasoned Wall Street prognosticator best shows no sign of arrival), he presents known for his accurate predictions of the performance of the complex areas of the financial world stock market, commodities, gold, and the Dollar. He is best from a practitioner’s standpoint (he known for calling a real estate bubble in the USA and how sub- isn’t an academic: he runs a prime loans would eventually bring down the entire economy. Brokerage) in a manner that is easy He is a regular commentator on CNBC, Bloomberg, CNN and to understand and that allows the US Radio. reader to grasp the basic mechanisms of how US markets work in an The little book of Bull Moves in Bear Markets is written for the operational way: for instance, he perma-bears. It was penned at the start of 2008, and in typical describes the actual manner in which Schiff fashion talks about the risk that Lehman Brothers, PinkSheet stocks work from company Freddie Mac and Fannie Mae presented to the US economy to dealer to end buyer. and his belief that they would collapse (which they later did in historic fashion). The advice in this book is really for people who earn and invest The main thrust of the book is that of moving investments in US dollars, but it can provide an equally important message to away from US Dollar denominated assets. Schiff has been a Irish readers because the point about looking to other economies fan of gold since the early 2000’s and he also favours investing for opportunity is important: you may have to live here, but you in Asian, Australian, and European shares: in particular those can invest anywhere and in advising clients diversification is a key that pay dividends. message that Brokers can communicate. This book will help put further reasoning around the case for diversification and what While he doesn’t get everything right (his prediction of pending countries it may be worth focusing upon in order to tap into hyperinflation in the USA that was made four years ago still markets with the best opportunities in the coming years.

T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r 29 PIBA Update

PIBA Trustee Training in association with New Ireland Joint PIBA/IMAF meeting with Matthew Elderfield (Head of From the 1st of February 2010, all pension scheme trustees are Financial Supervision, Financial Regulator), 8th March 2010 required to undertake training. If you were acting as a trustee prior PIBA and IMAF met with Matthew Elderfield. Industry items were to this date you have two years to complete the training. If you are discussed including: dual lending/pricing, cancellation of agencies a newly authorised trustee you have six months to complete the based on non-production, Minimum Competency Requirements, the training. Once a trustee completes the training he/she must Approved Professional Body Regime, requirements for basic banking undertake training at least every two years thereafter. products versus basic insurance products, Statements of Suitability. The Pensions Board recently launched a new e-learning system which provides this training online. The course has nine lessons ranging from the basics of pensions and trusteeship, through to The National Pensions Framework more complex areas such as investment. The trustee e-learning The National Pensions Framework document was published in system can be accessed at trusteetraining.pensionsboard.ie or early March. This framework document sets out key developments from the Pensions Board’s website on www.pensionsboard.ie. for the future of pension provision as well as detailing the Alternatively, trustees can complete approved training courses. A list principles on which the framework is based. The framework of approved courses is available on the Pensions Board website. document is available on the following website: PIBA in conjunction with New Ireland ran four trustee training seminars www.pensionsgreenpaper.ie/publications_nationalframework.html. on March 22nd, 24th, 25th, and 30th in Athlone, Dublin, Cork and While some proposals will be implemented in the short term, a Dublin respectively. Over 200 delegates attended. This event was free technical implementation group chaired by the Department of of charge for PIBA members and other nominated delegates and Social and Family Affairs will be established to develop the provided four hours CPD (as certified by the QFA Board). legislative, regulatory and administrative infrastructure required to put the reforms into operation. This group will conduct extensive consultation on many aspects of the framework before presenting final options to Government for decision. Meetings Update Pensions Lobbying, 4th February 2010 Diarmuid Kelly (PIBA CEO) and Elizabeth Smith (PIBA Compliance Manager) met with Prof. Orlaigh Quinn, Head of Pensions Policy The Financial Regulator’s register of insurance intermediaries and Ciaran Lawlor from the Department of Social and Family Affairs The Financial Regulator recently issued a reminder to insurance in relation to the Pensions Framework document. intermediaries that they must be listed on the Financial Regulator’s ‘Insurance Mediation Register’. Minimum Competency Requirements, 10th February 2010 Liam Carberry (PIBA Director) and Elizabeth Smith (PIBA If your firm acted as an insurance intermediary prior to 2005, this Compliance Manager) met with the Financial Regulator in relation activity was covered under its authorisation under the Investment to the Minimum Competency Requirements. Intermediaries Act, 1995 (as amended). However, if your firm did not return the relevant documentation to the Financial Regulator Meeting with Matthew Elderfield (Head of Financial following the introduction of the EC (Insurance Mediation) Supervision, Financial Regulator), 1st March 2010 Regulations 2005 (‘IMR’), your firm is not listed on the ‘Insurance Michael Hoare (PIBA Chairman), Diarmuid Kelly (PIBA CEO) and Mediation Register’. Elizabeth Smith (PIBA Compliance Manager) met with Matthew Elderfield (Head of Financial Supervision, Financial Regulator). The Insurance Mediation Register is available on the Financial Issues brought up included industry matters such as Statements of Regulator’s website www.financialregulator.ie under ‘Registers’. If Suitability and Administrative Sanctions. you cannot locate your firm, please contact the Retail Intermediaries Section of the Financial Regulator at Meeting with Financial Regulator regarding unregulated [email protected] or on (01) 224 4375 activities by regulated Institutions, 2nd March 2010 or (01) 224 4371. Michael Hoare (PIBA Chairman), Diarmuid Kelly (PIBA CEO) and Elizabeth Smith (PIBA Compliance Manager) met with Michael The Financial Regulator will be writing again to all of those Deasy, Temporary Head of Financial Institutions, Investment insurance intermediaries that have not yet registered under the services, Funds authorisation and Markets supervision and Adrian IMR. However, if your firm is not registered, PIBA advises members O’Brien, Deputy Head of the Consumer Protection Code to discuss to act now and register your firm with the Financial Regulator as unregulated activities by regulated institutions. soon as possible.

30 T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r Industry Round-Up

New Ireland launches market-leading new consumer With a new product offering from Aviva you can now capitalise on website with a focus on keeping customers informed this market. Regular Saver from Aviva is a simple, flexible product — New Ireland Assurance has recently launched its newly offering your clients the opportunity to invest in Aviva’s wide range revamped website offering customers access to the latest of funds. Michael Cosgrave, Broker Sales Director at Aviva, information on their investments and pensions using commenting on the launch of the Regular Saver told us “After the interactive tools and calculators to personalise their success of SSIAs people seemed to lose the savings habit. And now information requirements. The website, www.newireland.ie, according to a number of surveys that habit has returned. With boasts an impressive investment centre with daily price and interest rates at an all time low, we think this is a great market for performance information for nearly 500 New Ireland pension Brokers to get back into. And the timing couldn’t be better. With and investment funds, and customers will be able to produce markets having rebounded strongly in 2009 – proving that markets personalised investment tables and graphs with the site’s do rise as well as fall, now is a great time to be promoting the interactive fund comparison tools. A highlight of the website is benefits of regular saving – particularly with the euro cost averaging the New Ireland TV feature, which provides customers with story. Brokers have told us that they are looking at the existing customer base more and more – and our new savings product real insight into the investment strategies and up to the might just be the product they are looking for. In fact, one Broker minute thinking of our fund managers, while also providing told us that they see savings as the new protection”. the latest economic and market commentary in an easily digestible manner. The enhanced website will give further Aviva have put together all the material you need to help your confidence to Brokers recommending New Ireland's wide customers ‘rediscover the savings habit’; just speak to your Broker range of life and pension products. consultant today for more details or click onto www.avivabroker.ie.

Caledonian Life launches its "Meet the Managers" Videos and Seminars, Better Business Together campaign new from Friends First Caledonian Life recently launched its Better Business Together Friends First are delighted to introduce a range of videos that will campaign, providing Brokers with an array of market leading introduce you to the faces behind their funds and help you get a business development ideas and resources from a range of better understanding of how each fund can work within a fully industry experts. Covering everything from managing your diversified portfolio. The videos are available online via the Friends online presence, running direct campaigns and writing sales First 'Investment Centre' — visit www.brokerfirst.ie/investments. letters right through to lead generation ideas and publicity (Alternatively they are available by request from your account techniques, the campaign spans a diverse range of topics. executive as a DVD). Caledonian Life’s business development centre can be found Friends First are committed to offering a wide range of quality on their Broker Centre (esp.caledonianlife.ie). Alternatively investments to every type of investor. Through careful fund Brokers can receive updates and information directly to their selection and diversification, Friends First aims to offer investors inbox. Brokers should contact their Caledonian Life Broker real opportunities for growth no matter what the prevailing consultant or send their details directly to economic climate, with degrees of risk and reward to match every [email protected]. investor’s appetite. Building and managing a robust and strategically diverse pension or investment portfolio is easy with Friends First. That’s because of the range of investment options offered, the pedigree of their Aviva — Some facts to ‘saver’ multi-award-winning management team and the comprehensive Recent surveys have told us that as a nation we are saving fund information and tools they provide to help you select and more money now than at any other time, with the average track the investments that are right for your clients. Irish person saving over !305 a month. With over 75% of For more information on the fund managers, or the Friends First people saving on a regular basis it’s no surprise to see that range of funds, please contact your account executive or Broker Ireland currently leads the European tables for percentage of development team, or visit www.brokerfirst.ie/investments. income that is being saved. In fact, over the last year, the percentage of average disposable income being saved has The Friends First "Meet the Managers" seminars are run rocketed from just 2.5% to a whopping 12.5% — the European average being only 5%. continued overleaf …

T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r 31 throughout the country and give Brokers an opportunity to meet but still offered clients that all important protection. Well we think this the managers behind their investment funds. new fund ticks all the boxes. With at least 80% of a client’s investment protected from Day One it will certainly appeal to those customers who want some capital protection. But it’s the growth engine that I’m really excited by. Rather than follow the herd and base this fund on a Aviva - Investment without all the worry! managed fund, we decided to be innovative. We designed a fund that This month sees the launch of a new Protected Fund from Aviva — offers genuine diversity across three different asset classes — a very welcome addition to their fund range. The Aviva Irl commodities, Eurozone large companies and corporate bonds — Protected Growth Fund offers your clients exposure to three great three lowly correlated assets that offer great potential for growth. So growth stories — commodities, European equities and corporate we think a fund offering genuine diversity, great potential for growth bonds — while at the same time aiming to ensure that at least and protection should certainly appeal to investors”. 80% of the investment is protected from potential falls in the The Aviva Irl Protected Growth Fund is available across a range of markets — through the ‘Protected Price Promise’. savings, investment and pension products for both single Michael Cosgrave, Broker Sales Director at Aviva, commenting on premium and regular premiums. Please speak to your Broker the launch of the fund told us “Recently, Brokers have been asking consultant today for more details or click onto us for a fund that played to Aviva’s undoubted investment strength www.avivabroker.ie.

C C R O O M S Win a Luxury Break* in the P SW ET O IT R Radisson Blu St. Helen's, Dublin IO D * The package comes with two nights bed and breakfast and one evening meal. N

One of the finest hotels in the Irish capital, the Five Star Radisson Blu St. Helen's Hotel stands on 4 acres of magnificent formal gardens surrounded by established woodlands on the N11 Stillorgan Road. The scenic setting will certainly make your stay a memorable occasion. The hotel was formerly one of Ireland's most important historic houses and has recently completed an upgrade of all 151 guest accommodations. It is within easy reach of Dublin’s dynamic city centre and the ferry port at Dun Laoghaire, and is 20 minutes from Dublin Airport via the Port Tunnel. St. Helen’s has 11 dedicated conference and banqueting rooms on two floors, which can accommodate from 6 to Simply complete the crossword puzzle and send your entry along with the form to: 350 people theatre style, a reception for 300 people or dinner for 250 people. Our hotel is an ideal choice for Crossword Competition, c/o Salient Print Management, 37 Woodlands, Naas, Co. Kildare. incentive groups and residential conferences. All our meeting rooms have air-conditioning and natural daylight, and Entries to arrive not later than 30th April 2010. complimentary Wi-Fi is available throughout all meeting rooms and public areas. There is also free car parking available for 220 cars. Think outside the box when deciding on your next meeting venue and choose the Radisson Name: Blu St. Helen’s Hotel for a unique meeting experience. Our Special Day Delegate Rates are from !45.00 per delegate. This includes room hire for one of our 11 unique Company: meeting rooms, 1 tea/coffee break, a working buffet lunch, complimentary LCD projector and screen, free Wi-Fi and free car parking (subject to availability, minimum numbers of 15 delegates apply). Address: To make a booking or for more information, please contact our Meeting and Events Team today on (01) 218 6013 and quote PIBA to avail of this great rate. Email: [email protected] or website: www.radissonblu.ie/sthelenshotel-dublin Phone:

1 2 3 4 4 5 General Knowledge Crossword

6 7 Across Down 6. Hormone produced in the pancreas that 1. South American mountain range (5) 8 decreases blood sugar (7) 2. St Valentine’s Day fell on this day in 7. The 2010 Ryder Cup will be played in 2010 (6) 9 10 this country (5) 3. Rice, the lyricist on the musicals 11 9. She accompanies Peter Pan to ‘Evita’ and ‘Chess’ (3) Never Land (5) 4. Wine bottle that is twice the size of 12 10. Small finches (7) a normal bottle (6) 12. Syringes used for giving injections 5. Cos or iceberg (7) 13 (11) 8. Noddy's best friend (3,4) 14. Table Mountain and Robben Island 14 15 16 11. Leaves of this plant are used in are in this country (5,6) cigarettes (7) 17 18. Vegetable which helps Popeye (7) 13. Aquatic mammal, larger than a 19. In the Bible, he slays Goliath (5) porpoise (7) 18 19 21. 'Hard _____', a novel by Charles 15. Bicycle built for two (6) Dickens (5) 16. Maps used by navigators (6) 20 22. National gambling event (7) 17. Daily record, as kept by Bridget 21 22 Jones (5) 20. 'About A _____', a Hugh Grant movie (3)

Lucky Winner ✦ The lucky winner of our Winter ’09 competition was: Tom Carroll, TDC Financial, 11 Georges Quay, Cork

32 T h e P r o f e s s i o n a l I n s u r a n c e B r o k e r