Fiona Murphy talks to the director of Hammond Business Partners about a recent tragedy that brought home the value of business protection, working with niche businesses, and why he is so passionate about selling this product
COVER has published a series of pieces to spread greater awareness of business protection in the past few editions. It is a product that remains massively undersold and virtually unknown to business owners of all shapes and sizes. But it's a product that is increasingly becoming more needed as the self-employed workforce swells.
One of the things I've heard that has really brought the value of business protection to life to me in recent months is an incident at Hammond Business Partners.
I met Wes McCranor, the director of Hammond Business Partners, at one of our COVER Adviser Clinics. Despite being a business protection specialist, he told me the value of the product didn't really hit home until his business incurred the massive loss of a key person.
“[In the US] they will take your home or your farm to cover care costs, so people know they need to protect themselves. Understanding and engaging with financial products is so embedded in the culture
Weeks later we caught up and he explained: "My business partner had a heart attack two-and-a-half weeks ago [at the time of writing]. It's such a wake-up call that this happened to us.
"The death of the managing director is a really big thing. And the fact that it happened to us is very close to home now. Dave Hedgecock [the director of Hammond Business Partners] was a well-known guy in the industry [in the Midlands].
"He was with us on Friday, had a heart attack on the golf course and Sunday I got a phone call. He didn't use private medical insurance. He went through the NHS, and the NHS sent him home on Sunday.
"He had another heart attack on Monday. We're business owners and we're directors saying we have to make claims and handle share purchases. Although we have provision in place, it's still very difficult. We are dealing with it first hand.
"Now here we are in the same position. It still hasn't really hit home. Out of everybody it happened to, it happened to us. Hammond Group is the longest running financial firm in the Midlands."
Born in the USA
McCranor grew up in Indiana in the US and worked as a financial adviser for Universal America. However, he describes his first experience of selling prior to that by knocking door to door selling life insurance products in the cornfields of his hometown.
After moving to the UK, McCranor worked as an IFA and then for PruProtect, whose products he still primarily sells with Hammond Business Partners under a single-tie arrangement, although of course PruProtect has now rebranded to VitalityLife.
How did he actually make the jump into having a primary focus on business protection in the first place?
"A year ago my business partner and I had a grand idea about selling business protection. I am really passionate about protection: I've been doing it since I started work. I actually learnt the industry in the States where protection is obviously a lot more available.
"When I came to the UK, I realised that no one really enjoys the protection market. I was working on the provider side and banging on IFAs' doors and saying, 'You should sell some life insurance, your clients need it.' And they were saying, 'We do a little bit of protection here and there.' Their whole focus is on pension and investments."
Financial culture differences
How does McCranor's beginnings as a financial adviser in the US differ to his work here, in terms of the culture of financial understanding and selling products day to day?
He said: "What we did in the States was we put health insurance in place, then filled the gap in health insurance with critical illness. Then we would implement life insurance to protect their estate and then we would say, shall we put in some investments in place to help you make some of that money back that you're paying out?
"The health insurance market in the US covers only so much, so there are gaps such as cancer cover that need to be protected by critical illness. The long-term care conversation over there is also larger.
"They will take your home or your farm to cover care costs, so people know they need to protect themselves. Understanding and engaging with financial products is so embedded in the culture. I've sold to people in their early 20s for that reason because it is cheaper."
For McCranor, there are lessons he has learnt from working both sides of the pond: "I want to make clients understand the severity of what they're putting in place.
"It's not something to buy today and cancel tomorrow. I find a lot of clients over here ask with life insurance – is it cancellable? That is a real red flag for me. I need them to change that mindset completely.
"I like to say to clients, 'You've been approved by an insurer for life insurance. This may never happen again. You don't know what's going to happen today or tomorrow, you may never be eligible to take cover out again.
"Take it and run with it. Let's put some cover in place, we can go up [in terms of sum assured] in the future, but at least let's have something in place.
"It's like pulling teeth trying to get people to have the conversation around protection. People are more interested in selling or making money. I came back to the UK when RDR was coming in."
A 'backdoor' approach
I asked McCranor how he actually has that conversation around protection needs with business clients.
He explains: "It's something that everybody who has a business needs. Its tax efficient and often you find that people would prefer to protect their business than anything else in their life.
"I also see it as a backdoor approach to introducing protection. Rather than going into a business and saying that they have to cover their spouse and kids and their pet: everyone knows they have to do those things.
"But I saw it as: your business is your biggest asset. Without it, a business owner won't be able to pay for their house, generate income and actually cover all of these things in their lives. I say, let's cover your business first. It's the vehicle that gets everything else.
"I think people enjoy that conversation more and business clients are a lot more susceptible to pay premiums via a business and do it tax efficiently, it's embedded in the UK culture. The business world is a lot more responsive to the conversation.
"With relevant life, I had this very conversation this morning. Rather than the company director going on the group life policy with their staff, the conversation I have is: If your company winds down, you've still got that policy and you can take it with you. It doesn't form part of your lifetime allowance.
"People don't know these things. I've given seminars and asked business owners, 'Do you know what business protection is?' One hand raised. But when you explain it to people, they are genuinely interested in it. We just need to get the message out there."
Contractors and cover
McCranor explains that the market he is most looking to attract is contractors with the company primarily dealing with IT contractors, surveyors, architects. He also has an interest in hedge funds.
Of this market he said: "Contractors get paid a bit more because they are contracting but they're not receiving workplace national insurance or employee benefits or sick pay. When you approach them, use that 'key man' term.
"With a one man band firm, that contractor is the key man. I say to them, 'If you can put a serious illness cover policy in place, you will get a cash payment into the business you can use to replenish lost profits and pay yourself. Contractors find it so enlightening that they can do that. There's nowhere for them to buy it."
When I ask further about the single-tie arrangement with VitalityLife's products and whether it limits client choice he says: "I've yet to have a client say to me, which company am I going with? They genuinely don't care. They care about the advice and what they are getting."
McCranor adds that ideally he would like to sell products as packages to different contractor firms with specific messages targeted to each type of contractor. He points to his website as a source of information for firms.
McCranor's final message for the market overall is: "We know the SME sector is growing every day, yet about only 2% are covered. I would say there is plenty of the pie for all of us, but I would say for those who don't want to do it, to move out of the way and let those of us with passion for it, work with the clients."
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