My recommendation includes a protection product for which I will receive a commission directly from the product provider.

Transcription

1 Mr & Mrs Smith 1 Main Street Birmingham West Midlands B2 5LS 14 th July 2015 Dear Mr & Mrs Smith We met on 1 st July 2015 to discuss your financial planning needs. The aim of this report is to explain my recommendations and the rationale behind them. As you will remember, during our first meeting I recorded a lot of details about your current personal circumstances and financial information. We also discussed your preferences, your thoughts on financial matters including inflation and interest rates, your short-term goals and longer term ambitions. It is important that you fully understand my recommendations in this report and I would ask that you read it carefully and let me know if there is anything you do not fully understand. You should read this report in conjunction with all the additional documents I gave you including Key Features Documents and any Illustrations. Charges For Advice There is no charge for this initial advice. My recommendation includes a protection product for which I will receive a commission directly from the product provider. Your Current Situation Name Mr A Smith Mrs A Smith Date of Birth 23 rd April th May 1977 Marital Status Married Married Dependents Yes Will in Place Yes Occupation Transport Manager Teaching Assistant Employment Type Employed Employed Gross Annual Income 22,000 6,000 Tax Rate 20% Nil Asset Value 322,00 Liabilities 62,500 Health Good Good Smoker No No Mr Smith, you are of good health and confirmed that you are a non-smoker. Your gross annual income is 22,000 and this is derived from your employment as a Transport Manager. Based on this declared income, I confirm that you are a basic tax rate payer (20%).

2 Mrs Smith, you are also of good health and confirmed that you are a non-smoker. Your gross annual income is 6,000 and is derived from your employment as a Teaching Assistant. Based on this declared income, I confirm that you are exempt from paying Income Tax as your income is within your Personal Allowance threshold of 10,600 (2015/16). You both have three children together. Thomas is aged 12, Millie is aged 14 and Josie is aged 8. You confirmed that your children will be financially dependant upon you both until they are aged 21. Your assets are predominately made up of your residential home being valued at 300,000. I have detailed your declared assets in the table below: Asset Owner Approximate Value Main Residence Mr & Mrs Smith 300,000 Vehicle Mr Smith 20,000 Current Account - Lloyds Mr Smith 2,000 In addition to the above assets, you confirmed that you also have the following liabilities: Liability Owner Amount Outstanding Monthly Repayments Mortgage Anthony & 66, Karen Personal Loan Anthony 6, We discussed what possible financial emergencies might arise. You confirmed that you have earmarked your Lloyds current account as your emergency fund but we discussed how this is inadequate in terms of your income and expenditure needs. You agreed to address this and build a more adequate emergency fund. You confirmed that you have made Will s but did not disclose the intent. I advise that your Will s are reviewed periodically to ensure it is in line with your wishes. The purpose of our meeting was to review your protection arrangements to ensure that you hold the right levels of cover in each area and that you are not paying more than you need to. You both stated that arranging suitable protection is a priority for you, as you would not wish yourself or your partner to experience any financial difficulty should you die or suffer a more serious illness. Available Budget Having looked at your regular outgoings and requirements to fund occasional ad-hoc items, you confirmed a monthly budget of per month could be used to meet your needs and objectives.

3 Your Needs, Objectives and Priorities I recommend that we should review all your financial needs and look to address them in the following priority order: 1. Protection On Death 2. Income Protection 3. Critical Illness 4. Retirement 5. Savings 6. Investments 7. Estate Planning 8. Mortgages and Other Liabilities You have specifically asked me to advise you on Protection on Death and Critical Illness and I have focused my advice in this report on these needs. You decided not to review: Income Protection because Mr Smith, you do not wish to review this at this current time and Mrs Smith, you are happy with your provision from work. Retirement because I have reviewed this in depth in a separate report dated 1 st July Savings because you do not wish to commit yourselves towards regular savings at this time. Investments because you do not have any investments to review nor any lump sums or regular disposable income available for investment at this time. Estate Planning because on review of your estate, it is unlikely that you will exceed your joint nil rate band. Mortgages and Other Liabilities you are satisfied with the terms of your current mortgage. Had I undertaken a full review of your financial circumstances, other needs and priorities may have been identified and consequently you may be open to financial consequences e.g. a financial loss in the future so I recommend we undertake a full review as soon as possible. A more cost effective recommendation may have been possible had I considered your full financial position. The following section of this report confirms your needs and objectives you asked me to review and advise you on. Protection on Death & Critical Illness Mr & Mrs Smith We discussed the need for protection in the event of your death or on the earlier diagnosis of a serious defined Critical Illness. You stated that holding suitable cover in both of these areas is your priority for you as you would not wish yourself or your family to lose your family home or be financially disadvantaged in either event.

4 Mortgage Cover You wish to arrange sufficient cover to ensure that your mortgage would be fully repaid should either of you die or be diagnosed with a Critical Illness. This will ensure that you do not leave debt behind which could cause your partner financial difficulty and in the worst case scenario put your family home at risk. We identified that in the event of your death or a serious defined Critical Illness you need cover of 66,500 over 14 years to pay off your outstanding mortgage. Life Cover for Family Protection Mr Smith as you are currently the main earner in your household, you were concerned that Mrs Smith and the children could be substantially financially disadvantaged by your death as they would lose the main source of income into your household. You were keen to ensure that they would have sufficient money available to continue to pay the bills and maintain a good standard of living, and to this end, you wish to arrange cover of 150,000 to age 75. You felt that this sum would provide ample cover whilst your children are still financially dependent on you as well as providing ongoing cover for Mrs Smith once your children are no longer financially dependent upon you. Although I offered to undertake a more detailed analysis to quantify your need over and above your mortgage, you declined to undertake a more detailed analysis at this time. You stated that you were happy that the level of cover as stated above would be sufficient for your needs. I recommend that we undertake a more detailed review in the near future to ensure that your needs continue to be fully met. Mrs Smith although your earnings are less than Mr Smith, it is clear that you make a significant contribution towards the smooth running of your home and with regard to bringing up your children. You were concerned that your untimely death, could create significant financial difficulty for Mr Smith as he would lose your income into the household and his ability to work could be impacted as he would also have to take care of the children and your home. Alternatively if he chose to continue to work he would incur childcare expenses. You were keen to arrange cover that would take the financial pressure of Mr Smith at what would be a difficult time. The funds would give a choice to either continue to work as he does now and access childcare or reduce his hours in which case the funds can be used to supplement lost income. As with Mr Smith you were also keen for cover to extend beyond the children s financial dependency to your 75 th birthday to protect Mr Smith s financial security. Although I offered to undertake a more detailed analysis to quantify your need over and above your mortgage, you declined to undertake a more detailed analysis at this time. You stated that you were happy that the level of cover as stated above would be sufficient for your needs. I recommend that we undertake a more detailed review in the near future to ensure that your needs continue to be fully met.

5 Critical Illness for Lifestyle Protection We discussed your need in the event of either of you suffering a critical illness and you stated that holding suitable cover in this area is also a priority for you as you would not wish to find yourself short of funds should you suffer a more serious illness. You understand that being diagnosed with a critical illness can lead to significant financial difficulty if there is no protection in place. In such circumstance you would wish to have funds available to you to meet any costs which may be incurred. These may include paying for private medical treatment, on going care, adaption to your home or just a long holiday whilst you recuperate. We also discussed the need to consider cover in the event that long-term medical care in a facility other than a hospital is required. You did not wish to make separate arrangement for the provision for long term care, stating that should such a need arise, you would use these funds to meet the costs incurred. Following discussion you felt that a sum assured of 30,000 each would be sufficient to meet any one off costs and to ensure that you can maintain as good a lifestyle as possible following the diagnosis Although I offered to undertake a more detailed analysis to quantify your need over and above your mortgage need, you declined to undertake a more detailed analysis at this time. You stated that you were happy that the level of cover as stated above would be sufficient for your needs. You wished to arrange cover to your expected retirement at the age of 66. I recommend that we review this cover regularly to ensure that your needs continue to be fully met. Existing Arrangements We discussed your existing life cover arrangements in the event of your death and agreed that these would be cancelled upon acceptance of the new policies recommended. The mortgage cover is being replaced as your existing cover does not fully meet your needs. You existing family protection policies are being replaced by new plans which fully meets your revised needs. Mortgage Cover Product Recommendation: Bright Grey Mortgage Protection Policy - Joint Life 1 st Event Mr & Mrs Smith I have recommended this policy at a premium of monthly.

6 The policy will pay a decreasing lump sum of 66,500 if either of you dies or suffers a specified critical illness during the cover term of 14 years. This policy is suitable for your needs because it will provide a lump sum sufficient to pay off your outstanding mortgage in either event. I have also recommended Waiver of Premium benefit is included on this plan and the cost for this benefit is shown on your personal Illustration. This benefit provides the peace of mind of knowing that your premiums or contributions to this plan will continue to be paid and your benefits maintained should either of you be unable to work due to accident or illness for a continuous period of more than 26 weeks during the plan term. As this policy is going to replace an existing policy, which includes critical illness benefit, I strongly recommend that you read the specific definitions, which apply to each illness or condition on each policy before continuing. I have made you aware that there may be differences in the cover provided and you should satisfy yourself that you are happy with the definitions applied to this cover before cancelling your existing arrangement. Trusts I have not recommended this plan be written in trust because benefits are to repay your mortgage. In the event of a claim on death the funds will form part of your estate and your mortgage will not be automatically repaid. Alternative Solutions Considered In considering this recommendation I have discounted like for like policies provided by other providers, which were more expensive. Life Cover for Family Protection Product Recommendation: Old Mutual Wealth, Term Assurance Policy - Single Life for family protection Mr Smith I have recommended this policy at a premium of monthly. The policy will pay a capital sum of 150,000 if Mr Smith dies during the cover term of 38 years. This policy is suitable for your needs because having lost your income into the household it will provide Mrs Smith with a valuable lump sum which will help her to provide for your family and continue to pay the bills. It will also provide cover for Mrs Smith to safeguard her long term financial security even after your children have grown up and are no longer financially dependent. The term of 38 years was recommended as you wished to retain cover until the age of 75. I have recommended Waiver of Premium benefit is included on this plan and the cost for this benefit is shown on your personal Illustration. This benefit provides the peace of mind of knowing that your premiums or contributions to this plan will continue to be paid and your benefits maintained should Mr Smith be unable to work due to accident or illness for a continuous period of more than 26 weeks during the plan term.

7 This policy meets your revised needs and will replace your existing policy on acceptance. Trusts I have recommended this plan is written in trust to ensure that the chosen beneficiary receives the money in a timely manner and that the benefits do not form part of your estate on your death. It is important you read the Trust literature I gave you as this provides further details of how it works and the potential IHT consequences. It also outlines any income tax and capital gains tax consequences of the arrangement. If you are unsure on any points please contact me. Alternative Solutions Considered In considering this recommendation I have discounted like for like policies provided by other providers, which were more expensive. Product Recommendation: Bright Grey, Term Assurance Policy - Single Life for family protection Mrs Smith I have recommended this policy at a premium of monthly. The policy will pay a capital sum of 150,000 if Mrs Smith dies during the cover term of 37 years. This policy is suitable for your needs because having lost your income into the household and principle carer for your children it will provide Mr Smith with a valuable lump sum which will help him to provide for your family and continue to pay the bills. The funds will also allow Mr Smith to access childcare whilst he is at work and/or supplement his income if he chooses to work less hours. It will also provide cover for Mr Smith to safeguard his long-term financial security even after your children have grown up and are no longer financially dependent. The term of 37 years was recommended as you wished to retain cover until the age of 75. I have recommended Waiver of Premium benefit is included on this plan and the cost for this benefit is shown on your personal Illustration. This benefit provides the peace of mind of knowing that your premiums or contributions to this plan will continue to be paid and your benefits maintained should Mrs Smith be unable to work due to accident or illness for a continuous period of more than 26 weeks during the plan term. This policy meets your revised needs and will replace your existing policy on acceptance. Trusts I have recommended this plan is written in trust to ensure that the chosen beneficiary receives the money in a timely manner and that the benefits do not form part of your estate on your death.

8 It is important you read the Trust literature I gave you as this provides further details of how it works and the potential IHT consequences. It also outlines any income tax and capital gains tax consequences of the arrangement. If you are unsure on any points please contact me. Alternative Solutions Considered In considering this recommendation I have discounted like for like policies provided by other providers, which were more expensive. Critical Illness For lifestyle protection Product Recommendation: Friends Life Term Assurance Policy - Single Life for Mr Smith I have recommended this policy at a premium of monthly. The policy will pay a capital sum of 30, if Mr Smith suffers a specified critical illness before the age of 66. This policy is suitable for your needs because it will provide a valuable lump sum at the right time that would help you to meet the extra costs, which very often accompany the diagnosis of as more serious illness. I have also recommended Waiver of Premium benefit is included on this plan and the cost for this benefit is shown on your personal Illustration. This benefit provides the peace of mind of knowing that your premiums or contributions to this plan will continue to be paid and your benefits maintained should Mr Smith be unable to work due to accident or illness for a continuous period of more than 26 weeks during the plan term. Alternative Solutions Considered In considering this recommendation I have discounted like for like policies provided by other providers, which were more expensive. Critical Illness For lifestyle protection Product Recommendation: Friends Life Term Assurance Policy - Single Life for Mrs Smith I have recommended this policy at a premium of monthly. The policy will pay a capital sum of 30, if Mrs Smith suffers a specified critical illness before the age of 66. This policy is suitable for your needs because it will provide a valuable lump sum at the right time that would help you to meet the extra costs which very often accompany the diagnosis of as more serious illness. I have also recommended Waiver of Premium benefit is included on this plan and the cost for this benefit is shown on your personal Illustration. This benefit provides the

9 peace of mind of knowing that your premiums or contributions to this plan will continue to be paid and your benefits maintained should Mrs Smith be unable to work due to accident or illness for a continuous period of more than 26 weeks during the plan term. Alternative Solutions Considered In considering this recommendation I have discounted like for like policies provided by other providers, which were more expensive. Other Information Policy Replacements We have discussed in detail your views on your existing protection policies and your current financial circumstances and established it is in your best interests to replace your existing cover because the policies you hold do not fully meet your revised identified needs. The advantages of replacing your existing policies are that your needs will be fully met. There are no obvious disadvantages of cancelling your existing policies other than the possible differences in critical illness definitions already detailed above. We discussed the possibility of making changes to your existing policy to meet your new requirements. However we discounted this because you preferred to arrange new cover to meet your new identified needs. You should ensure any existing protection policies are not cancelled until any replacement policies are in force to ensure continuous cover. It is your responsibility to cancel any existing policies that are no longer required. Policy Replacement - Tax Considerations There are no tax consequences in cancelling existing protection policies. Your Solution Costs The total regular premium amount for the recommendations you are proceeding with now is per month. This is within your proposed budget, however, you believe this amount is affordable and sustainable both now and in the future. The premiums quoted assume that you are accepted on standard terms and are guaranteed not to change throughout the term of the plans. Supporting Documentation Please refer to the Illustration(s) and Key Features Documentation that I have provided you with. These documents contain important information including full details of the aims, your commitment, the charges and the risks of the product(s) recommended along with any relevant exclusions or limitations. Please ensure that you have read and understood these fully.

10 Cancellation Rights Please be advised that you have the right to cancel any policy within 30 days of the receipt of your policy documents. Periodic Contact It may be that we contact you at times other than those specified at outset, for example to draw your attention to investment matters or provide an update on current markets however we are not obliged to do so. Next Steps I will continue to provide you with a personal service which includes the efficient processing of your plans, liaising with the product providers as required and answering any further questions you may have with respect to my recommendations. If you have any queries or questions about this report or if any of the information differs from your understanding of our discussions, then please let me know. I look forward to speaking with you again in the future. Yours sincerely Mr Adviser Dip PFS Financial Adviser