Income Protection For Financial Advisers

This is the genuinely distinctive thing about advisers, and it argues for less cover in one respect and more care in another.

If a substantial share of your income is ongoing adviser charges on existing clients, some of it keeps arriving while you are off. That means the immediate gap may be smaller than your total earnings suggest, and a longer deferred period can make sense.

The risk is assuming it holds. New business income stops at once. The book itself needs servicing, so it erodes over months as reviews are missed and clients drift. And if the fees are paid to a firm rather than to you, whether they reach you during an absence depends on the firm's arrangements rather than on the client. Working out what would actually arrive, and for how long, is the exercise worth doing before deciding how much to insure.

This is the part that decides whether the recurring income survives the absence.

A sole adviser who is off for six months has clients with reviews due and no one to do them. Some firms have reciprocal arrangements with another adviser, some have a locum arrangement in place, and a great many have nothing and rely on it not happening.

That is worth sorting out before it is needed, because it is the difference between an absence costing new business and an absence costing the book. Cover can also be sized to include the cost of paying another adviser to service clients, which protects the asset rather than just the cash flow.

There is an uncomfortable pattern worth naming on a page written for this profession.

Advisers sell protection for a living, and are statistically no better at buying it for themselves. They are also in a regulated, target-driven, client-facing role where mental health problems are the commonest cause of long absence, and they may be reluctant to put that on an application in their own industry.

Declare it anyway, in full, including any treatment or medication. You know better than most readers of this page what an incomplete application does at claim stage, and our page on depression and anxiety sets out what we would ask.

Employed advisers usually have death in service through the network or bank; directly authorised advisers have none.

There is a specific asset question here though. A client book has genuine market value and is regularly bought and sold, so a family may have something realisable, unlike most of the trades on this site.

That value depends on the book being serviced and the clients staying, which argues for having both a continuity arrangement and cover rather than relying on the sale price.

The events that end advisory careers are usually cognitive or cardiac: a stroke, a serious cardiac event, or any condition affecting memory and concentration.

Those can leave somebody able to work and unable to hold regulatory responsibility for advice, which is a permanent change rather than an absence.

A lump sum funds the transition and can cover the orderly sale or transfer of a book rather than a forced one, which usually makes a material difference to what it is worth.

A directly authorised firm has obligations that continue through an absence: regulatory fees and levies, professional indemnity, compliance support and any staff.

Professional indemnity works on a claims-made basis, so if the firm stops, run-off cover is needed for claims arriving later. That is a cost attached to stopping rather than to trading.

Cover can be sized with those continuing costs in mind as well as personal income. Where there is a limited company, executive income protection lets it hold and pay for the cover, and relevant life cover does the same for the life element.