The Professional Insurance BrokerT 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 29 • Summer 2010

Opportunity knocks

At the time of writing this article, we have just had a very successful day to celebrate the 15th anniversary of PIBA. It began with the 2010 Annual General Meeting for the morning, and the afternoon was packed with excellent speakers from various walks of life. The AGM represented a microcosm of how our members’ businesses are evolving. While we always have to record and challenge the Association’s activities in the period under consideration at such a meeting, the real indicator of members’ sentiment at present unveiled itself during a lively debate in relation to the ISTC collapse and the ensuing consequences for clients and Brokers alike. Most of those present acknowledged that any one of us could find ourselves in a similar predicament if a similar set of circumstances were to conspire again. In essence, several PIBA members have been left swinging in the wind by those who should know better than to allow it to happen. There is considerable anger abroad that our businesses can literally be threatened with extinction as a result of intransigent positions adopted by those who ultimately depend on the goodwill of professional practitioners as represented by PIBA. If you are lucky enough not to have been involved in the promotion of this particular bond, don’t think this doesn’t concern you as the issues that arise are relevant to us all. Judging by the mood of the meeting as we approached lunch, we have not heard the last of this issue.

The Annual Conference was seamlessly produced and conducted by PIBA’s Edel Morey, ably assisted by her colleagues. The audience was swelled by dignitaries from all insurance companies and the

feedback tells us that they enjoyed the variety of speakers assembled. Our keynote speaker, Bill Cullen, was received warmly by the audience, many of whom have heard Bill speak many times before. He still managed to entertain, motivate and inspire everyone present with his unique style of presentation and his wonderful ability to re-present well worn ideas in a refreshing way, on how to be more successful in our working lives. Bill Cullen has developed into a powerful brand after many years of taking calculated risks and using sheer gutsy determination to overcome any obstacle that is put in his way. As such, he is a lesson to us all in our business.

This morning I heard on the news that new car sales are well up on last year: fantastic news indeed as a measure of how positive consumers are feeling about the future. Allied to the trickle of acknowledgements from various bodies that the worst of the recession is over, this bodes well for the next twelve months within our industry. The reports on how our banking crisis unfolded are currently breaking into the public domain and they will no doubt confirm what we as independent financial professionals have known for a long time, i.e. that banks’ customers have been used as cannon fodder to bolster their bottom lines at the expense of providing appropriate advice. This leaves a massive void that we are uniquely positioned to fill: that of trusted advisors to clients who are suspicious and confused. Let us not waste this opportunity. Trust is built up over a long period of time: it can be broken overnight if we are not careful. Let’s make hay, whether the sun shines or not this summer.

Chairman’s Remarks

Contents

By Michael Hoare

Otto von Bismarck

Where is the Business?

Jim Dowdall, CEO of Aviva, speaks about Aviva's financial strength and his vision for the future

In Focus … Financial Planning — Behavioural Theory put into Practice

Pensions: the Lesser Known Benefits

Irish Life's new solution gives better way to control portfolio risk

Photo spread: PIBA Annual Broker Conference & Celebrations of PIBA's 15th Birthday

PIBA Meets … Matthew Elderfield, Head of Financial Regulation, Central Bank

Going Under the Hammer!

Coping with the Minimum Competency Deadline

Trustee Training — Challenges and Opportunities

Combating Money Laundering in Financial Services

Managing your clients' finances during unemployment

Standard Life Investments House View

My experience of the Graduate Diploma in Financial Planning

Five things you Need to Know about Professional Indemnity!

Thinking Differently about your Online Presence

Book Review

PIBA Update

Industry Roundup

Crossword

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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 ro ke r 3

I attended the PIBA AGM and conference recently and left feeling refreshed by the level of positivity in the room. It’s been a challenging couple of years but it seems that the Broker community has adapted well and has made the changes necessary to push forward on the ‘New Decade - No Limits’ theme. The road ahead is clear if probably a little bumpy, but the opportunity for the independent Broker has never been better. The public at large are less comfortable with their traditional providers so it is up to us to spread the good word of independent advice. As a group we offer a wealth of knowledge and experience unrivalled by those in customer facing roles in the direct channels.

It is fantastic to see our new regulator Matthew Elderfield taking the time to give our magazine an interview; his regime will surely differ from what came before and I urge you to read the interview. It’s encouraging that he embraces the idea of proportionality and plans to oversee the industry at large “based on their inherent impact or riskiness”. Regulation is a positive thing and ensuring high standards is in all our interests.

Having an organisation as strong as PIBA is not only a great resource but also a credit to those who have built it over the years. I have been privileged to be involved in some small way recently. PIBA provides us with powerful resources that we simply could not provide in our own practices. Compliance information, affinity schemes, access to products such as MRPI and the power to negotiate with the life offices collectively are some of the more notable benefits. On top of this, PIBA crucially gives us a place to turn if something goes wrong.

The future is bright; we have travelled a long road in the last number of years and have emerged stronger then ever. The misadventures of our main competitors can only be to our advantage. Now it’s up to us to spread the word; to confirm the invaluable position of the Broker. If there is one message I took from the recent conference it’s that positive results come from positive actions. What the future holds is in our hands. It’s up to each and every one of us to employ our knowledge and expertise; and with the continuing support of PIBA to make the Broker the advisor of choice for the consumer.

Editorial

Committee Members

Michael HoareJarlath Jordan

Paul CullenLiam CarberryJimmy CumiskeyMaurice HarnettPeter BreenDixie CollinsPhilip Brennan

ChairmanVice-Chairman

SecretaryTreasurer

Sub-Committee Chairpersons

LifeGeneralMortgageLegislation

Chief Executive: Diarmuid Kelly

Paul CullenMaurice HarnettJimmy CumiskeyPhilip Brennan

The Professional Insurance Broker14B Cashel Business Centre, Cashel Road, Crumlin, Dublin 12 • Tel: (01) 492 2202 • Fax: (01) 499 1569 • e-mail: info@piba.ie • Website: www.piba.ie

Chief Executive: Diarmuid KellyEditorial Group: Donal Milmo-Penny, Jack FitzPatrick, John Hogan, Karl Deeter, Edel Morey. Editor: Emer O’FlanaganPublisher: Salient Print Management, Naas, Co. Kildare. Tel: (045) 866057 & (087) 254 3463. Design: Salient Print Management, Naas, Co. Kildare. Tel: (045) 866057 & (087) 254 3463

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.

By Donal Milmo-Penny (Guest Editor)

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 ro ke r 5

Otto von Bismarck

By Diarmuid Kelly, Chief Executive, PIBA

History sometimes gives useful perspectives even if we repeatedly fail to learn its lessons. Otto von Bismarck is an interesting historical character. He coined the phrase “politics is the art of the possible”. On becoming Chancellor of Prussia he set about unifying Germany through a combination of war and diplomacy (war is an extreme form of politics). He succeeded in his aim and ended centuries of German division in just nine years. His final act in this campaign was to create a war with France in 1870, when Bismarck orchestrated events to make France declare war on Prussia. In the ensuing national fervour, the remaining southern German states agreed to unity led by Prussia. The new German Empire won a quick war and took the territory of Alsace and Lorraine from France. Bismarck was made the Chancellor of the new state in 1871.

As Chancellor, Bismarck set about building German industrial might, frequently using the “French threat” to unify the still fragile political structures of the new state. He also introduced progressive social policies such as the old age pension (albeit with a view to isolating socialists). By 1890, Germany was a strong nation state at the centre stage of Europe. The new Kaiser (Wilhelm II) sacked him in 1891.

Historians often speculate that Bismarck would have gone on to pursue peace with France, thus avoiding the First World War. Who knows whether we could have had a United States of Europe by now? The young Kaiser who sacked Bismarck in 1891 was the same man who led Germany to defeat and humiliation with the Treaty of Versailles in 1918 and the rest, as they say, is …

Economics is the science of prioritisation of resources. Politics is the art of prioritisation of people (including air time to articulate their views). When you prioritise resources with efficiency and people with fairness (which is not always the same as equity) you can get a seriously effective organisation. And that is what PIBA aspires to be.

We act for 850 firms in three sectors: Life, General and Mortgages, across four functions: legislation/regulations, PR/media/communications, representation and business development. With twelve staff (seven representative, five network services) it is inevitable that choices on how to allocate resources are made, but we always seek to be fair to individual members whilst acting in the overall best interests of the 850 firms.

It was particularly heartening to see the warmth of fellow members towards the Brokers caught up in the ISTC bond issue that was discussed at the recent AGM. We are at the advanced stages of learning lessons for the future for all members, but there was a clear willingness among members to help their fellow Brokers.

Such community spirit backed up by central organisation is at the heart of our success over the last 15 years. We have a lot to be proud of as we look back over these years; but now we are in our best shape ever in terms of the strength of our membership, our committees, staff and finances. In my view, the best of PIBA is yet to come. I’d love to tell you about our future plans but competitors are watching! As Otto might say, do we need war, diplomacy or a common enemy?

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 ro ke r 7

With already one Quarter gone in the 2010 business year it is evident that some of the trends that permeated throughout 2009 will continue into this year. From speaking with Brokers from around the country there does seem to be a more positive feeling with regard to business in general, as well as more positivity that more opportunities may present themselves this year.

However, what is abundantly clear is that large volumes of business are not just going to present themselves or walk into Brokers’ offices this year. Therefore, a lot of hard work as well as proactive thinking and structured planning must be put in place to give Brokers the best chance to capture these opportunities.

In this article I am going to share with you some insights from our experiences of what is working for Brokers throughout the country.

Proper Planning

There is no substitute for planning and the old phrase “failing to plan is planning to fail” has never been more relevant. Every Broker should have a proper business and marketing plan in place setting out the objectives for the year, and detailing the activities required to achieve these objectives, the timelines for delivery, and the resources (human as well as financial) required.

Activity Levels

High levels of ‘appropriate’ activity is working. Brokers who are proactively and consistently contacting their clients, increasing their own profile locally, engaging in local marketing activity and carrying out full financial client reviews are having success.

Back to Basics

Throughout the boom years it was often the case that the high volumes of business prevented annual client financial reviews from being carried out - in some cases reviews have not taken place for a number of years. We are now finding that Brokers who are engaging in detailed client reviews using structured fact finds are having success.

Brokers are looking at their existing client bank and CRM systems to identify clients to set up appointments with and carry out reviews. We have been working with and providing refresher training for Brokers around the concept of the ‘ideal week’, looking at the optimum number of appointments the Broker must have in their diary to generate business. Priority is being given to protection, ensuring that clients have proper, appropriate and affordable protection cover in place, but the review process is also a perfect opportunity to review a client’s full financial requirements, including their investments and pensions.

Although new business is not generated from each review and some of the discussions are quite tough, especially when it

comes to talking about existing investments or pensions, our experience is that Brokers’ clients see this as an excellent, ‘added value’ service that will be very beneficial in the long term.

Pensions Rebalancing

Consumers and Broker clients have become much more price sensitive and value conscious over the last couple of years. Their attitude to risk in most cases has also changed. As a result historical and traditional charging structures, non value adding or expensive product features, and traditional or rigid pension platforms are no longer relevant. We are seeing a sizable shift away from these traditional platforms and many Brokers’ clients would no longer see the typical managed or consensus fund as their default pension investment fund. Consumers are looking for transparent products with transparent charges offering good value and probably with more of a conservative investment return. This is providing an opportunity to Brokers to sit down with their existing clients, and also with new clients, to ‘rebalance’ existing pension arrangements.

House View on Investments

Over the last couple of years we in Friends First have been advocating that Brokers have a ‘house view’ on investments. The house view is about portfolio construction and management as opposed to simply product and fund selection. It allows the Broker to review all funds under management, to identify as a Brokerage where they may be over exposed in any one asset class and how to possibly deal with this over exposure.

The house view also allows Brokers to look at investment fund management in a structured and segmented way, to look at existing client portfolios and to take consideration of critical components such as risk profile/attitude to risk, volatility, and correlation of existing assets/funds. It allows a Broker to come up with a set of investment strategies that meets with their clients’ needs both now and into the future.

This has allowed Brokers to review clients’ existing portfolios, de-risking them where necessary, as well as rebalancing clients’ current portfolios, bringing them up to date and replacing outdated investment strategies. We are working with many Brokers, helping them to determine their own ‘house view’, providing them with a sales tool to easily and practically explain the house view concept to their clients. Many of these Brokers are using the concept as a new business opportunity tool and have been successful in generating new business income.

There is no magic wand for success in the current business environment but Brokers who have a structured plan in place, keep activity levels high, carry out full client financial reviews and return to the basics have a greater chance of success. We are assisting Brokers in all of these areas and if you are not already doing so I would urge you to have a chat with us.

Where is the Business?

By John Corr, Regional Sales Manager- Area West, Friends First

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 ro ke r 9

Aviva is the market leading insurance group in Ireland by virtue of our size, our range of products; and also our commitment to being the best. We also pride ourselves on always seeking to lead change in the market and maximising new opportunities to deliver value for our partners and our customers. Aviva’s promise is ‘looking out for you’, and our commitment is to ensure that we deliver sustained and strong growth for our own business and that of our partners with a proposition that consumers will find compelling and desirable.

In keeping with this approach, and in response to both our customer and Broker needs, we recently launched a new Regular Saver product. With its flexibility, no lock-in period and the option to select from Ireland’s widest fund choice, the Regular Saver from Aviva is already a real success with consumers and their Brokers.

In achieving this initial success we have seen that a notable element of the feedback we have received is that consumers are seeking financially strong and secure insurance providers when making their purchase decisions.

With agencies like Moody’s and Standard & Poor’s rating Aviva as ‘excellent’ and ‘very strong’, and our surplus regulatory capital of £4.4bn, our customers draw reassurance from our financial strength and know that Aviva is best positioned to deliver on their goals of prosperity and peace of mind. With our key strengths, including our financial and capital security, our innovation track record and our product diversity, our customers have real peace of mind when they choose Aviva.

Our position as part of the fifth largest insurer in the world empowers us to leverage the strength of Aviva. Crucially it also allows us to share the outstanding knowledge and experience we have here in Ireland with our colleagues in other markets where we have strong Broker distribution partnerships, and vice versa.

We will continue to build on this approach to deliver for our customers, because for Aviva the starting point is our customer. Every day we ensure that the customer is at the core of all we do and we constantly seek to build the relationship of trust with consumers in every action we take. In a recent survey on the most reputable companies in Ireland carried out by the internationally renowned Reputation Institute, Aviva in Ireland was recognised as

the most reputable Life and Pensions and Health Insurance provider in Ireland. For a brand so young in Ireland, this is clearly a significant achievement and highlights the merits of our financial strength in the eyes of consumers.

Our ongoing thirst for excellence and commitment to quality keeps us motivated to always strengthen how we can continue to together deliver to customers. Achieving this means that we keep to a simple philosophy — every day we must strive to lead the market in every aspect of our business and be the most relevant insurer for consumers whether they are existing customers or partners, or in the process of considering their insurance, savings, pension and protection needs.

We also demonstrated this approach in our Life and Pensions business recently with the launch in March of our Protected Growth Fund. This fund addresses the customer’s need to balance their desire for the potential of high returns on their investment with the security of our ‘Protected Price Promise’. We have also just celebrated our first year in partnership with BlackRock — the worlds largest fund manager.

The opening of Aviva Stadium in May was a momentous occasion for Aviva, and indeed for Ireland. Aviva Stadium is an iconic national stadium that everyone can be proud of and we know it will be a great home for our national soccer and rugby teams. The stadium will be the scene of great occasions in soccer and rugby every year and our partnership with the IRFU and the FAI allows us to share in those great moments with sports fans in Ireland and around the globe when international teams visit Ireland. This relationship will also make an important contribution to inspiring and developing grassroots sporting programmes for children all over the country.

By the end of 2010, we will look back at some great occasions in Aviva Stadium. I also expect that we’ll be looking back together on another strong year for Aviva and our partners — a year in which we’ve worked to provide our customers with access to the best products across Life and Pensions, General Insurance and Health Insurance, and where Aviva has further consolidated its position as the insurer of choice in Ireland through a relentless focus on responding to the needs of consumers.

Jim Dowdall, CEO of Aviva, speaks about Aviva’s financial strength and his vision for the future

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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 ro ke r10

Introduction

In recent years, the last twenty in particular, there has been significant scientific research into understanding human behaviour and its consequences for finance and economics. This article and case study illustrate how, in practice, some of these findings might be applied to the financial planning process.

The case study sets out an approach that is based on research into an area of behavioural finance known as mental accounting. Mental accounting refers to the tendency for people to mentally divide their wealth into different ‘accounts’, and to then attribute different risk parameters to each of those ‘accounts’ depending on the purpose of the ‘account’.

For completeness, some of the principal findings of researchers in this area are that:

For most people, saving rarely holds its own in the battle for regular take-home pay. Those who do manage to save additional funds do so by dividing their money into different mental accounts.

Most people do not see the package. They separate the choices into mental accounts.

It is common for financial planners and investment managers to administer risk tolerance quizzes in order to determine a degree of risk that is suitable for their clients. However behavioural finance stresses that tolerance for risk is not uni-dimensional. Rather it depends on several factors, one being recent experience facing risk.

Internationally, the conclusions of behavioural finance researchers are contributing to the development of alternative methods of constructing investment advice. Behavioural finance theory removes the client’s risk profile from being the central tenet upon which strategic asset allocation decisions are made, and in its place puts the client’s objectives (mainly lifestyle). The risk profile becomes a checking mechanism at the end of the process.

The following more clearly illustrates the investment advice process being cultivated internationally on foot of the findings of behavioural finance.

Case Study Background

The client and his wife were both retired and in their late 60’s. Their only source of income was the contributory old age pension. Prior to meeting with me they had sold their home in order to release capital to sustain a certain lifestyle that they were accustomed to. A condition of the sale had been a life interest in the property for both of them, subject to the payment of a market-based rent. This advice had been provided by their son, a solicitor. At the time of first meeting with the clients they had a sum of €400,000 to invest.

The initial meeting was primarily about putting the clients at ease, and spending the time to get an understanding of their lifestyle preferences. This included an attempt to understand any monetary concerns or fears that they might have. At the conclusion of the first meeting, I left them with a budget outline to complete and have ready for me in two weeks time.

Second meeting

The second meeting took place two weeks later. Its purpose was to review the budget document that they had completed. The outcome of this was to make sure that the clients committed to the spending patterns contained within the budget plan, as any deviation from this could have a material impact on any investment plan.

The clients’ agreed objectives were:

To generate an annual income of €24k (€2,000 per month) from the investment portfolio.

The income was to be indexed to inflation.

They wanted to retain the capital towards the cost of any potential medical and/or nursing costs.

Whilst it was very obvious that these objectives could not all be met, we agreed to take a further meeting at which we would review the available options and make an informed decision. We had asked that their son attend the meeting as it was likely that he would be consulted by the parents in the decision-making process.

Analysis

The analysis of their situation threw up a number of issues that would require further discussion before a suitable investment recommendation could be made:

The return on investment required in order to provide for their income requirements was 6%.

Allowing for inflation-linked adjustment into the future caused this target return to move towards 9%.

Clearly the objective of retaining the capital value and living off the income proceeds were not compatible.

The analysis itself was conducted under a number of scenarios:

The clients taking a much-reduced income and retaining the capital.

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by Paul Grimes, Financial planning practitioner and consultant

FINANCIAL PLANNINGBehavioural Theory put into Practice

Perhaps the most difficult step in the process. Working with the client to determine a set of lifestyle objectives that can inform the decision-making process for investments.

In as much as it is possible, determining a target rate of return for the investment(s).

Use the calculated target rate of return, along with investment timeframe, to determine the most appropriate mix of assets required in order to achieve the rate.

Checking back with the client to ensure that the asset allocation is within their risk tolerance. If not, it means revisiting Step 1 above and restarting the process.

Once the asset allocation has been agreed, determine the most appropriate method for acquiring the assets.

STEP 1Client's Objectives

STEP 2Determine Required Rate of Return

STEP 3Asset Allocation

STEP 4Risk Profile

STEP 5Construct Investment Portfolio

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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 ro ke r 11

The clients taking the income they required, but depleting the capital over time.

The clients taking their required income for the next number of years, and then dropping it in later years, with or without depleting the capital sum.

Analysis was based on life expectancy and modelled solutions based on ‘what-if’ analysis of different life scenarios.

Subsequent meetings

Careful consideration was given to the method of presenting the output of the analysis to the clients. The need to have the clients understand the issues pertaining to the competing needs for their capital, without losing them in a mire of spreadsheets was challenging. The presence of the son was also a consideration. In the end, we opted to deliver a presentation that was largely graph-based, illustrating the likely outcomes of each of the analysed scenarios. In addition, the spreadsheets, with some commentary, were provided to the clients; we did go through one of the scenarios in detail to educate the clients and their son on how to read them.

Whilst the main objective of the meeting was to educate the clients on the nature of the financial consequences facing them under a number of scenarios, we did also start to outline an approach to managing their finances based on the principles of mental accounting. In short, this involved us creating a number of “pots” of money for the clients, each with its own prescribed objectives. The clients were very comfortable with this approach, but needed some time to consider the implications of the analysis presented.

In a subsequent phone call, we were informed that the clients had a preference for a solution that allowed them to:

retain their existing lifestyle for the next five years,

if necessary, reduce their spending for the subsequent years, and

provide some form of ‘emergency fund’ that would cover emergency medical costs. This amount was agreed at €75,000.

We re-crunched the numbers, and arrived at the following recommended strategy using the principles of mental accounting described above, and the clients’ revised objectives:

POT 1 — Living Expenses AccountPot 1 would contain sufficient capital to provide the clients with their required income for the first five years of their plan (until circa age 75). The determination of the required amount of capital made allowance for the fact that the clients would be receiving deposit interest on the funds over the duration of the five years. This capital was to be invested 100% in a cash account.

POT 2 — Medium Term Income Pot 2 would contain sufficient capital to provide the clients with income for the following seven years of their plan (until circa age 82). The investment strategy that underpinned this pot was 85% bond-based, with a 15% exposure to equities (global). The investment objective was to manage this part of the portfolio until it had accumulated the required level of capital, at which point the equity part of the portfolio would be sold off, and the portfolio would become 100% bond, and/or cash depending on the circumstances (time remaining until the funds needed to be accessed being the primary one). The intention with this strategy was, by Year 5,

to have transferred all or a substantial part of the funds into the Income Account (Pot 1).

POT 3 — Emergency medical funds Pot 3 would contain the capital agreed to be set aside to provide for medical/nursing expenses. The portfolio was 100% cash invested, at the time securing a rate that was in line with inflation. A part of the strategy required re-assessment of this account on a regular basis to ensure that the rate secured against the deposit would be sufficient to keep parity with inflation. If not, then a top-up to the account would be required.

POT 4 — Long-Term Income Pot 4 contained the balance of the clients’ funds, approximately €100k. As income requirements were safeguarded for twelve years, and also medical expenses were covered, these funds were to be invested into a diversified portfolio of growth assets to include property, equities, and commodities. The objective of this pot was to provide a return that was greater than inflation. As funds were transferred out of Pot 2 to Pot 1, so too would funds be transferred from Pot 4 to Pot 3, although this was not a time-bound decision. The ideal would be to start an orderly transfer from Year 7 onwards, depending on asset valuations at that time. There was sufficient time to provide some flexibility as to how and when precisely this happened.

In making their decisions, the clients and their son were able to attach a distinct purpose to each pot, which tied very closely to their stated lifestyle objectives.

Where did it all end?

The plan was fully implemented as described above. In subsequent meetings with the clients, at three monthly intervals during Year 1, we reviewed the progress against the spending budget that we had agreed at the very outset. On the surface all appeared well.

However, at our fourth meeting, which was attended by the husband only, the client disclosed to me that his wife was an alcoholic, and that the funds set aside to cover their income for the first five years were almost completely depleted. Needless to say this caused some panic. We were forced to re-evaluate the strategy with significantly less capital available, and also at a time when asset prices had dipped sharply. Crystallising the portfolios at this point would have compounded the problem of the mis-spent capital. Fortunately, the clients’ children became a part of the solution and delayed this rebalancing for a couple of years, at which point the asset values had recovered.

Paul Grimes is a consultant and has worked in the private banking and wealth management industry for more than 20 years. His particular area of expertise is developing financial planning solutions for high net worth clients and their businesses. Paul qualified as a financial planner during his career in Australia, and has also studied Accountancy (CPA Ireland), and Taxation (AITI).

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2.

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We in the pensions industry are constantly and quite rightly highlighting the various tax benefits attaching to pensions, along with the necessity for pension funding to maintain one’s standard of living post retirement. However, there are also lesser known benefits attaching to pension funding, which we in the industry sometimes take for granted, and which we really should be communicating to our clients.

As an avid pension saver myself, it is very worthwhile to reflect on these less obvious benefits of funding a pension through an exempt approved pension. I have identified some of these less obvious benefits below.

1

All personal pension contributions to exempt approved pension arrangements for PAYE employees qualify for income tax, PRSI and health levy relief. This can be as high as 49% if you are a higher rate taxpayer, equating to a return on your money of 96% less pension contract charges and commission before it is even invested. In other words, if you contributed to a savings policy, you would need a return on your money in the first year of 96% just to get you to the starting point of the pension investment. (Most of the pension fund is of course subject to income tax at the marginal rate on eventual drawdown.) The Government has indicated through the National Pensions Framework that these tax breaks are unlikely to change before 2014.

2

As a voluntary contribution to a pension scheme is not accessible until retirement, such a contribution amounts to a self imposed pay cut. A pension investor employs the financial discipline to cut their gross pay in the present in order to have pay in the form of pension benefits in the future. This self imposed pay cut provides a valuable buffer against any potential future cut in pay or indeed in the event of finding oneself in a position where one is made redundant and is compelled to accept a job for lesser pay in the future.

3

There is an old adage in financial planning circles that says that in order to prosper financially, you should pay yourself first from your pay cheque, and pensions are ideal for such a priority payment arrangement as you get to pay yourself first even before you pay the tax man! (The only exceptions here are the income levies, for which there is no relief against pension contributions.) If you are a PAYE employee, it is usually possible to obtain income tax relief at the marginal rate of tax along with PRSI and health levy relief at source, which means that the pension contribution is deducted from your gross pay and not your net pay.

4

Yet another adage in the world of financial planning is that it’s not how much you earn that counts: it’s how much you keep of those earnings. Again, if you pay income tax under Schedule E (PAYE), the current pension system ensures that not only do you get to keep your hard earned money in a tax exempt fund but you also enjoy full income tax, PRSI and health levy relief, which you would otherwise have paid on your pension contribution if you had decided not to invest in a pension. Income tax of course applies on eventual drawdown, although some of the fund can be availed of tax free.

5

Once a pension fund is building, it effectively provides you with underwriting free and premium free life insurance with tax relief attaching, as the proceeds of most pension arrangements can be paid out tax free on death, although there could be an inheritance tax liability depending on the beneficiary. It is also a non assignable death benefit, which means that it exists solely for the benefit of the member and not for the benefit of any financial institution.

6

If you are lucky enough to have other significant valuable assets, the proceeds of a pension scheme can be earmarked as an inheritance for your next of kin. The proceeds of a Personal Pension and PRSA can be paid tax free to an estate on death, although there could be an inheritance tax liability depending on the beneficiary. For occupational pension schemes a lump sum of up to four times salary can be paid tax free in addition to the value of personal contributions and Additional Voluntary Contributions (AVCs) on death before retirement.

7

Occupational pension schemes and PRSAs usually provide early retirement options from age 50 (although this is subject to trustee consent with occupational schemes), which can provide a valuable lifeline in the event of job loss or pay cut in your 50’s.

In these challenging times, it is no harm to highlight what can be the lesser known invisible benefits as well as the obvious benefits of pensions.

This article does not constitute advice or an advertisement.

Pensions:the Lesser Known Benefits

By Kevin Fitzsimons MPMI, MIIPM, QFA, FLIA, RPD

Pensions and Area Development Manager, Canada 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 ro ke r12

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 ro ke r 13

Irish Life’s new solution givesbetter way to control portfolio riskBy Graham Fox, Investment Development Manager at Irish Life

One of the most pressing questions facing financial advisors is why did diversification fail during the height of the credit crisis. From late 2007 to early 2009, the peak-to-trough decline in the average managed fund was approximately 45%. The size and scale of this decline came as quite a shock to many investors, as most believed that the typical managed fund would protect against such declines. However, unusually high levels of volatility and correlation across asset classes seriously hampered the performance of diversified portfolios during this period.

Unfortunately, during this period the correlation of all of the major asset classes rose to 1 as they all moved in unison and fell sharply. Consequently, there was no hiding place during this period as equities, property, commodities and some credit markets experienced sizeable declines. The only real way of avoiding significant losses was to go to cash or have the ability to actually short many of these asset classes – something that is easier said than done.

“mitigate the risk … by using a wider range of assets”

The reality of the situation is that trying to time asset markets is a fruitless exercise and generally results in most investors doing much worse than a long-term buy and hold passive investor. Very few investors have the ability to stay in cash, or even hold a meaningful allocation in cash during a bull market in equities, and live to tell the tale. One of the few investors to have successfully done this in the years prior to the credit crisis was Warren Buffet but his position is a little unique.

However, there are other ways to mitigate the risk of being long equity markets without having to resort exclusively to market timing and this is to implement a strategy of greater diversification by using a wider range of assets and varying management styles.

The US endowment approach is one such model that has been implemented with reasonable success over the years. And while this approach does not eliminate the risk of market falls, it does help to reduce these risks. While this approach did experience a peak-to-trough decline of about 20% during the credit crisis, this still compares quite favourably with the peak-to-trough decline in for example the S&P 500 of nearly 60%, or the 45% decline in the average managed fund.

Smoothing the journey

We believe that Irish Life’s new fund, CORE, would have been better able to provide protection against the large falls that were experienced during the credit crisis but still retain the capacity to deliver strong returns. The falls in CORE would have been one third lower than the average managed fund experienced based on simulated past returns. CORE is positioned to do this by following a similar approach to the US endowment one, but without the illiquidity disadvantage that has characterised many of these funds.

The reasons CORE would have had a lower decline in 2008 was because of its relatively lower allocation to equities and the higher allocation to alternatives. However, because of the lower allocation to equities than the average managed fund, CORE will underperform when equity markets outperform and this occurred in the period May 2003 through

to May 2006. However, you should remember that the average managed fund needed to outperform because it was recovering from much bigger falls than CORE would have had. We show below the current CORE asset splits.

Equities provide growth engine

The equity allocation will be indexed and follows the FTSE World Index. We strongly believe that equities represent good value for the long-term investor and warn against extrapolating the poor performance of the last decade into the next. The fact that equity markets in most Western economies performed so badly in the last decade actually increases the probability that they will perform strongly over the coming 10 years.

In terms of the government bond allocation, CORE will be investing in euro government bonds with maturities of less than five years. In contrast to equities, long-term government bonds performed very strongly in the last decade and this, combined with the risk of higher inflation over the coming years, means that we have taken a conservative approach by investing in short-term government bonds.

Safety features through adding in Alternatives and Bonds

By taking a nucleus of equities and bonds and allocating around 25% to alternatives and property we have developed a much more diversified portfolio than the traditional managed fund. CORE will contain traditional alternatives such as property, as well as newer concepts such as managed futures and a country and currency overlay. This asset split is designed to lower the volatility of the portfolio while maintaining a strong growth potential.

The benefit of using alternative assets in CORE is that it enhances the level of diversification within the fund, but without harming the long-term growth potential. Specifically, managed futures have traditionally been very lowly correlated with equities and are capable of producing high-single digit returns on a consistent basis. This, combined with the other alternative assets should help provide some protection when equity markets falter.

CORE could be the ideal solution whether you want a single fund solution, or a fund to form the foundation of a portfolio whose risks can be altered by the use of satellite funds. This will allow portfolios to be built that will suit the individual needs of clients. Over the course of an entire cycle CORE has been designed to deliver managed fund type returns but with lower volatility. To find out more about CORE, please contact your local Irish Life Account Manager today.

Cash 2%Property 7%

Country andCurrency Overlay 4%

Best Ideas 3%

ManagedFutures 9%

Index LinkedBonds 2%

Corporate Bonds 3%

Government Bonds 20%

Global Equities 46%

Emerging Market Equities 2%

Infrastructure Equities 2%

PIBA Annual Broker Conference &Celebration of PIBA’s 15th Birthday

Thursday May 27th 2010, Radisson Blu St. Helen's Hotel

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 ro ke r14

Seán O’Flaherty (Best Advice), Dixie Collins (PIBA Committee, Cork)P.J. Shanahan (Shanahan Begadon Mortgages & Financial Ltd, Waterford)

Jarlath Jordan (PIBA Vice-Chairman, Galway), Rachel Doyle (PIBA)

Bill Cullen (Keynote Speaker)

Kevin Courtney (Courtney Insurances Ltd., Dublin), Chris Deegan

(Fort Insurances Limited, Dublin), Siobhan Lynch (Fort Insurances Limited, Dublin)

Dominic MacHugh (Irish Life)

John Fogarty (Fogarty Financial, Co. Waterford), Paul Leahy

(Leahy Financial & Mortgage Consultancy, Co.Wexford)

Rachel Doyle (PIBA), Eamonn Long (Long Financial, Co. Carlow)

Paul Grimes (Speaker)

Diarmuid Kelly (PIBA CEO)

BBQ & 15th Birthday celebrations

Bill Cullen (Keynote Speaker)

Dr. Peter Stafford (Speaker)

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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 ro ke r 15

Pat Mackin (Bridge Financial Services, Co. Louth)

Des Denning (Denning Insurances Ltd, Co. Louth)

Declan Purcell (Caledonian Life), Brian Winkworth (Aviva)

Philip McGoldrick (Caledonian Life)

Michael Power (Mortgage & Investment Centre, Co.Tipperary)

John B. Smiles (Hooper Dolan Financial Ltd, Co. Waterford)

Pat O’Sullivan (LIA)

James Caron (Speaker)

Willie Holmes (General Manager Brokerage, Irish Life)

Michael Hoare (PIBA Chairman)

Connor McHugh (New Ireland), Paul Smith (Irish Life), Dominic MacHugh (Irish Life)

PIBA Broker Conference 2010

Michael Hoare (PIBA Chairman), Chris Leach (Speaker)

Bill Cullen (Keynote Speaker)

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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 ro ke r16

PIBA [ DIARMUID KELLY, CEO ]

Meets …

Matthew Elderfield (Head of Financial Regulation)Diarmuid Kelly (PIBA CEO)

Q Congratulations on your appointment as Head ofFinancial Regulation. Since our unpredictable climate is no match for sunny Bermuda, I’d like to ask you one question that’s on everyone’s mind — why did you decide to take this role?

I had a great time in Bermuda and the weather is certainly a little better than that in Ireland but I took the new job for a number of reasons. First, I relish a big challenge and there are some big challenges in financial regulation in Ireland now for sure. Also, I see it as a big opportunity to help build a new organisation as the Financial Regulator restructures and merges into the Central Bank. Doing all this in Europe, part of the Eurozone, at a time of significant change in international financial regulation was also a big attraction as I think Ireland can punch above its weight and have some influence in those policy debates to come. Finally, my wife and I think Dublin is a great place to live and we’re really enjoying it here.

Q Could you tell us a little bit about yourself and yourbackground?

I was born in Leeds, England, hence my affiliation to Leeds United, but moved to New York when I was a kid and grew up in Manhattan. I have been educated in both Britain and America so I guess I’m Anglo-American but I would call London home. Before becoming a regulator, I spent ten years working for a number of trade associations representing the financial services industry, most recently in the derivatives sector. After that, I spent eight years at the Financial Services Authority in a number of different supervisory roles before going to Bermuda. In Bermuda, I was the CEO of the Bermudian Central Bank, the Bermuda monetary authority.

Q You are coming into the role at a time of extremeuncertainty in the Irish financial system. What are your thoughts on the Irish regulatory system at this stage? How will you do things differently?

It’s clear the Irish regulatory system needs to make a lot of changes. It has to be acknowledged that there was a failure of regulation in Ireland which helped contribute to the severity of the financial crisis that we’re all still living through. I see three major areas of failing. First, the rule book wasn’t strong enough for the types of risks that the banks were taking. A large part of that gap in the rule book was due to weaknesses in international standards concerning capital and liquidity. But part of the problem has to be laid at domestic sources in Ireland so we need to make some changes to Irish rules too such as standards for corporate governance. Second, I think the level of resources for supervision in Ireland is significantly below what is required. We need to have the right number of supervisors as well as policy experts and enforcers to be able to do the job properly. Third, and perhaps most important, you have to have the right approach. Part of that is about systems and processes and I’d like to develop a risk-based approach that directs resources to those firms that have the highest inherent risk and that allows for a systemic assessment of the risks in those firms. However, more important is the need for a change of attitude: a willingness to be more assertive and challenging in how you do your supervision with a firm. In particular, I’ve challenged my supervisors to ensure that big risks at big firms are properly managed and that if we’re not satisfied by the response of management, we’re willing to put our foot down and impose our own solutions.

Q How different is it to the regulatory environment in Bermuda?

The challenges in Bermuda were both different and similar. In Bermuda too, we had the need to improve supervisory resources and look to our rule book to be ready for the changes facing international insurance regulation. But the global financial crisis impacted Bermuda in a very different way from Ireland, in large part because the insurance industry – which was Bermuda’s most important industry – has fared relatively better than the banks. That said, there were challenges on the banking front and with smaller investment and insurance companies that we had to work through over the couple of years I was there.

Q Are there any other regulatory systems that you admire?

I used to work at the FSA and I think there are a number of good aspects of the UK regulatory regime that can be adapted to the Irish market. But it’s important to emphasise that you can’t just Xerox across regulatory standards from one jurisdiction to another. I also think the Canadian regulatory system has done well in the financial crisis and I like the emphasis that the Canadian head regulator places on early intervention.

Q What would you have done differently if you hadbeen the Regulator here for the last five years?

It’s all too easy to have 20/20 hindsight but as I’ve noted earlier, I hope I would have pushed for tougher rules, more resources and a different approach to supervision.

Q Our members believe that they were over-regulatedin comparison to larger financial institutions in the past. At the Irish Insurance Federation’s annual lunch, you said that “getting that balance right is a high priority for me in my new role”. Can you elaborate on your thoughts in this area?

It is my understanding that, when the Central Bank became responsible for the regulation of insurance intermediaries back in 2001, they were

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 ro ke r 17

Matthew Elderfield Head of Financial RegulationCentral Bank

Matthew ElderfieldHead of Financial Regulation

subject to a similar regulatory regime to that which already existed for other types of retail intermediaries at that time and all firms who sell retail products to Irish consumers are subject to the same rules in the Consumer Protection Code, so in that arena all firms are subject to the same level of regulation.

I have indicated in my recent speeches that I intend overhauling our approach to financial regulation. I have described our new approach as one of assertive risk-based regulation underpinned by a credible threat of enforcement.

Our starting point will be to develop a risk impact framework that allows a categorisation of the various types of financial firm, based on their inherent impact or riskiness. This will be used to allocate resources and decide on our level of supervisory engagement with the firm. For the largest, high impact, firms we will have a much more intense level of supervisory engagement. At the other end of the spectrum, we need to have an effective regulatory reporting framework to flag problems, a rapid reaction capability to address problem cases as they arise, credible enforcement to act as a deterrent for poor practice and a combination of thematic visits and spot checks to check on standards. We will consult on the impact framework, and the metrics used to decide on categories, later this year.

Q How can our members feel more confident of alevel playing field going forward?

As I mentioned previously, I intend introducing a risk-based regulatory regime later this year, which will be the subject of a consultation process. This model means that we will not have a one size fits all approach. Regulation will be balanced and proportionate depending on the risk of the sector or the firm in question. This approach also means that, in some areas, rules for small intermediaries will not be the same as systemically important banks.

Q What timescale have you in mind for particularchanges?

We will hold a number of consultations on different aspects of the regulatory framework later this year - the new regulatory model, and also on our reviews of the Consumer Protection Code and the Minimum Competency Requirements. Any changes to the regulatory framework need to be informed by the views expressed during the consultation process.

Q What are your views in relation to the principlesversus rules debate?

In my view, we need to move beyond the debate on rules versus principles-based regulation, when it’s clear we need to have a mixture of the two, rooted in a clear understanding of risk. This is the thinking behind the introduction of the new risk-based regulatory model.

Q With the challenges currently facing the industry,how do you see the role of the Broker developing?

There is an opportunity for Brokers to demonstrate to consumers that they provide a valuable service, by providing advice and recommendations on the retail financial products available in the marketplace that are suitable to the individual consumer’s needs. But

Brokers will need to keep up to speed with any new consumer standards as the regime evolves.

Q Where do you see the Broker industry fitting in tothe new financial regime?

The new risk-based regulatory model will cater for small intermediaries as well as large, complex entities. Therefore I see no reason why the intermediary channel should not remain an integral part of the financial services industry and I recognise the significant role Brokers play in providing financial services to consumers.

Q With BIAM and New Ireland being put up for saleby Bank of Ireland, what role, if any, do you have in regard to who buys it and the possible effect on market choice?

We don’t act as a competition regulator but we will vet any new owner to make sure they meet our standards.

Q When and how do you see the financial industrypositively evolving and us regaining a positive reputation internationally?

Since the start of this year, we have introduced increased capital requirements for banks to strengthen their balance sheets and we acted to place Quinn Insurance Limited into administration following serious solvency issues with that firm. We have recently published tough new standards on corporate governance and related party lending, which we hope to introduce later this year.

These are serious regulatory actions. Such measures provide concrete evidence to the international community that we are willing to learn from the past and are putting requirements in place to ensure that those home-grown factors which contributed to the banking crisis cannot happen again. These actions and implementing the rest of our plans will help, over time, to repair the damage done to the reputation of the Irish financial services industry.

Q Finally, leaving Matthew Elderfield, “The FinancialRegulator” to one side, what can you tell us about Matthew Elderfield (outside of the job)?

I’m a big Leeds United fan and was a happy man this year when Leeds finally got promoted out of League 1 into the Championship. Being a Leeds fan over the past few years has been kind of like being an investor in subprime debt. Just when you thought you couldn’t go any lower things got worse, but maybe we’ve turned things around now. Otherwise, I enjoy my cycling to work and at the weekend, and my real passion is music. I spend way too much time on iTunes and enjoy seeing live bands as often as I can squeeze in the gigs.

With property prices decreasing back in line with the average industrial wage there is no doubt that there is value to be had for those willing to take the plunge!

One of the recent trends for those hoping to get a bargain is to attend property auctions. While traditionally these auctions were limited to a single property, Real Estate Alliance held the first ever giant property auction in Ireland on the 30th of April 2010 at the Shelbourne Hotel, Dublin. This auction sold 16 of the 61 lots on offer, amounting to 27% of all properties, raising €3.9 million.

If your clients are considering buying at auction you should advise them to do their homework, as turning up on the day of the auction unprepared could cost them.

The first thing someone who is looking to purchase a property via an auction should do is get information on the property(s) involved: you can do this by contacting the estate agent. Any prospective purchaser should select a property suitable to their circumstances in an area close to amenities, buses, schools, trains etc. and within their price bracket. Each property has a guide price that gives you an indication of the seller’s minimum expected price. However, this is subject to change; therefore you should always recheck the guide price nearer the time of the auction. The auctioneer will also be given a reserve price prior to the auction: this indicates a price under which the seller will not accept any offer; and unfortunately for buyers this is not usually disclosed.

You should always view a property before going to an auction. Interested buyers may make an appointment with the seller’s estate agent prior to the auction.

Most estate agents will be able to provide you with a contract for sale or copy title documents prior to the auction. Again these may change up to the day of the auction so make sure to check whether any amendments were made prior to bidding.

If you are very interested in a property and would like to make an offer pre auction, let the estate agent know as it never hurts to try and secure a deal if you are certain that this is a property for you.

Most auctions require a deposit on the day of the auction: approximately 10%.

If your client does not have finance available already they will need to arrange a mortgage prior to the auction. An AIP will be issued without a valuation in most cases, but you must have the property details. The maximum loan to value borrowers will be able to attain is 92%; therefore you must have at least 8% of the property price in cash from savings/gift (not borrowed).

It is important to remember that AIP’s are only an approval in principle and are not legally binding; therefore it is probably best to recommend that your client get a loan offer prior to attending auction. For a loan offer the majority of lenders will require a valuation. Permission to get a valuation can be granted by the estate agent.

Buyers would be prudent to get a structural survey (engineer’s report) carried out on a property prior to the auction as there may be some issues with second hand properties that wouldn’t be obvious to the naked eye. It is also prudent to speak to your solicitor, who should check out the title and ensure that there are no burdens or skeletons that could infringe on the property.

To attain a mortgage with any lender your client will need the following:

Three months’ bank statements on all current and savings accounts (these cannot show arrears or missed payments)

Three months’ loan/credit card statements

Three months’ payslips (if PAYE)

Stamped and dated Salary Cert from Employment (if PAYE)

P60 (if PAYE)

Notice of Assessment (if self employed)

Two years’ accounts (if self employed)

Proof of address/identity i.e. utility bill and photo ID such as passport or driver’s licence.

On the day of the auction you will need to bring some items with you such as the deposit, ID such as passport or driver’s licence, details of your solicitor, recent utility bills/bank statements and a solicitor’s letter confirming your current address.

It is important to remember that when you are a successful bidder, i.e. when the hammer falls and you are the highest bidder, then you have entered into a legal and binding agreement to purchase the property.

If you have been granted a mortgage loan offer based on a valuation of the house for 90% LTV, you cannot bid beyond this as the mortgage LTV is based on the value of the house and not on the price paid for it.

Example

Property is valued by the lender’s selected valuer at €250,000; the lender grants 90% LTV to a borrower for this property.

At the auction the property bids rise above €225,000; the borrower in question must stop bidding because even if the property sells at €300,000 the lender will only lend to their maximum LTV on their valuation of the property, i.e. they will only lend 90% of €250,000: €225,000.

The next Real Estate Alliance National Giant Property Auction will take place on the 28th of September 2010. Details can be obtained from www.realestatealliance.ie.

Going Under the Hammer!

By Rachel Doyle, Mortgage Manager, PIBA

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 ro ke r18

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Coping with the Minimum Competency DeadlineBy Bryan Johnston, Managing Director, Business and Training Solutions

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The 1st of January 2011 is a very significant date for many working in the financial services industry. Many working in the industry, who have not been ‘Grandfathered’ and who have been working in the industry on the 1st of January 2007 or before must be qualified by the end of this year or they can no longer offer advice to consumers.

Background

Minimum Competency Requirements apply to anybody who advises on or sells retail financial products, but also to a much wider category of people including those that manage people who give advice, and assist in claims or complaints.

A person can satisfy the MCR either by having a recognised qualification or by being ‘Grandfathered’. Grandfathering allowed a person to continue advising on retail financial products, without a professional qualification, if they had at least 4 years’ experience in a particular category up to the 31st of December 2006.

All ‘Grandfathers’ had to be registered by the end of December 2007 and ‘Grandfathering’ is therefore no longer an option. ‘Grandfathers’ can only advise in the category they have been accredited in, so for example if a person has been ‘Grandfathered’ because they have at least 4 years’ experience in housing loans they cannot offer advice on savings or investments. Those not ‘Grandfathered’ or without a recognised qualification have until the 1st of January 2011, or 4 years from when they first joined the industry, to obtain a recognised qualification. So January 2011 is a very significant date for many.

Which Qualification?

The Professional Diploma in Financial Advice leading to the QFA designation is the recognised benchmark qualification for all those who work in the financial services industry, and is a Level 7 qualification on the National Framework of Qualifications. University College Dublin (UCD) is the awarding body for the Professional Diploma in Financial Advice, while successful candidates are eligible to use the QFA designation on application to LIA.

The QFA designation meets five of the six Minimum Competency Requirement categories. The Professional Diploma in Financial Advice is made up of six modules, and not only does it meet the Minimum Competency Requirements, but it is also a very practical course and Brokers use the manuals as a reference on a daily basis.

The modules are as follows:

QFA Life Assurance;

QFA Pensions;

QFA Investment;

QFA Loans;

QFA Regulation;

QFA Financial Planning.

The first five exams are multiple choice, while the final exam is a written examination of three hours’ duration.

Supports

If you are looking at starting or continuing your studies then help is at hand. In addition to providing manuals and the examination structure LIA provides:

Lectures — Lectures are held in several venues around the country and there is a big correlation between attending lectures and passing exams. They can also provide the initial motivation for getting started. The lecturers try to provide an atmosphere that is fun and has energy and students are always encouraged to ask questions. Sometimes a very simple clarification can save hours of wasted energy. Additional notes are also supplied for the lectures.

Lectures usually last for three hours and generally about two-thirds of the time is spent on relevant chapters and about one-third looking at questions. For the last module, QFA Financial Planning, there is a big emphasis put on looking at case studies and past exam papers.

Webinars online — Pre-recorded lectures are available 24/7 for each module of the Professional Diploma in Financial Advice. Each module has several webinars of about 30/40 minutes and this is another excellent way to help your revision from the comfort of your own PC.

‘Take A Test’ online — This tool allows students to take sample tests, either on a chapter by chapter basis or on a full test basis, for the five multiple choice QFA exams. On completion of each test students are given an individual test report.

Feedback from past exams — You can look back at the last three exams and see exactly where significant numbers of students answered questions incorrectly. This is a great way of becoming familiar with the areas that past students have found challenging.

Examination/Study Guide — This is a really good guide introducing you to the module you are studying. The guide outlines the breakdown of the exam, in terms of chapter weighting, and exam rubric. How to approach studying is covered in another document made available online. The document encompasses how to study, time management, and lots more.

Additional Exam Sittings Exams are normally held in January, May and September. Ahead of the January 1st

continued overleaf …

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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 ro ke r 19

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Trustee Training –Challenges and Opportunities

The requirement for Trustees of company pension schemes to undertake compulsory training with effect from the 1st of February 2010 will have a significant impact on the shape of the pensions market in Ireland.

The requirement for Trustee training was initially mentioned in the Social Welfare Act 2008, but its implementation was delayed while the Pensions Board developed a Trustee training course on their website. New Trustees will need to undertake the training within six months of their appointments, while existing Trustees must initially complete the training by the 31st of January 2012 and then repeat the training every two years thereafter. The training applies to Trustees of all types of pension schemes — both group and one man schemes. The only exception is that Trustees of stand alone group life schemes are not required to undertake the training.

The requirement for Trustees to undergo training makes sense, as it will ensure that they are aware of their obligations and responsibilities. However, where a company is acting as a Trustee, the new requirements will prove problematic in many cases. The need for training and the extent of it (for example

the Pensions Board online training will take approximately nine hours to complete) has led many existing Trustees to re-evaluate the way in which they provide pension benefits for their employees.

New Ireland’s view is that the requirement for training and the options available to employers only serve to underline the significant role that the independent Broker has to play in the whole area of pension advice.

Reviewing an Existing Company Pension Plan

For existing schemes, the first question is whether it is appropriate to continue with the existing Trust based arrangement or to consider a switch to a Group PRSA. Before a decision like this is taken, it is crucial that the Broker discusses with the Employer/Trustees the pros and cons of both types of plan. If a decision is taken to switch to a Group PRSA, then the communication process becomes extremely important, as the reasoning behind the changes needs to be explained fully to each of the scheme members.

Alternatively, if an Employer/Trustee decides to stay with the

By James Skehan, Head of Pensions, New Ireland Assurance

2011 deadline LIA are holding additional exams in July, October, November and December subject to demand.

So to finish off, some of the benefits to you of studying include:

You will meet the Financial Regulator’s Minimum Competency Requirements.

Consumers are becoming much more aware of dealing with qualified people and financial journalists actively encourage consumers to check if their advisor is qualified.

The Professional Diploma in Financial Advice is one of the most practical courses available and will increase your knowledge and confidence when dealing with consumers.

You will get a Level 7 qualification from University College Dublin.

Having the QFA designation is a requirement by most employers in financial services today.

You will be able to look after your customers more professionally and confidently.

You will be eligible to sit and study for the new and internationally recognised qualification of Graduate Diploma in Financial Planning.

Once started, study, like exercise, is quite enjoyable and many students go on to further study.

There are only six months to go to January 2011!

Contact LIA at (01) 456 3890, or if I can help with any concerns you have, give me a call on (087) 256 4413.

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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 ro ke r 21

Trust based defined contribution scheme, then the advice centres on the continuation of the existing Trustee arrangement, with the subsequent need for training, or the option to switch to an alternative corporate Trustee service.

New Ireland’s Company Pension Choice

New Ireland believe that both the Group Defined Contribution model and the Group PRSA have certain advantages, and with our new Company Pension Choice initiative we can now provide a number of additional supports aimed at meeting the needs of both the Broker in terms of comprehensive technical advice, and the employer in terms of assisting them during their decision-making process. For more information on Company Pension Choice, contact your New Ireland Broker Consultant.

Trustee Training — The Options

Pension legislation now requires Trustees to undergo “appropriate training“ and one way of achieving this, as mentioned above, is to complete the web based training available from the Pensions Board. Training is free but can take approximately nine hours to complete. As an alternative, New Ireland, through its associate company General Investment Trust, has developed a Trustee training course, which has been approved by the Pensions Board and satisfies the requirement for appropriate training. The training will take approximately four hours to complete and is available, for a fee, to Brokers and their clients.

In March, New Ireland in conjunction with PIBA made the Trustee training course available to PIBA Brokers and their clients, and approximately 200 attendees completed the training course in Dublin, Cork and Athlone. The reaction from PIBA Brokers who completed the course was extremely positive and it was felt that the training gave them, as participants, a valuable insight into the duties and obligations of Trustees in discharging their duties.

Corporate Trusteeship Service

Another alternative worth considering, particularly for employers who are acting as Trustees, is to appoint a corporate Trustee. In response to a growing demand for corporate Trusteeship, New Ireland has made this facility available through their associate company General Investment Trust Limited (GIT). The advantage of this service is that GIT will take over and assume all Trustee duties and responsibilities, thereby relieving the existing Trustees of any future obligations and also the need to complete Trustee training. Details of this corporate Trusteeship service are available through your New Ireland Broker Consultant.

The information contained in this document is based on our understanding of current legislation as at April 2010. Terms and conditions apply.

New Ireland Assurance Company plc is regulated by the Financial Regulator and is a member of the Bank of Ireland Group.

From left to right: Edel Morey (PIBA), James Skehan (New Ireland),David Hanley (Padraic Kissane Financial Services)

James Skehan presenting the Trustee Training course

PIBA Brokers and their clients attending the Trustee Training course

From left to right: Ken Smith (New Ireland), Edel Morey (PIBA),James Skehan (New Ireland), Karl Keegan (KJK Life&Pensions)

Combating Money Laundering in Financial ServicesBy Elizabeth Smith, Compliance Manager, PIBA

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 ro ke r22

Historically in times of recession the prevalence of money laundering increases, so it is more important than ever that Brokers are vigilant in relation to their anti-money laundering requirements. Lenders have indicated that there has been an increase in fraudulent documents being submitted with mortgage applications. It is important that you should ensure that you have sighted the original statements/payslips etc. and inspected them in detail to ensure that the information provided is consistent. This is a time of change in the area of anti-money laundering, with the transition from the requirements of the Criminal Justice Act to the new Criminal Justice (Money Laundering and Terrorist Financing) requirements.

This Act was signed into law by the President on the 11th of May 2010 and transposes the long awaited Third EU Money Laundering and Terrorist Financing Directive into Ireland. As at the time of going to print, there is muted talk within the industry of a commencement date for this legislation of the 15th of July 2010. However, this date has not been officially confirmed. The Criminal Justice (Money Laundering and Terrorist Financing) Act 2010 consolidates Ireland’s existing anti-money laundering and terrorist financing laws. Mortgage Intermediaries and Brokers by virtue of their registration as Insurance Intermediaries who provide Life Assurance or other investment related services are deemed to be “designated persons” under the legislation and therefore must comply with the requirements. Brokers only operating in the General Insurance market do not fall under the requirements.

As currently required, all Brokers will need to continue to:

Identify their customers

Have procedures in place, including staff training

Keep records

Report suspicious transactions to An Garda Síochána/the Revenue Commissioners.

The new legislation introduces the concept of a 'risk based approach', whereby Brokers will be required to carry out a risk based assessment in an appropriate manner having regard to the services they are providing, their customer base and their geographical area of operation. Additional requirements in relation to identifying politically exposed persons, monitoring accounts on an ongoing basis and third party reliance will also be introduced.

One of the most significant changes introduced will be the requirement for designated persons to carry out Customer Due Diligence (CDD):

Prior to establishing a business relationship with the customer;

Prior to carrying out occasional transactions amounting to €15,000 or more, whether the transaction is one single operation or a series of linked operations;

Where there is a risk of money laundering or terrorist financing; and

Where there are doubts about the accuracy of existing customer identification.

There are three categories of Customer Due Diligence (CDD): Simplified, Standard and Enhanced.

Simplified Due Diligence (SCDD) may be applied to life assurance policies having an annual premium of no more than €1,000 or a single premium of no more than €2,500. SCDD may also be applied to pension, superannuation or similar schemes where contributions are made by an employer or by way of deduction from an employee’s wages.

It is our understanding that for Standard Due Diligence Brokers will need to verify the customer’s identity, as well as that of the beneficial owner where applicable, obtain information on the purpose and intended nature of the business relationship and conduct ongoing monitoring of the business relationship.

Enhanced Customer Due Diligence is required for customers who present a higher risk of money laundering or terrorist financing. This would be where the customer is not physically present for identification purposes or is deemed to be a non-domestic politically exposed person (PEP). A PEP is an individual who has been entrusted with prominent public functions, or an immediate family member or known close associate of such a person. A designated person must identify the source of wealth and obtain senior management approval for each relationship.

Brokers will be obliged to put in place internal procedures and reporting procedures to assist in preventing money laundering. Going forward all relevant staff must receive ongoing training to ensure compliance with the new Act. If an employer fails to provide training, this is an offence on the part of the employer. The Financial Regulator has new powers and can take all reasonable steps to ensure compliance with the legislation such as onsite visits and removal of documents. The Financial Regulator can impose administrative sanctions for non-compliance.

The Financial Regulator is currently drafting core guidance notes in respect of the new legislation with sector specific guidance notes to be completed in due course. PIBA will update members when the new legislation has commenced and the guidance notes are available.

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Managing your clients’ finances during unemploymentBy Kevin Paterson, Sales & Marketing Director, Assurant Intermediary

As we are all too keenly aware, especially in today’s uncertain economy, there is no such thing as a job for life. The unemployment rate for Ireland in April 2010 stood at 13.4 per cent. Losing one’s job is clearly a risk for everyone, but it shouldn’t mean that we stop living our lives. Repayment Protection Insurance (RPI) can play an important role in helping your clients manage their finances.

Some personal finance experts will argue that traditional income protection offers a far better deal than RPI, providing longer term cover and greater flexibility. The simple truth is that this type of insurance does not cover involuntary unemployment – the biggest trigger for a claim alongside disability – and there is no alternative cover providing short-term protection.

Some members may be tempted to self-insure, believing that putting the money that they would spend on an insurance premium into a savings account will help foot the bill should the worst happen. Clearly saving a portion of income is always prudent. However it is not simply a question of putting money aside every month. If clients are relying on their savings, they need to be conscious of whether they are going to achieve sufficient return. With interest rates currently hovering between 2.5 and 3.5 per cent, it is questionable whether their short-term savings are delivering any real return. That makes the self-insurance option look less viable right now.

Consumers should consider that even if it was viable to self-insure and they could save the equivalent of the insurance premium every

month, that option still may not offer sufficient protection. The fundamental principles of insurance apply for RPI, just as they do for all other types of cover, be it motor insurance, household, travel and so on. If an insured consumer needs to make a claim, they get back more than the total of what they’ve paid for the cover. However, if they choose to rely on savings, all they get back is the total of what they’ve put in the account, plus any interest earned.

The Irish market in recent years has suffered from high unemployment rates which in turn have led to a high level of insurance claims. As a result, most RPI providers have pulled out of the Irish market, leaving consumers without affordable protection. Denying consumers access to suitable and affordable insurance protection could cast thousands into a financial black hole that could cause long-term and, possibly, irreparable damage to the Irish economy.

It is clear that the industry has to work closely with the regulator and consumer watchdogs to engage not only consumers but, equally importantly, the national media as a key influencer. We have to validate the benefit of the product. We also need to ensure that personal finance experts understand the different protection product propositions and the gaps between state support and what the private sector can provide. We have to work together to ensure that, for the benefit of the consumer, this cover is seen as neither a rip off nor a turn off.

The policies will cover up to 100% of a mortgage or loan payment, 65% of net monthly income, or €1,500 per month, whichever is the lowest.

The premium for RPI ASU cover is €9.75 per €100 per month of benefit, and for RPI AS only cover is €5.25 per €100 per month of benefit.

PIBA members benefit from commission levels of 20% of each premium paid.

Initial exclusion periods

•• New mortgages and new loans — 150 days

•• Existing mortgages and existing loans — 180 days

•• Exclusion FREE period for ‘like-for-like’ product transfers, providing seamless transfer of cover.

Exclusions

•• Unemployment cover is NOT available to those who are self-employed

•• There is a 24-month exclusion period for pre-existing medical conditions.

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COVER

Accident and Sickness: if the client was unable to work due to accident or sickness and made a valid claim, the monthly benefit would be paid for up to 60 months.

Unemployment: if the client was made redundant and made a valid claim, the monthly benefit would be paid for up to 12 months.

Critical Illness: a lump sum payment would be made to pay off the outstanding balance on the loan up to certain limits depending on employment type.

For further details please refer to the policy terms and conditions.

COST EXAMPLE FOR RPI FROM PIBA’S SCHEME PROVIDER, ASSURANT INTERMEDIARY

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 ro ke r 25

Standard Life Investments House ViewBy Andrew Milligan, Head of Global Strategy, Standard Life Investments

RISK

The Global Investment Group has concluded that portfolios will take on moderate levels of risk, focusing on assets with high, yet sustainable yield, looking for relative value opportunities, in view of continued economic and market volatility.

GOVERNMENT BONDS

US Treasuries HEAVYYields look relatively attractive against the backdrop of muted inflation pressures, which will limit any interest rate increases this year. They may also benefit from safe haven flows in a volatile environment.

European Bonds Move to NEUTRALStill well supported by an environment of moderate economic growth and restrained inflation, but vulnerable to further concerns about debt servicing problems in some Eurozone member countries.

UK Gilts NEUTRALConcerns about the economy’s fiscal position and sizeable gilt supply in the years ahead make us cautious, but interest rate increases remain unlikely for some time.

Japanese Bonds NEUTRALLow Japanese government bond yields mean this asset class is increasingly being used as a funding source for other investments, including other government bond markets.

UK Inflation-Linked Debt NEUTRALThere are inflation risks in the medium term from Central Bank quantitative easing, but valuations of inflation-proofed debt need to be examined carefully.

CORPORATE BONDS

Investment Grade VERY HEAVYSpreads over government bonds are still historically wide, although not as attractive as last year. Improving corporate cash flow supports a peak in bond default rates.

High Yield Debt Move to HEAVYBenefiting from an attractive carry, improving corporate cash flows and a peak in the default cycle as the global economy recovers. Investors still need to be aware of selective default risk.

EQUITIES

US Equities NEUTRALSupported by improving corporate cash flows into 2010 on the back of strict cost control. However, the upside is limited by the consumer debt and housing market overhangs restraining domestic demand.

European Equities LIGHTProfitability is restrained by less cost cutting than seen in the US and UK, plus the impact of tight fiscal policy, albeit some sectors are supported by their exposure to emerging market economies.

Japanese Equities LIGHTExposure to the Asian and US economies offset by weak domestic dynamics and tighter fiscal policy; Government action unsuccessful so far in stimulating consumer spending or ending deflation.

UK Equities NEUTRALThe market can make headway supported by valuations and the benefits of Sterling’s depreciation on overseas earnings, but it faces headwinds from weak real income growth and fiscal tightening.

Developed Asian Equities NEUTRALCautiously selective on Asian economies, benefiting from strong Chinese growth but wary of inflation pressures building in some countries unless central banks take firm action to dampen liquidity.

Emerging Market Equities NEUTRALSome are benefiting from the upturn in commodity demand and upgrades to sovereign debt ratings: others are still facing external financing problems and awaiting a strong recovery in export growth.

PROPERTY

UK and European HEAVYSelectively Heavy with a particular focus on supply constrained office markets, e.g. London and Paris, and higher yielding Central European logistical property.

North America NEUTRALSignificant property debt maturities present risks for US commercial property, but Canada's lower leveraged property markets should fare better.

Asia Pacific LIGHTExcessive supply in certain markets in Asia, e.g. China and Singapore, will hold back growth but higher-yielding Australian markets look more attractively priced.

OTHER ASSETS

HEAVY $ and £ vsForeign Exchange LIGHT € and ¥Interest rate differentials, divergent growth prospects and political drivers are becoming more important drivers for global capital flows.

Global Commodities NEUTRALStrong demand for industrial commodities will be led by infrastructure projects in emerging economies, but oil and soft commodities will eventually see new supply come on stream.

Cash VERY LIGHTCentral banks in the major economies will keep monetary policy very loose into 2011 as inflation pressures remain weak due to excess capacity and high levels of unemployment.

Investors are on balance quite cautious and many remain invested in cash and lower risk funds, waiting for markets and confidence to improve. Financial advisors might find the following Standard Life Investment views (based on a global investor with access to all the major asset classes) useful. These are 6 to 18 month investment views from the 10th of May 2010.

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25

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My experience of the Graduate Diploma in Financial PlanningBy Paul Cullen, QFA JFS (DIP), Managing Director, Life Goals Ltd.

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 ro ke r26

I first heard of the CERTIFIED FINANCIAL PLANNER™ certification from Australian colleagues whilst attending the Million Dollar Round Table (MDRT) some years ago. It was explained to me at the time that this was seen as the premier qualification for financial planners in Australia, Canada, the USA and many other countries. When I heard that the CFP® certification was to be introduced to Ireland my interest was aroused for a number of reasons.

I had felt for some time that the profession I was involved in was evolving rapidly, and was nearly unrecognisable as the same profession that I had joined fifteen years previously. Furthermore I believed that it was likely to continue to change and evolve in the coming years. With that in mind, I was looking for something that would help me to not just keep pace with industry change, but to help me grow my business in these challenging times. After attending some of the information sessions last summer, and speaking to overseas colleagues, it was clear to me that this was probably the most relevant course for financial planners available today.

The first step in attaining CFP® certification is to pass the Graduate Diploma in Financial Planning. Initially I have to say I was daunted by the amount of material that needed to be covered, the time commitment required (two nights a week is a big ask for any practitioner with business and family commitments) and the fact that this was a Level 9 qualification on the national framework of qualifications, not to mention the financial outlay required to enrol for each of the six modules. I am glad to say I am now two-thirds of the way through it and would recommend it to any professional who is involved in advising clients on their financial affairs. The programme is very practical and I can assure you that from day one you will acquire knowledge and skills that you can put into practice immediately. The programme looks under the bonnet at what we do as financial planners; it has helped me to see the bigger picture of focusing on formulating financial plans as opposed to focusing on the financial product.

Briefly, some of the very practical benefits that I have found to date are:

Being able to carry out a multiplicity of calculations with clients, for example retirement funding calculations, max-funding estimates, portfolio returns, comparing funds based on a risk-adjusted return, lending calculations etc.

This has reduced my dependence on ‘help desks’, and most importantly has helped to enhance my professional image with clients.

Being more aware of how different personality types absorb information and their preferences for different communication styles. In practice, I find that I am more tuned in to signals that will assist me in conducting effective client meetings. In addition, the research presented on the science of persuasion has provided me with tools for improving my influencing skills.

The course also looks in depth at the whole pension industry on a macro level and a micro level. It also teaches students how to quickly calculate maximum ordinary contributions using revenue capitalisation factors, calculate maximum benefits at voluntary early retirement, calculate maximum past funding lump sums that can be added to a fund within revenue limits, and calculate maximum tax free termination payments. After a twelve week module this becomes second nature and I have found that the ability to do this confidently on the spot with clients is hugely beneficial.

Tax and estate planning is something every advisor should have a decent knowledge of and this course can only add to that knowledge. It looks at income tax, adjusted profit and loss computations, capital allowances computations, filing dates for tax returns and surcharges that may be applied, capital gains tax computations using indexation factors, the whole area of residence and domicile, preparing a share history for clients, bonus issues and rights issues, capital acquisition tax, aggregation, agricultural relief, business relief, stamp duty, and corporation tax. All these are very relevant to financial planners.

In summary, I have found this programme to be very relevant, beneficial and worthwhile. From a business perspective, I have incorporated a lot of the knowledge learned into my business dealings with clients. Importantly, I feel that I am delivering a more professional service to my clients; and I believe that this will assist me to better position my business in the coming years. I believe that in the future, this qualification will be seen as a benchmark for financial planners. I would encourage all advisors to consider doing it: the worst that could happen is that the quality of the advice you provide may improve!

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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 ro ke r 27

Five things you Need to Know about Professional Indemnity!By Paul Kelly, Business Development, PIBA Network Services

Professional Indemnity has unfortunately come to the fore in the minds of many Brokers in the last twelve months. There are some recurring issues which demand attention and it is important that all Brokers have a basic knowledge of these areas.

1Switching your Professional Indemnity policy provider — The implications of this if a claim arises

Professional Indemnity Insurance operates on a “claims made” basis and so it is the policy in force at the time a claim (or potential claim) is made against you which responds rather than the policy in force at the time the alleged negligent work was undertaken. If for example your current policy expires on the 1st of August 2010, and you move to the PIBA PI provider Lockton for the forthcoming year and a claim arises during this time, then this is to be reported to Lockton. The claim may have been for advice/work carried out whilst with a previous PI insurer, but the policy in force at the time of the claim is the one which has taken the risk for any work you or your business has carried out. Do not be afraid to shop around!

2Is there a potential claim? Basic steps to be taken

Ensure you advise your Brokers/insurers immediately if you become aware of a claim or circumstance likely to give rise to a claim, even if you believe the basis of the complaint to be unsubstantiated.

Always ensure you notify by email with the original sent by post asking for immediate acknowledgement of this.

Always seek the advice of your insurer/Broker prior to responding to a potential claim.

Do not, under any circumstances, solicit or entice any potential claims or make any admission of liability. This could be treated as acting self insured.

3Professional Indemnity with self-employed sales staff

It is important to remember that, when using the services of self-employed contract staff, your underwriters may wish to retain subrogation rights against them. This means that should a claim be made against your firm as a result of work performed by the self-employed contract staff, your policy will respond but your underwriters will want to try to recover costs from them. There may be a warranty within your policy that requires you to ensure that each self-employed contract staff carries their own adequate Professional Indemnity insurance to meet these subrogation rights. Failure to comply with this warranty may result in the claim against your firm being avoided.

Alternatively, you may wish to have each self-employed contract staff member covered under your own Professional Indemnity Insurance policy. This means that underwriters will waive their subrogation rights. However, it is important to remember that should a claim be made against the firm arising from work done by the contractor, it may have a detrimental effect on your policy and/or future premiums. You may want to ask yourself ‘How much supervision and control do I have over their work?’

4Purchasing a client bank

When purchasing a book of business from another Broker, it is important to let your underwriters know immediately. The cover provided by your underwriters would, no doubt, be restricted to work performed on those files following the takeover. It is important that you ensure, prior to the takeover, that the Broker has arranged adequate ‘run-off’ insurance for any claims that may arise as a result of negligent acts, errors or omissions occurring on those files prior to your takeover. Failure to ensure adequate run-off cover could result in an uninsured loss for your ‘new’ client.

5Thinking of retirement

The exposure a Broker faces does not automatically stop on the day you cease writing business. Run-off cover is again essential for a Broker for the period of six years from date of retirement, whether selling on your client bank to another intermediary or selling back to a Life office. The statute of limitations is six years and all files have to be held for these six years from the respective dates the business was written.

The annual premium on a policy should decrease every year in line with the decreasing exposure of your business and funds should be set aside for this as a principal/director of a Brokerage. In certain circumstances some PI providers will look at offering a six year once off policy for this period: it is important to see if this option is available to you.

Lockton and PIBA arrived at the first anniversary of our three Professional Indemnity scheme arrangement in early June 2010 with a strong performance showing over 340 membership firms already availing of this group scheme in its first year. Supporting this scheme is important as it will ensure the continuation of favourable Professional Indemnity rates for PIBA members in the future.

To speak to Lockton about your PI or any of the above contact Ian Ronan in Lockton on (01) 858 5211 or email at Ian.Ronan@ie.lockton.com.

You can also contact me on (01) 492 2202 or paul.kelly@piba.ie to discuss any issues.

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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 ro ke r28

We all know that it’s important to ensure that your Brokerage has a strong online presence. Indeed, many Brokerages spend a lot of time maintaining their website so that it provides a strong representation of their service and their business as a whole. They’re entirely correct to do so. A good website provides a place where clients, both new and existing, can find out about your skills, experience and service offerings.

Of course, it’s also important to think about how your client finds your website and, in a broader sense, how your Brokerage is represented online generally.

Increasingly, prospective clients seek out product information online before deciding to contact a Broker. Think about the process you would go through if you were making an important purchase. Quite often you would do some product research before deciding to go ahead and buy, you might read up on the product itself, seek out reviews or testimonials from others who have bought the same item, or even look into different suppliers and their credentials. It makes good sense to do so and one of the easiest places to do such research is online.

Many individuals place a high degree of importance on assessing their financial options: indeed, that’s why many seek out the expert services of a Broker. It’s easy to see, then, why a prospective client might approach finding financial advice with the same rigour.

The advent of the Internet has meant that information on financial services is widely available across the Web. Websites such as askaboutmoney.com, itsyourmoney.ie and more all aim to provide consumers with help in making financial decisions.

As a financial professional you know that no amount of research can improve on the kind of tailored, independent advice that a Broker can offer their client. It’s even more important then to ensure that your Brokerage has the online visibility it needs and deserves.

A good place to start is to see how your website performs in various search engines. Search engines are the most common tools web users start with when looking for services. Try searching for products or services that relate to your own business and see how easy your Brokerage is to find. There are many ways to improve your positioning on search engines and your Caledonian Life Broker Consultant can help you do it.

Another good way of promoting yourself online is to participate in online forums that relate to financial matters. Imparting some of your expertise could be a useful way to

meet new prospects and drive business toward your own website. You could also try contributing to financially orientated websites or even offer to do a weekly Q&A for them. Include your picture with anything you write and don’t forget to include your contact details.

Nobody knows your client base and target market better than you do. Think about how your clients use the Internet and use that knowledge to develop ways of engaging with them in online places other than your own website. Perhaps ask a client at their next consultation whether they found your website easy to use. You might find creating a Facebook or Twitter profile to be a beneficial way of interacting with your clients. But if you do, be sure to keep it up to date.

Another good idea might be to look for online advertising opportunities on websites that deal with issues local to where you are based.

Whatever approach you take, extending the reach of your business beyond your website is something that is straightforward to do. Building your online presence will improve your public image and help drive new prospects to your business.

Of course, at Caledonian Life we’re here to help you do it. Our online Broker Centre esp.caledonianlife.ie contains a wealth of business development resources and articles to help you further develop the business that you do. You’ll find many of the concepts in this article covered in depth with easy to follow and practical examples on topics such as generating PR for your business, strengthening your online presence, running mail campaigns and much more.

Of course we’d love to hear from you in person too. If you’d like to discuss any of your own ideas contact your Broker Consultant directly, or email marketingsupport@caledonianlife.ie – we’ll be delighted to hear from you.

Thinking Differently about your Online PresenceBy Ross Bloomfield, Marketing Executive, Caledonian 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 ro ke r 29

The Economics of ProhibitionBy Mark Thornton [Published by Mises Institute]

This book has undone my previous beliefs on how we should deal with the issue of drug use and drug dealing in a modern society. Up to now it was simply “lock ‘em up and throw away the key”, but it seems it isn't that simple.

The essential message in The Economics of Prohibition is that making drugs illegal actually creates the criminal market that brings with it side effects such as gun crime and murder. Al Capone never would have risen to the heights of criminal overlord that he eventually reached had alcohol not been outlawed during prohibition in the 1930's. Prohibition was seen as a blanket cure for social malaise, but the cure created the disease. Mark Thornton looks at the reasons why from an economist’s perspective and explains that all is not as it seems.

The Economics of Prohibition considers not only the incentives for drug smuggling, but also the fact that the potency of the drugs increase per dose over time because it pays a trafficker more to bring in more powerful narcotics than it does to bring in bulky weaker ones. This is done using many different data sets that stretch back over 100 years (the book was written in 1991) covering much of modern American history. It remains

as relevant today as it was at the time of going to press because the 'war on drugs' isn't like other wars: it has never ended and there doesn't seem to be any victory in sight … ever.

This book will challenge the standard approaches that Ireland has taken in terms of methods to deal with our ever growing drug problem. It isn't easy to change your views on a topic which is so emotive, — the recent campaigns against headshops is evidence of this — but when you look at the papers every day of the week you quickly realise we aren't solving the problem: we are just making it illegal and learning to live with the resulting crime. The Economics of Prohibition is a must read if you are looking for some challenging thoughts on drug policy for a modern nation.

Naked Guide to BondsBy Michael V. Brandes [Published by Wiley]

'What is the bond market? And how does it work?' These are questions you won't have to ponder again once you finish Naked Guide to Bonds. This book is a must if you want to look under the bonnet of fixed income securities, which takes in everything from standard government bonds to mortgage backed securities, municipal bonds and other collateralised debts.

Bonds are a vital component of any portfolio: a rule of thumb is that you should have the same percentage of your portfolio in bonds as you are in age (it's straightforward: a person who is 60 would have 60% in bonds), so you cannot overlook a need for strong comprehension of this asset class.

Amongst financial advisors bonds tend to be overlooked quite often. The bond market is the 'boring brother' to the stock market (although in the last two years it has gained a comparable number of headlines), and assurance firms will often have ten equities funds for every bond oriented fund. Generally this is because returns and liquidity operate quite differently from the way they do for stocks.

Terms such as duration (which has nothing to do with how long a security runs — it is in relation to changing interest

rates), yield to maturity, yield to call, yield to worst, general municipal obligations and many other terms from the practitioners’ world are explained in such a way that you actually stand a chance of remembering them.

Naked Guide to Bonds will ensure that you have a firm grip of the workings of bonds and the various jurisdictions and markets they tend to trade in. It's written in plain English and would greatly benefit any financial advisor who wants to come to grips with the monolith that is the bond market.

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 ro ke r30

PIBA Update

PIBA Committee 2010/2011

The newly elected PIBA Committee was voted in during the PIBA AGM on the 27th of May 2010.

The PIBA Committee 2010/2011 is as follows:

Michael Hoare ChairmanJarlath Jordan Vice ChairPaul Cullen SecretaryLiam Carberry TreasurerMaurice Harnett

James Cumiskey

Dixie Collins

Peter Breen

Phillip Brennan

Special thanks to Tom O’Keeffe, Michael Leyden and Anne Hession, who retired this year. Tom and Michael gave four years while Anne gave two years of dedicated service.

Mortgage News

Central Bank April 2010 Monthly StatisticsThe latest Central Bank figures issued on the 31st of May showed a continuing decline in lending to businesses and in mortgages. While the decline in mortgage lending at €348 million during the month of April is lower than the fall of €717 million in March, at a time when affordability is at an all time high, the reality is that people are having great difficulty in acquiring mortgages.

IBF/PwC Mortgage Market ProfileThere is a continuing dramatic decline in mortgage lending by the banks, down to an historic low of €1.2 billion in the first quarter of 2010. The trend has been negative and accelerating since 2007 and has now reached the lowest on record. There was a 39% drop in mortgage lending in the first quarter compared the same period last year. The rationing of credit on this scale is throttling the fledgling recovery in the economy.

Meetings Update

11th May 2010, Financial Services OmbudsmanDiarmuid Kelly, Michael Hoare and Elizabeth Smith met with Bill Prasifka (Financial Services Ombudsman). The introductory meeting gave both parties the opportunity to discuss issues, including complaint trends.

PIBA Regional Compliance Seminars —‘Know your compliance’

PIBA are running a series of regional compliance seminars starting in June 2010 for PIBA members. The seminars are free of charge and will qualify for 2.5 hours formal CPD for both Life and General insurance.

The following venues have been confirmed: Portlaoise, Wexford, Sligo, Athlone, Cork, Galway, Limerick and Meath.

Further sessions will be scheduled shortly according to demand. For further information please contact edel.morey@piba.ie.

PIBA Members Scheme Update

New Mortgage Payment Protection and Loan Payment Protection Scheme in association with Assurant SolutionsThe PIBA/Assurant Scheme was launched in early May. For further information please contact paul.kelly@piba.ie.

New PIBA/permanent tsb Deposit FacilityPIBA and permanent tsb have partnered to encourage PIBA members to become authorised Deposit Intermediaries. For further information please contact paul.kelly@piba.ie.

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Industry Round-Up

The Insurance Institute of Ireland appoints Denis Kelleher as President for 2010-2011

A full house of over 750 insurance professionals gathered on the 26th of May in the RDS Concert Hall for the Insurance Institute of Ireland’s inaugural business breakfast seminar, entitled ‘Financial Regulation in Ireland: A New Foundation’. The event marked the beginning of the Institute’s 125th Anniversary year, under its newly appointed President, Denis Kelleher, an executive director at New Ireland Assurance Company plc.

Delegates at the event heard addresses from Matthew Elderfield, Head of Regulation, Central Bank and William Prasifka, the recently appointed Financial Services Ombudsman on the regulatory environment.

Irish Life investing in their frontline Brokerage Support

Irish Life has appointed Donal Wood as head of their Brokerage E-Business Solutions team and John Roberts as head of their Brokerage Marketing and Operations team.

Commenting on their appointments, Willie Holmes, General Manager, said:

“I am delighted with the appointment of both Donal and John, who bring with them over 40 years’ experience in the Life Assurance industry. This is another significant investment we have made this year in our Broker team and is in direct response to the feedback you have given me over the past twelve months. I am extremely confident that you will see in our team a more holistic approach to the support we provide you, enabling you to grow your business in these challenging times. Donal will be working closely with Brokers to find more ways to make it easier to do business with us using technology, while John will be providing practical direct marketing support with a focus on supporting the growth of your business.”

Friends First launches new market neutral equity fund to Irish investors to beat market volatility

Friends First has recently launched a new Market Neutral Equity Fund. Managed by Insight Investment, a leading UK based asset manager, the Market Neutral Equity Fund uses an ‘absolute return strategy’ targeting positive returns for investors, regardless of the overall market performance.

Speaking about the new fund, Simon Hoffman, Pensions Sales Manager at Friends First commented: “Irish investors are, quite rightly, nervous given the huge volatility experienced in the marketplace in the last couple of years. This new fund uses techniques which give it the potential to deliver positive market returns in all market climates, offering more consistent returns for investors.”

“In periods of uncertainty many investors rush to safety and move their funds into cash until markets return to growth,” Mr Hoffman continued, “however, timing the markets is not an exact science – the Market Neutral Equity Fund gives investors the opportunity to invest in a fund with the aim of producing higher growth than cash funds, regardless of how markets perform, but with less of the volatility that is associated with equity investments.”

The Market Neutral Equity fund is available across the range of Friends First Pension and Investment products. It is ideal for use as a diversifier and can be used by Brokers and clients as a component when designing and building their own portfolios.

In addition, to assist clients when portfolio building, Friends First have also introduced a new Magnet Range which includes three specific funds with varying degrees of risk: Magnet Stable, Magnet Portfolio and Magnet Adventurous. The Magnet Range is different because it includes funds from established and proven fund managers which, while investing in traditional assets such as international equities, property and Government bonds, also look for growth opportunities in emerging markets or currencies or through alternative investment strategies. The new Market Neutral Equity fund is a key component within these new options.

For more information about the Market Neutral Equity fund and Magnet Range please visit our Investment Centre at www.brokerfirst.ie/investments.

Industry Round-Up continues overleaf …

Donal Wood John Roberts

Lucky Winner ! The lucky winner of our Spring ’10 competition was: Emma Greene, Keary Auctioneering & Insurance, Main Street, Loughrea, Co. Galway

Whites of Wexford is one of Ireland’s leading 4-star hotels, offering luxury accommodation, uniquely located in Wexford town. Just a two hour drive from Dublin, this hotel is within easy access of Rosslare Europort and Wexford train and bus stations.

Whether you are visiting for business or pleasure, Whites of Wexford aims to be both innovative and attentive to guests’ needs. This is why they are the first hotel in Ireland or the UK to offer a Cryotherapy Clinic. Cryotherapy reduces recovery time from muscle strain and injuries, and also gives pain relief in illnesses such as arthritis. Whites of Wexford Conference and Events Centre boasts a capacity of 2 – 1000 guests theatre style and private dining for 10 – 800. All 10 meeting rooms have natural daylight and air conditioning; and are conveniently accessible.

The 157 bedroom hotel offers a variety of accommodation styles to choose from, delicious food and beverages and luxurious spa and leisure facilities. There really is something here for everyone!

Special corporate rates can be arranged by calling Jane Crosbie on 087 9834743. If you fancy taking a break, the hotel is offering superior rooms for two adults from €119.00 per room per night, bed and breakfast. Children stay free when sharing with parents.

Whites of Wexford, Abbey Street, WexfordTel: (053) 912 2311 • Fax: (053) 914 5000 • www.whitesofwexford.ie

* The package comes with two nights bed and breakfast and one evening meal.

Simply complete the crossword puzzle and send your entry along with the form to:Crossword Competition, c/o Salient Print Management, 37 Woodlands, Naas, Co. Kildare.

Entries to arrive not later than 31st July 2010.

CROSSWORD

COMPETITION

Name:

Company:

Address:

Phone:

Across

Bauer, the main character in the television series '24' (4)

Archaeological dig (10)

Microscopic, single cell organisms (8)

Type of tear gas in the form of an aerosol spray (4)

Pen for swine (6)

Homer Simpson is this colour (6)

Oval-shaped nut (6)

Thick, creamy shellfish soup (6)

Former Russian ruler (4)

Animal or plant which lives on another organism (8)

Building for the cultivation of plants (10)

Outer layer of an orange (4)

Down

Burrowing, nocturnal mammals with strong, horny plates (10)

Clark, Superman's secret identity (4)

Condition caused by a deficiency of vitamin C (6)

Enclosure where birds can fly around freely (6)

Something that motivates a person to act (8)

Princess Royal (4)

Fried snacks shaped like sausages (10)

Whips used to inflict punishment (8)

Unhappy people are said to be in the _____ of despair (6)

Chalky liquid used to coat the inside of organs so they will show up on an x-ray (6)

African country which appeared in the 2006 World Cup (4)

Canal linking the Red Sea to the Mediterranean (4)

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General Knowledge Crossword

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Win a Luxury Break*

in White's Hotel, Wexford

Irish Life adds extra cover to 40,000 existing Specified Illness Cover customers — free of charge

Irish Life was delighted to recently write to thousands of your customers on your behalf to tell them that we were enhancing their existing specified illness plans, free of charge. With immediate effect the following changes apply:

8 extra specified illnesses were included on a full payment basis; plus

3 life-altering conditions including non-invasive breast cancer (DCIS) for these customers for partial payment of up to €15,000 (or half the specified illness cover amount, whichever is lower).

Tennis champion Martina Navratilova was recently diagnosed with non-invasive breast cancer (DCIS) and is currently undergoing treatment. This has heightened the media and the public’s awareness of this condition. Over 500,000 women were screened by BreastCheck from 2000 to the end of June 2009 — around 20% of the cancers detected were for DCIS. So this is a condition that many of your clients, or someone in their family, will be very familiar with. Irish Life is the only company to provide cover for partial payments for non-invasive breast cancer (DCIS).

Irish Life is Ireland’s biggest provider of Specified Illness Cover, paying out over €35 million in claims in the last year. Typically 9 out of every 10 applications for specified illness cover claims are paid by Irish Life.

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