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Episode 4 - Protecting those things that matter with Roy McLoughlin · Bassline by Cavendish Ware

• 0:01
  Speaker: Sure, we'd all like to be, but no one's immortal.
• 0:04
  Speaker: That said, too many of us put off making important decisions about our financial future, particularly when it comes to guaranteeing the health and safety and prosperity of those around us and those who will live after us.
• 0:18
  Speaker: Today on Baseline, we have Roy McLaughlin of Cavendishware talking about why insurance matters and smart ways to approach the topic that are not at all intimidating and in fact inspiring.
• 0:34
  Speaker 2: From the studios of NMD Plus, Baseline.
• 1:05
  Speaker 1: And now is your host, Dave Wallace.
• 1:08
  Dave: Welcome to this month's episode.
• 1:10
  Dave: And today we're talking to Roy McLaughlin from Cavendishware.
• 1:14
  Dave: So Roy, could you introduce yourself and just tell us a bit about what you do?
• 1:19
  Roy: Yeah, sure.
• 1:20
  Roy: So I have been Cavendish Ware for just over five years, actually, now.
• 1:24
  Roy: And I guess I'm a holistic advisor there.
• 1:26
  Roy: So as well as doing the normal subjects that our listeners have heard of in terms of wealth management, I focus quite a lot on the corporate world, but on the protection world as well.
• 1:36
  Dave: So protection is the topic which I was keen to chat to you about.
• 1:40
  Dave: You know, we were just having a brief chat before the podcast.
• 1:43
  Dave: I'm in my 50s, I've got a few policies in place.
• 1:46
  Dave: I'm trying to remind myself as to why I've got those policies in place.
• 1:51
  Dave: But before we get into the protection in middle age, could you just briefly outline what policies and what sort of products there are from a protection point of view, just in case people don't really know what those are?
• 2:04
  Roy: Yeah, absolutely.
• 2:04
  Roy: So if we focus on the individual side, clearly protection is talking about a subject that we don't really want to talk about, but nonetheless is all around us, which is broadly when things go wrong.
• 2:14
  Roy: So the industry, I guess, has three central products.
• 2:17
  Roy: There is what happens if people die, there is what happens if people have critical illnesses, serious illnesses, and there is what happens if people are just off long-term ill from work for any reason.
• 2:28
  Roy: So they are called life insurance, critical illness, and income protection.
• 2:32
  Roy: And they tend to be the main three things that we will talk to our clients about.
• 2:35
  Roy: And one of our philosophies at Cavendish Ware is to make that conversation the underpin of all conversations.
• 2:41
  Roy: So if we're talking to people about their investments, we should be talking to people about protection as well.
• 2:46
  Roy: Because unfortunately, and his spoiler alert, these things are going to happen to some of our clients.
• 2:52
  Roy: And the recent pandemic brought lots of things to the fore.
• 2:55
  Roy: But I think one of the ironically positive scenarios is it's made us think about this subject even more so.
• 3:00
  Roy: And what I mean by that is that you know, many of our listeners will have that indestructibility about themselves, where you know, well, none of these things ever going to happen to me.
• 3:08
  Roy: Well, clearly death will at some point, but you know, you take my point.
• 3:11
  Roy: And we've seen this, and there's lots of anecdotal evidence as well to suggest that the pandemic has made people question that indestructibility.
• 3:19
  Dave: It's funny you should say that.
• 3:20
  Dave: If I remember a few years ago talking to Adrian from Cavage Square and saying, look, I've got these bloody policies.
• 3:26
  Dave: Yeah, it won't happen to me.
• 3:27
  Dave: You know, look at me, I'm fit, I'm doing swims down the river tents, blah, blah, blah.
• 3:33
  Dave: And then, you know, COVID came along, and I was like, yeah, now I remember what it's kind of there for.
• 3:38
  Dave: So it's interesting what you say around the wake-up call that COVID has been.
• 3:42
  Roy: Yeah, I mean, it's psychological as well, isn't it?
• 3:44
  Roy: When you don't think things are going to happen.
• 3:45
  Roy: I mean, the biggest objection to protection is it won't happen to me.
• 3:48
  Roy: And then suddenly it's all around us.
• 3:51
  Roy: And unfortunately, very few of us haven't been touched by this god-awful crisis.
• 3:55
  Roy: Then suddenly you start actually empathizing with what would happen if it happened to you or your nearest and dearest, and how would that affect everything else in your financial life?
• 4:05
  Dave: One of the things which is interesting about it is you're talking about talking to people who are sort of younger about something which is really difficult to wrap their heads around.
• 4:14
  Dave: What are some of the things you're trying to get them to think about, other than you know, this might happen to you?
• 4:20
  Roy: There's the obvious what they call trigger points in our industry.
• 4:23
  Roy: So, you know, your classic trigger points were you have a child, suddenly you have little people running around at your feet, and and you have that sense of responsibility, don't you?
• 4:30
  Roy: And people go, Oh my god, I feel so responsible now.
• 4:33
  Dave: You need protection in case you trip over them, do you?
• 4:35
  Roy: In case you trip over them.
• 4:36
  Roy: So, you know, when people buy houses, you know, traditionally that was the time to have a look at it.
• 4:42
  Roy: I think sometimes the job situation makes people think, you know, if we're moving around jobs, the average person certainly used to change jobs once every four years in this country.
• 4:50
  Roy: I suspect that's going to be more prevalent now, you know, that insecurity of what am I covered by and by my employer.
• 4:56
  Roy: So the trigger points are obvious ones, but I also come full circle to people are now saying, Oh my god, this has happened to someone I know, or this has happened to someone I've heard about.
• 5:05
  Roy: And has actually made me think, what happens to your finances?
• 5:09
  Roy: You know, am I covered by my employer?
• 5:11
  Roy: Is a question we get asked on a daily basis.
• 5:13
  Roy: Am I covered by the state?
• 5:15
  Roy: Is a question we get asked about.
• 5:17
  Roy: You know, I've read all about this universal credit business, or I've seen a big kerfuffle about that on the parliament.
• 5:22
  Roy: What does that mean for me?
• 5:23
  Roy: And I think sometimes our job is an awareness, almost wake-up call, to question what would happen in those scenarios.
• 5:31
  Dave: When I started out in my career in Yellow Pages, there were a lot of people who were going to stay there for the rest of their lives, basically.
• 5:39
  Dave: And now, when you look at it, as you say, people kind of chop and change, and sometimes there is sort of protection within work schemes, but the changing nature of society in terms of work and how we work is you know, if you're chopping and changing jobs, which people are doing increasingly, and you know, people moving between employment as an employee and running their own businesses, you know, things like protection then probably gets dropped out if you're not careful.
• 6:07
  Roy: Yeah, I mean, many of our clients will be part of the gig economy, you know, they probably don't realize it.
• 6:11
  Roy: I think we say gig economy, we have this vision, don't we, of the delivery driver going down uh, you know, Oxford Street at pace.
• 6:18
  Roy: But actually, the gig economy is many of our customers because that will be people who are, you know, setting up small companies, whether they're limited companies or self-employed.
• 6:28
  Roy: There are many people who do, you know, more than one job now, you know, people who do consultancy roles, etc., etc.
• 6:33
  Roy: And the gig economy is estimated to be, you know, the fastest growing part of society.
• 6:37
  Roy: And I think that will only increase post-COVID because you know, I think furlay gave people a lot of time for thinking, yeah, so you're on 90% of your salary, you're okay for a while, but they do say a lot of people said, Am I in the right job?
• 6:50
  Roy: Am I in the right career?
• 6:51
  Roy: And this is time for reflection and maybe moving on.
• 6:54
  Roy: And we're seeing it, but lots of people setting up new companies, which is great, and that's fantastic in many ways.
• 6:59
  Roy: But when you're your own boss, suddenly your exposure becomes far larger than when you're working for a Yellow Pages type operation, where you know you've got all of that in place.
• 7:08
  Dave: In the rush to sort of set up a business and the rush to find clients and pay bills and all the other bits and pieces, you often just don't think about yourself.
• 7:17
  Dave: As I'm saying this, I'm thinking about myself as somebody who fits very neatly into your description.
• 7:23
  Roy: Well, you know, the smaller you are as a company, the smaller the entity, the greater reliance you have on what's called key people.
• 7:29
  Roy: And I mean, we're skiing off into a subject probably for another day here, but actually, one's exposure in a small company is far bigger because there's no one else to do your job.
• 7:37
  Roy: So all the subjects I'm talking about are as relevant to individuals as they are to small businesses and SMEs.
• 7:43
  Dave: I think it's really important for people to understand that.
• 7:46
  Dave: And so things like critical illness and just the way that kind of works is slightly different from, I guess, more employment-based protections, isn't it?
• 7:56
  Roy: Yeah, so critical illness to the uninitiated is basically a policy that you take out in the event of the big three critical illnesses, unfortunately, heart attack, cancer, and stroke, and it pays out a lump sum in that situation.
• 8:08
  Roy: It's quite amusing that there are quite a few people in society who have life insurance, and I'm not decrying that for one second, but actually, you're three times as likely to have a critical illness as you are to die before your 60th birthday, and you're five times as likely to be off long-term ill.
• 8:23
  Roy: And the solution to that is something called income protection.
• 8:25
  Roy: Even people that have life insurance are sometimes insuring the wrong eventuality.
• 8:30
  Roy: And as you know at Cambridge, where we'll have a stat, but you know, that 531 multiple suggests to us that people should be talking about income protection first, then critical illness, then life insurance.
• 8:40
  Roy: It should be done in that order because of the propensity for it to occur.
• 8:44
  Dave: It's really interesting because I heard of those stats before, but I mean that is something to really bear in mind.
• 8:49
  Dave: I was sort of really reminded the other day of how quickly things can kind of change around all of this.
• 8:54
  Dave: So a friend of ours fell off her horse, and you know, she's now in hospital with a broken back, and literally in one second.
• 9:02
  Roy: In one second.
• 9:03
  Dave: That really got me thinking around infallibility.
• 9:06
  Dave: We all think we're infallible, and then in one second, things can change.
• 9:11
  Roy: Yeah.
• 9:11
  Roy: The other interesting thing here is that obviously, you know, as a wealth manager, we build people's pensions and ICEs and investments up.
• 9:17
  Roy: But when things go wrong, there is an element of society that thinks that they have self-insurance, i.e., they can, oh, don't worry, I've got a big ICER, I've got a big pension, whatever it is, and they can dip into that.
• 9:26
  Roy: Well, that might be like if you fall off a horse and you're out of work for a couple of months.
• 9:30
  Roy: But what happens if that poor lady is away for you know a year or two?
• 9:33
  Roy: Okay, and also it's a time when markets are going in the direction that they are as we currently speak.
• 9:39
  Roy: Self-insurance is a very dangerous game.
• 9:42
  Roy: Excuse the pump, but it is Russian roulette, because you are potentially drawing on you know funds that you built up over a huge amount of time at the wrong time.
• 9:52
  Roy: And also what you're doing is you're just pushing the problem down the road in terms of if you take money out of your investments now and those investments were there for your future, okay, the problem is that you are inadvertently affecting your future by accessism now.
• 10:06
  Roy: So we hear self-insurance as an objection to protection all the time.
• 10:10
  Roy: But I think our role is to sit down and scenario test this with people.
• 10:14
  Roy: I mean, our industry will often talk about something called a black swan event, which, as you probably know, is a stock market crash.
• 10:20
  Roy: Well, actually, I would argue a black swan event is equally some sort of long-term illness occurring.
• 10:25
  Roy: And actually, there's some quite interesting stats here.
• 10:27
  Roy: You and I are of a similar age, you know, we broadly experienced four stock market crashes over the last 20, 30 years.
• 10:33
  Roy: Maybe we've got another one as we speak, okay.
• 10:35
  Roy: But then you look at the stats that I told you about the propensity to have long-term illness and critical illnesses and stuff.
• 10:41
  Roy: Well, a black swan event for me is as much being ill, okay, as it is a stock market crash.
• 10:47
  Roy: So we have to build these eventualities into any sort of holistic planning.
• 10:51
  Dave: What's the stat around cancer, though?
• 10:53
  Dave: One in two of us is going to get cancer in our lifetime.
• 10:57
  Roy: Yeah, and one in three before 60.
• 10:59
  Roy: And that's the most alarming one because that is where you're actually carrying on working.
• 11:03
  Roy: And people need to ask themselves, would my job look after me?
• 11:06
  Roy: And actually, that's a fascinating question.
• 11:08
  Roy: When you ask people what their view is on whether their workplace would look after them in the event of them being off for six months, a year, two years, no one really knows the answer.
• 11:17
  Roy: And they go off and they come back with the staff booklet, the HR booklet, and it says that immortal phrase at the employer's discretion.
• 11:24
  Roy: And I think you and I both know what that really means.
• 11:28
  Dave: Again, it's sort of one of those things where I can imagine a lot of people feel assured in their jobs that the people at work will look after them.
• 11:35
  Dave: And I think one of the lessons I've learned over the years is that's probably not very true, to be honest with you.
• 11:41
  Roy: Yeah, well, we all know whose mother assumption is.
• 11:44
  Roy: But I think, you know, at the very least, what people need to do is have a think about that.
• 11:47
  Roy: Now, if they conclude, ah, in that situation, my employer would look after me because there's a guy at work that's had cancer and he's been off for three or four years and they continue to look after him, then fine, then to a certain extent our work is done.
• 11:59
  Roy: But actually, I think part of the financial advisor's remit is to open these questions and make people go and find out and just question themselves and ask themselves.
• 12:08
  Roy: And of course, to your earlier point, if someone's going to be in a situation where they're, oh, actually, I'm not sure about the job I'm in.
• 12:14
  Roy: I might be moving on, you know, I can't see myself being where I am for the not too distant future.
• 12:18
  Roy: Well, surely this must come into play there as well.
• 12:20
  Dave: One of the things that is interesting about the whole area of protection is the younger you are, the cheaper it tends to be.
• 12:26
  Dave: Is that right?
• 12:27
  Roy: Yeah, but basically, most protection is unlike car insurance, where you know, once car insurance goes up, depending on how many crashes you have, where you live, and sometimes when you get as old as you and I, the fact that we need a black box in our car that tells us that we're not going to drive in anymore.
• 12:42
  Roy: Yeah.
• 12:42
  Roy: Okay.
• 12:44
  Dave: That's the taking our licenses off as soon, right?
• 12:47
  Roy: Exactly.
• 12:48
  Roy: That's the AI that the insurance companies have with things like car insurance.
• 12:51
  Roy: Same with house insurance, okay.
• 12:52
  Roy: If you're unfortunate enough to be burgled a couple of times, well, guess what?
• 12:55
  Roy: Your premium goes up.
• 12:57
  Roy: The life insurance side works completely opposite.
• 12:59
  Roy: What you do is you buy into something called a guaranteed rate.
• 13:02
  Roy: So the advantage of taking out when you're younger is that effectively you've got that rate for the rest of your life.
• 13:07
  Roy: Okay.
• 13:08
  Roy: And where protection sometimes becomes more expensive is if you come to it as a fresh face, I'm going to be nice and say 50-year-old to you, and say, right, I want to do this for the first ever time, that's much more expensive than someone coming to you when they're a fresh face 30-year-old or 40-year-old.
• 13:23
  Roy: So there is an element of looking at this, you know, when you're younger because the cost is built in and it's guaranteed.
• 13:30
  Roy: So you don't have that situation where if you have claims that the premiums you know go up, if you've taken a policy out.
• 13:36
  Roy: But there's also the after the Lord Mayor show scenario, which is, you know, sometimes people approach us because they've just had a heart attack or a stroke or something like that.
• 13:45
  Roy: And that is very difficult to cover.
• 13:48
  Dave: I mean, unfortunately for me, I've found over the years that I have an inherited disorder.
• 13:56
  Dave: And, you know, luckily for me, I did have a couple of policies in place before that was found.
• 14:02
  Dave: You know, it's completely asymptomatic.
• 14:04
  Dave: I mean, it just was found on a kind of routine thing and you know took a long time to fully diagnose.
• 14:10
  Dave: Yeah, but it's never impacted my life slightly.
• 14:14
  Dave: But where it has impacted me is when I looked at the quotes for life insurance or protection beyond having that was just extraordinary.
• 14:22
  Roy: So, as I say, thank goodness I had sort of policies in place to I mean, the irony of life insurance is that it's actually going down in price, though, because we are living longer.
• 14:31
  Roy: And strangely, the actuaries will tell you that COVID hasn't really affected that.
• 14:34
  Roy: So, what we often say, particularly to new clients, is that it is worth people having a review or asking us to do a review of any existing policies they have to see if they're still competitive.
• 14:44
  Roy: And that's something that people should do because inertia sits in, doesn't it?
• 14:47
  Roy: You know, I meet people on almost a daily basis who say, you know, I've been paying legal and general £54 a month for the last 20 years and I don't know what it is.
• 14:54
  Roy: When we ask them to go in and blow off the cobwebs in a dusty old cupboard where that policy lies.
• 14:59
  Roy: And I think a lot of people don't actually remember what they've got and why they took it out.
• 15:03
  Roy: So, you know, like anything in life, you should be doing regular reviews of any protection needs that you've got.
• 15:08
  Roy: Equally, sometimes we come across clients who have a policy that they are covered for by the workplace, and sometimes you can't claim twice.
• 15:15
  Roy: So, you know, part of the financial advisor's job is to make sure that we have a health check on any existing policies, or certainly policies that were taken out years ago.
• 15:24
  Roy: And this is not knocking banks as much as you might think, but particularly people that have taken policies out via banks, because most banks aren't no longer in financial services, they are worth checking up on because no one else is going to do that for you.
• 15:38
  Dave: Just go back to, I guess the younger you are, the cheaper this can be.
• 15:42
  Dave: With Cavendishware, you know, you've got a certain clientele, you know, you're able to offer them advice based on what they got from a product holding point of view.
• 15:52
  Dave: Yeah.
• 15:53
  Dave: Just if you're a younger person, it'd be good probably to get my kids who are starting to approach their 20s to actually have a chat with Cavendishware.
• 16:02
  Dave: Are you sort of open to absolutely?
• 16:04
  Roy: We do this on two levels.
• 16:05
  Roy: Firstly, we think that there's an educational level because what we suspect or we see actually is that people are coming out of university and school and they don't know any of the terminology that I've just spoken about.
• 16:15
  Roy: So there's an educational piece where they can find out, you know, what is this critical illness that I've read about?
• 16:19
  Roy: What is this long-term illness that I've read about?
• 16:21
  Roy: So that is first.
• 16:22
  Roy: And secondly, some of it may or may not be appropriate, but certainly these are subjects that they should find out about.
• 16:27
  Roy: And of course, as I think Adrian's alluded to in one of the previous podcasts, we often do that in conjunction with a first guide to their pensions and to their ICEs.
• 16:37
  Roy: And I think that you know, what we need to do is encourage our clientele's children in particular to come and talk to us because they're not learning this in school.
• 16:45
  Roy: And I think I'm right saying there's only one university degree in the whole of the UK that's got anything to do with financial services.
• 16:51
  Roy: So you've got an uninitiated group of young people coming through, and it's something that you know we like to offer.
• 16:56
  Roy: Plus, also, there is another reason that we do it, and that's called intergenerational wealth, which I know you've talked to Adrian about as well.
• 17:02
  Dave: Yeah, I really like your point around education.
• 17:05
  Dave: I mean, I chatted to some younger people about their experiences of education at school from a financial services point of view, and they said, Oh, yeah, we were taught how to write check.
• 17:15
  Dave: And I was like, What?
• 17:16
  Dave: We're talking about a year or two ago, you know, and you just go, that is the most pointless thing.
• 17:22
  Dave: As you say, they're not even getting the basics around day-to-day financial management, let alone thinking about the future.
• 17:28
  Dave: So it's good to hear you're very open to having them in and chatting to them.
• 17:32
  Dave: That idea of the more holistic thing, thinking about it all as a story around how to save money, how to do investments, but then how to kind of protect that going forward.
• 17:42
  Roy: Yeah, I mean, financial services, I've been doing this job long enough to realize certain things, but it's all about habits, okay?
• 17:48
  Roy: And if you can get to people in the 20s and 30s and install those habits, whether it's savings habits, protection habits, pensions habits, whatever it is, okay, that actually be sorted out for the rest of their lives.
• 17:57
  Roy: And therefore, what we found is that when we've spoken to the children of our clients, the feedback has been phenomenal about the habits that we've helped start forming at a very early age.
• 18:07
  Roy: And I think that's incumbent on our profession as well, by the way, because there's not enough advisors out there.
• 18:13
  Roy: So anyone that's listening to this that's got, I say kids, makes me feel very old, but you know what I mean.
• 18:18
  Roy: It's got people who, you know, particularly, I think, as they start in their workplace, you know, a lot of people in their 20s, you know, got some people that we can go and sit down with them and talk to them and just hand hold them.
• 18:27
  Roy: And then the strange irony, of course, is that a lot of people in that generation will talk about ESG.
• 18:31
  Roy: Now we're skiing off into another subject here, but all these podcasts are linked, and that's been quite fascinating as well, because we've had people in their 20s in particular talking to their parents, going, Oh, there's this thing called ESG, Dad, and I've read all about it.
• 18:42
  Roy: It's something else that I'm doing in my life.
• 18:43
  Roy: And of course, as you know, we've got a solution for that as well.
• 18:46
  Roy: So, this is all interdependent and cross-fertilization happens all the time.
• 18:52
  Dave: It's great to hear that you can deal with clients not just as individuals but as family units, because I think that's kind of important, it's critical.
• 18:59
  Dave: Yeah, so yeah, brilliant.
• 19:01
  Dave: Well, listen, thank you so much.
• 19:03
  Dave: That's been such a useful conversation.
• 19:05
  Dave: I know I'll be getting my kids in, I think actually, I've already got a session organized.
• 19:11
  Dave: So Adrian was again, you know, saying that actually you've got some younger advisors coming in who are really good dealing with the younger people as well.
• 19:20
  Roy: Absolutely.
• 19:21
  Roy: So, any listeners that are interested, get in touch and you know, we're glad to sit down with them.
• 19:25
  Dave: Fantastic.
• 19:26
  Dave: Well, listen, thank you so much for joining us and have a great weekend.
• 19:30
  Roy: And yourself.
• 19:31
  Roy: See you soon.
• 19:31
  Roy: Brilliant.
• 19:34
  Speaker 2: Thanks for tuning in to Baseline, a monthly podcast series dedicated to topics that matter in world management.
• 19:40
  Speaker 2: Be sure to check out our podcast archive and SoundCloud.
• 19:44
  Speaker 2: And until next time, have a marvelous week.
• 19:47
  Speaker 2: You have been listening to Baseline from Cavendishware, an NMD plus production.