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Case Study

Updated: Oct 8, 2021

AFRM clients and referral partners know we recommend for our clients to have their financial risk management plans (and related insurance cover) reviewed every 12-18 months.

Doing so will ensure you have the policies in place to meet your current life circumstances.

It means we can refine your financial risk management plan to ensure you are covered for just the right amount, paying the right amount, and getting the best value from your policies.

That is why we provide a link to a review checklist on our home page to a series of questions to help you determine if it is time to have your risk management plan reviewed.

In our experience, the review process itself helps clients better understand their current life situation and to crystalise their thinking about future financial risk planning priorities.

As we have reported in the past, often a client may go into a review with a set plan of action in mind, whether that is to drastically cut back on levels of cover to reduce the level of premiums they are paying, or it is simply because their financial situation has changed, requiring a complete resetting of their entire financial risk management plan.

And that was very much the case for Bronwyn [name changed to protect client privacy], when she agreed to a review meeting with AFRM’s youngest adviser, Richard Dawson, earlier this year.

Bronwyn is a single, middle-aged, mother, working two jobs whose children had recently graduated university and had become financially independent.

Her financial adviser had prompted her to reach out to AFRM because a review of her financial risk management plan was well overdue.

Bronwyn, herself, had a specific goal in mind. She wanted to significantly reduce her levels of cover because in her view, with no financial dependents, her life insurance and Income Protection (IP) cover had become less relevant.

Bronwyn wanted to reduce her premium levels to allow her to pay down increased levels of debt, thanks to the purchase of a new property, and she also wanted the ability to increase her superannuation contributions if possible.

Through her superannuation, Bronwyn held a Term Life policy with a benefit amount of more than $500,000 and an Income Protection policy offering a maximum benefit of about $6,000 per month for five years – both of which had been put in place almost 10 years ago, at a time that she had minimal debt. The benefit levels of each policy were also indexed and thus increasing every year.

Bronwyn’s mindset when going into the review meeting with Richard was clear – living alone in a relatively new home with no financial dependents, Bronwyn saw little need for her current levels of life or IP cover. The funds currently being spent on premiums could be redirected to paying down her mortgage.

At the outset of the review meeting this year, Richard revisited the last review she had had all those years ago and the discussion held at that time.

Back then, the focus of Bronwyn’s risk management plan was to ensure that if anything happened to her there would be sufficient ongoing funding to pay for her children’s education.

Despite Trauma and Total and Permanent Disability (TPD) insurance cover being included in the discussions, Bronwyn decided that the IP cover would be sufficient to support herself and her children in the event of disability and death cover would provide some life-start support for her children, who were soon to begin in university.

Fast forward to 2021, with children now fully independent and finished studies, Bronwyn was now focused on her own financial goals and remained exposed to the risk of being unable to work; and in that event would be unable to pay off her now larger mortgage; or be able to generate sufficient wealth to live a comfortable retirement.

The subsequent discussions explored what risks Bronwyn faced in reaching her financial goals, and what each product could protect in each risk scenario. It was clear that a balance between reduction of premiums and mitigation of risk needed to be found.

Richard educated Bronwyn on how each product functioned, how it could be structured and how some trade offs between cost and comprehensiveness were more important than others, such as the ability to hold Death and “any” occupation TPD inside superannuation tax effectively, but “own” occupation coverage would be required to be held personally.

An increase in the Income Protection waiting period was also discussed with a view to reduce premiums. A waiting period is the length of time you must wait after an injury or illness before you start accruing IP insurance benefits.

Despite the absence of available cash savings to support herself in this scenario, Bronwyn had spoken with her sister recently and had determined that she would be able to rely on family for living costs during a waiting period.

This strategy, although not ideal, is an example of a compromise, achieved via review discussions, that can strike an effective balance between saving money and risk protection.

After each option was discussed, Richard and Bronwyn gained a mutual understanding of which factors posed the most risk to Bronwyn, but also which elements of the possible risk mitigation strategies Bronwyn valued most.

Accordingly, a risk management plan was carefully developed to satisfy all of Bronwyn’s needs in a reduction of premiums, while mitigating remaining risk.

Further, Richard was able to review some of Bronwyn’s broader circumstances, such as her estate planning arrangements. While Bronwyn did have a will in place, it was written while her children were dependents and had not been updated since they had become financially independent.

Richard flagged that there can be tax implications for death benefits, including superannuation balances being paid to adult children. Bronwyn was surprised to hear this and welcomed that Richard referred her to an AFRM recommended estate planning lawyer to get the best possible advice.

If it wasn’t for the review discussion, Bronwyn may have simply cancelled all of her coverage or may have continued to rely on an aged and unsuitable risk strategy. This review, leading to a change of products, re-calibrated Bronwyn’s balance between risk protection and healthy generation of wealth.

Once again, this story illustrates the importance and value provided by having your current financial risk management plan reviewed with one of AFRM’s expert financial risk advisers.

Bronwyn came into this review with a firm plan of heavily cutting back her level of cover purely to reduce premium expenses so that she could re-allocate those funds towards paying off her mortgage and increasing her superannuation contributions.

A talk with AFRM’s youngest risk adviser opened a range of new opportunities that Bronwyn was not aware of to achieve the same result, without sacrificing her future financial security.

That is the value of obtaining expert financial risk management advice.


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Nicholas Hatherly
Nicholas Hatherly
2021년 10월 07일

That’s all called “informed decision making”. It’s an advice process not a sales process. Well done Richard.

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