Good outcome conundrum: 8 out of 10 advisers discuss trusts, but only 3 out of 10 clients follow through

• 8 in 10 advisers always or frequently promote the use of trusts or beneficiary nomination during client meetings
• Ensuring money gets to the right person (84%) and estate planning (64%) are the main drivers for advisers to discuss trusts with clients
• A recent industry report found only 3 in 10 advised term assurance policies were actually written in trust in 2022 

Royal London research to better understand adviser practices in writing trusts and using beneficiary nomination reveals 8 in 10 advisers already actively promote their use during client meetings, with consideration of good outcomes a fundamental aspect of the application process.

Beneficiary nomination or putting a life insurance policy in trust ensures that the proceeds are paid to the right people in a timely manner, so it’s encouraging that the research shows advisers already actively discuss these.

Naming beneficiaries allows clients to take control over who benefits from the life policy and advisers say that they mainly discuss trusts with clients for getting the money to the right person (84%), estate planning (64%), providing good outcomes (51%) making the claims journey faster and more efficient (46%) and holistic planning (30%).

Encouragingly, only 2% of advisers said they never or rarely discussed using them, with the vast majority always (66%) or frequently (15%) promoting their use, while a further 17% said it was dependent on the client’s circumstances.

Low conversion to policies in trust

Despite high levels of respondents raising the need for a trust, the conundrum is that this is not reflected in correspondingly high rates of uptake.

Swiss Re recently announced research findings in conjunction with Insuring Change regarding trust usage. The report, ‘Life claims: a beneficial direction’, notes 8 in 10 single own life term policies are not put in trust. Of those taken with advice, as expected, uptake is higher, but still only reached 3 out of 10 in 2022. On the other hand, uptake of the simpler alternative of beneficiary nomination in the application, where available, was around three times higher than trusts or more, depending on the context.

Jennifer Gilchrist, protection expert at Royal London, commented:

"While ensuring life cover is in place is the right thing to do, it’s only part of the process. For complete peace of mind, it’s essential that clients identify who the beneficiaries are, so it’s hugely encouraging that advisers are delivering value for their clients by instigating those conversations.

"The Consumer Duty requirements place a strong onus on advisers taking all reasonable steps to achieve good outcomes for their clients and their beneficiaries, removing any risks of the life cover proceeds not being paid to the intended recipients. 

"The findings are very clear, writing a protection policy in trust or under beneficiary nomination is already on advisers’ radar and is almost always a part of the conversation with a client. However, with such healthy numbers promoting trusts and beneficiary nomination, it begs the question why an active decision on who should benefit from life policies isn’t being made by more clients."