UK Life Insurance Solutions Broker Salus on Reaching out to Asia’s HNW and UHNW Clients
Steve Lawless in 2018 co-founded UK-based boutique life insurance broker Salus, which specialises in providing a market-leading service to high net worth and ultra-high net worth individuals both in the UK and internationally. For some years before that, Lawless had headed up Old Mutual’s global UHNW life insurance sales effort which had a particular focus on clients from Asia & the Middle East, giving him a unique insight into both Asian & Middle Eastern clients, and life solutions for the wealthy. Salus today has not only its UK-based clients but also a growing number of clients from Asia with significant UK situs assets, many of such clients originating from the several close relationships the firm has with leading private banks, independent wealth managers and family offices in Singapore and Hong Kong. Lawless spoke to Hubbis recently to elaborate on Salus, the solutions the firm offers, its services, and his views of key trends in the market.
Lawless opens the discussion by explaining that he co-founded Salus in 2018 with two other partners, and that the company also has a head of underwriting, Jerry Brown, and shares six administrative team members with its partner business, Kubera Wealth. “Along with fellow founding partners Stuart Poonawala and Graeme Cowie, we had seen a clear gap in the life solutions market. We leveraged our expertise and experience in UK and international insurance, taxation and trust planning, and Salus is expert in placing high value and complex risks and doing so with as much simplicity of interaction for the clients as possible.”
The valued wealth market relationships
Lawless explains that Salus often meets its clients through private banks, independent or external asset managers, solicitors, accountants, and family offices. “We are UK based with many UK-based clients,” he reports, “but we also handle many clients from Asia who have certain UK assets or connections. Clients from Asia often tend to get presented with universal life insurance or other policy types that might not necessarily fit their needs or expectations. At Salus, we find that the products we can access through our insurer partners in the UK can often be a better solution for them, even though until they come to us they are unlikely to have heard of our solutions, as they have been advised from afar. Of course, the key problem they face is IHT on their UK assets, so while they might have great life insurance solutions in place, those may not be right for the specific purpose of protecting their UK asset holdings, and family situations potentially. We are offering UK sterling policies, specifically designed for UK assets.”
He gives the example of a Singapore-based couple with a GBP10 million property in the UK, with a potential GBP4 million tax liability and yet holding a dollar-based life insurance policy.
“That solution doesn’t precisely match their problem,” he says, “and so often this might be a single life policy where actually it should probably be a joint-life second death policy. It will also quite likely have an investment element to it, which muddies the water, as if client’s policies don’t enjoy the right returns, they may need to top it up, change it, or review it from an investment perspective. Whereas the policies we structure for such clients as these will be the right currency and the right structure for the legal side of who has to do what when there is a tax bill to be settled. Moreover, there’s no need to review it from an investment perspective because it’s pure insurance. And it is good value for money. What we’re offering is a simplified on-boarding process, and eventual client outcomes where there is as little room for surprises as is absolutely possible for Salus clients.”
Lawless observes that demand for life insurance for wealthy clients is growing globally, he reports. In the UK, the changes to domicile rules and attacks on tax and inheritance tax planning schemes have made aggressive tax structuring a thing of the past. As a result, clients’ assets are more and more visible to the authorities.
“The same trend towards transparency is happening globally,” he explains. “All countries’ rules differ, but the general theme is the same - the Common Reporting Standard and Automatic Exchange of Information has meant that wealthy clients’ assets are more visible now than ever before, and we are seeing more and more high net worth clients and their trusted advisors turning to life insurance as a most effective and least aggressive solution to solve clients’ complex needs.”
He comments that such clients need the help of highly experienced insurance experts, who are specialists in the high net worth space. These experts understand not just insurance contracts but the wider market and tax environment to make sure the clients get exactly the right solutions, and that they enjoy an incredibly effective customer journey.
“We believe the Salus team’s collective experience in this space is second to none,” he states. “With a particular history in UK and international insurance, taxation and trust planning, we understand the complexity and importance of what’s at stake when clients make long-term plans. We are confident that insurance is a perfect, non-aggressive tool to help deal with the difficulties in succession and wealth planning in today’s environment. Insurance is not the panacea, but an essential part of an often more complex holistic plan. Therefore, working closely with the clients’ bankers and other advisors, we believe we can help create the best possible customer outcomes.”
Lawless explains that Salus clients typically include business owners and private individuals, enabling them to make the most of their opportunities. “We work closely with them and whichever of their other advisors, such as accountants or solicitors in order to provide a seamless, high-quality service,” he notes. “There are many life insurance products available today and we specialise in tailoring them to the needs and expectations of those clients.”
He comments that life insurance also plays a vital role in estate planning for high net worth and ultra-high net worth individuals, including preserving the value of the estate, providing financially for dependents or a surviving spouse, and ensuring money is available to pay for any taxes, fees or other outstanding debts upon death.
Looking after the heirs
“We know from long experience that one of the greatest benefits of life insurance is that it can provide tax-free money to beneficiaries,” he says. “Life insurance is also often used to replenish an estate. By having the appropriate life insurance to pay any debts, your estate can remain intact for the heirs. And by the way, even if you already have life insurance protection in place, depending on when you last reviewed your estate and insurance needs, it may require updating to keep up with latest regulations and changes in individual or family situations. With more ‘creative’ structures no longer being as effective as they once were, at Salus, we focus at the cautious end of the market, and look to use pure life insurance and the relevant, non-aggressive trusts so these clients need not fear any comeback from authorities.
He notes that Salus will help clients create a liquid pool of assets, which is available very soon after death, which means that any inheritance tax can be paid quickly so that in turn probate has a much better chance of being granted in a timely manner.
“And many of our clients now have international connections,” he remarks, “and we can advise on dealing with the complexities with non-UK domiciled or resident individuals. Finally, we manage all clients’ medicals and medical data, so we make things as easy and efficient for the clients as possible throughout the underwriting process. In short, we manage the entire process, from the initial private medical screening through to the underwriting process, which is essential, especially if there is any medical or financial complexity, which is common for wealthy individuals.”
A key difference with Salus is that the firm fully underwrites the clients. “We have our own in-house underwriter and the insurers welcome the type of business that we do. They trust that we are doing a good job on the underwriting side and that in turn translates to negotiating power to make sure the clients obtain the best value for the policy.”
Once Salus has collated all the relevant documentation and is happy with the medical underwriting, the firm will present the client’s case to the most appropriate insurer to secure the best possible terms, which are then offered to the client. Once the client is on risk, the policy will often be placed in trust to ensure that in the event it pays out that it is treated in the most tax-efficient manner.
Six key areas
Salus focuses on six key areas of coverage. These include IHT planning, to ensure liquidity in the event of a death, without affecting the key assets. There is also ‘keyman’ protection, as businesses often need protection from the financial impact of losing a key employee. Family financial security centres on making sure enough assets are left for the family should there be an untimely death or critical illness of the main provider, this being especially important for families with younger children of education age.
Estate equalisation helps with the passing of an illiquid estate to multiple heirs fairly, without having to (force) sell the illiquid assets, with the insurance providing liquidity such that the estate can be split fairly for all parties and assets need not be sold. A pot of money can also be made available to repay a mortgage loan or other debt, leaving homes and other illiquid assets available for the remaining family.
Critical illness protection provides coverages for the potential of the main provider for the family falling critically ill. And finally, shareholder protection is there to help create liquid assets for surviving shareholders to purchase inherited shares from a deceased’s family. When a business owner/partner suffers an untimely death, it can create huge issues for the remaining shareholders, but by insuring shareholders and putting buy/sell agreements in place, this can completely solve the problem for all parties including family members.
Additional services Salus offers include probate coaching in a variety of countries. “Probate is never easy,” he reports. “And it’s particularly protracted and complex in the case of very wealthy clients. We endeavour to make sure that clients or their advisors have their clients’ affairs in the best shape possible, ready for probate. The fallout from poor file and record keeping around the probate process can be horrific. Life insurance can, at the very least, create a vital financial buffer in order to see clients through this difficult time without having to worry about short-term financial problems, or having to force sell illiquid assets at the wrong time, and receiving below par valuations as a result.”
The journey ahead
Lawless steps back to observe the evolution of the life industry, noting that the industry is shifting towards multi-pay, towards more guaranteed products or more inventive products.
“That is in tune with our mission,” he states, “as we tailor the right product shape for the right purposes. What we do in terms of our niche position is to fit a specific part of that market which really is the UK inheritance tax part, and it is really important to mitigate UK IHT, and to do so one needs to fully understand the tax rules around money going into policies / trusts – money coming out / husbands, wives, civil partnerships, family members, the timing of tax bills, trusts and taxation of those trusts depending on the domicile of the client. It is a highly complex space, but our actual product solutions are very straightforward.”
Lawless adds that Salus works mostly with the private banks, the multifamily offices and external asset managers in Asia, many of which are solid supporters of the Salus approach and solutions. He explains that Salus is especially eager to expand its business in Asia through both Hong Kong and Singapore.
“What we want to do is make sure that the banks and firms with which we work as introducers to our new clients are really happy with us, sure in the knowledge they have done a good thing for their clients, and of course that those clients are pleased with the outcome and our relationship. I want to get our UK offering better known in Asia because I think it is a really valuable part of the big picture that many potential clients are missing. So often, they head directly to offshore solutions, but the UK truly has a valuable part to play when addressing UK connected planning needs.”
Transparency and optimisation
He says he and colleagues firmly believe that any trusted advisor to a client in Asia with UK property and assets can potentially be well-served by Salus. “We can offer them a top-flight service and the optimal solutions, thereby enhancing the security for the clients and their families and the relationships between those trusted advisors and clients,” he explains. “We hold the introducer relationship very dear indeed; it is central to our business and to our future. We concentrate solely on pure life insurance; we never compromise our introducer partners in any way whatsoever.”
Lawless draws the discussion towards a close by noting that another key area the partners always want to understand is how Salus is remunerated. “We aim to be totally transparent on this front,” he explains. “We are usually paid on commission, but also work with fixed fees if preferred by our Introducers and their clients. We are UK FCA regulated, and we disclose absolutely everything. Our products are guaranteed, and they are extremely simple to understand, there is no hidden complexity whatsoever, and that frankly is unlike many other forms of life insurance globally.
The key relationships
His final comment is that the Salus relationship with the insurers is key to the whole proposition. “They do not let many other brokers pre-underwrite cases,” he states, “it really is only a very small handful of firms the insurers trust sufficiently on this aspect. The result is that it gives us negotiating power, but the insurers are comfortable with that because they trust our underwriting and our process. Clients that take out policies with us can take out the policy and then just walk away; they don’t have to keep worrying about whether it has performed.”
There is little doubt that matters of mortality are front of mind in the year of the global Covid-19 pandemic. Moreover, matters of estate and legacy planning have also been increasingly prominent in recent years globally, and certainly in Asia, where many of the founders, patriarchs and matriarchs are ageing and where the second generations – mostly baby boomers - also need to address these issues professionally and comprehensively.
Getting Personal with Steve Lawless
Lawless was born and raised in South London and studied economics at Staffordshire University. His career saw him later become Head of Bank Sales/Bank Distribution in the UK for Old Mutual, a role he held for five years before he became the Global Head of High Net Worth Sales for Old Mutual for another two years, which thus gave him the platform to work with his partners to create Salus. “In the Old Mutual roles, I got a wonderful insight into the worldwide universe of life insurance and the challenges facing clients, and therefore identified where the gaps were that we felt we could fill,” he explains.
Married with three young children, twins of eight and a third child of five, Lawless is understandably hectic at work and at home, although during the pandemic WFH has of course been the standard protocol. “As you might imagine, I need to stay healthy, so running is a passion, in fact, I completed a marathon last year, as you will recall. Golf is another pastime, as are wine collecting, cooking, tennis, playing guitar (latterly flamenco as a new challenge) - and then running around after the rather lively children.”
He worked Globally for Old Mutual, and thoroughly enjoyed his time in Asia. “That was a great time, learning new markets, new cultures, enjoying the heat, the dynamic and diversity of Asia, it was a wonderful tonic from the UK. I miss it now that’s for sure.”
Case Study - Singapore Residents with UK property valued at GBP20.65 million
A husband and wife aged 65 and 62, respectively, both non-smokers, both non-UK domiciled clients and both living in Singapore have a significant UK residential property that was valued at GBP20.65 million. Worried about the 40% IHT rules, they plan to sell up their London properties over the next few years ahead. Possibly within 5 years, and certainly within 10. This is to address the potential IHT liability of currently GBP8 million, realising that in order to fully settle the potential UK IHT and gain full access to their UK property portfolio their heirs would need to find GBP8 million in liquid and available funds under such a situation.
The clients were worried about the liquidity issue their family would face should they die unexpectedly before the properties are sold. So using some of the rental yield from the UK properties to help fund a life insurance policy, they could provide the GBP8 million to pay the potential IHT due during the period, and therefore protect the properties for the family, should the worst happen. The policy is a sterling-denominated, UK based, level 10-year term Life Insurance policy, for GBP8 million, payable on the second to die of the couple. That policy was bought via the couple’s UK-resident son.
“As properties are sold off,” Lawless explains, “the Life Insurance amount can be lowered to match the new lower liability, and the annual premium would drop pro-rata each time. The whole policy can be cancelled at any time. The annual premium at the outset was GBP17,861 for life cover of GBP8 million over a 10-year term, via the global insurer AIG.”
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