When a client pays for financial advice they are looking to their planner to secure them the best possible outcome. But what if, to get the best outcome, they would need to stop smoking, quit that risky hobby or even lose weight?
Lifestyle factors have an impact on every element of financial planning – these are variables which determine the life expectancy of a client, the premiums they will pay for all types of insurance policy, and the level of annuity they are able to buy with their pension pot when they come to retire.
When a client visits their adviser, they are likely prepared to take direction on how much money they should be saving each month and which products best suit their needs, but they might be less willing to take a recommendation on their health or lifestyle choices. Yet, often these are some of the factors which can have the greatest impact on the cost and availability of products.
Figures from Cavendish Online show a 30-year-old non-smoker of an average weight, could get a 30-year £250,000 life assurance policy from Legal & General for £9.66 a month. But if that person smokes 10 cigarettes a day, the monthly cost of the same policy rises to £16.67. A non-smoker with a high body mass index (BMI) – indicating that the client is overweight – would pay £14.47.
Meanwhile, someone who both smokes and is overweight would see their monthly premiums leap to £25. Over the 30-year life of the policy that’s a difference in cost of more than £5,500 compared to the non-smoker of average weight.
The monthly cost of a standard, 30-year £100,000 critical illness policy from Zurich for a 30-year old non-smoker of average weight is £23.55. But if that person enjoys going rock climbing in their spare time the monthly cost rises to £29.38 – the equivalent of almost £3,000 more over the life of the policy.
The same policy for a smoker with a high BMI who does rock climbing and also rides a motorcycle would cost a hefty £65.24 a month. That’s a staggering £15,000 more over the life of the policy compared with the non-smoker with no hobbies.
For Income Protection, the non-smoker of average weight could get a policy with a 13-week deferral for £1,500 a month to run to age 68 for £22.68 a month. That rises to £32.51 a month for a smoker and £49.77 a month for a smoker with a high BMI. The figures in each of these examples are for an accountant earning a salary of £35,000 a year.
It would be easy to assume that any client would welcome advice which would save them such significant sums of money, even if that advice were to lose weight and quit smoking. But is it ever appropriate for an adviser to make such a suggestion?
Addidi managing director Anna Sofat says: “I think much depends on the relationship you have with the client and the context of the conversation.” Over the years, she has had numerous occasions where she felt it has been appropriate to make recommendations to clients concerning health issues, such as telling a client that losing weight would help reduce the cost of their life cover.
She adds: “We try to be sensitive but frank and come from the perspective that we want the best for them. Cost itself very rarely drives change in behaviour but combined with a desire for a better lifestyle, having an impartial third party who is non-judgmental can sometimes be enough to spark the change.”
Candid Financial Advice managing director Justin Modray tends not to comment on health or lifestyle issues unless there is a direct impact on financial planning. He says: “We’re not here to judge, but it is our responsibility to make clients aware if health or lifestyle issues might affect their objectives.”
This is most common in couples considering retirement income, particularly where one partner has a health issue which could affect their life expectancy and therefore their partner’s finances, he says.
Informed Choice managing director Martin Bamford has “no reservations” about addressing health issues with clients but says it must be done in a polite and sensitive way. He explains: “Clients pay their financial planner to give them impartial advice and help them make progress in all aspects of their life.”
Bamford adds: “A lot depends on how close a relationship you have built with the client and how relevant the lifestyle factors are to their financial planning. Usually you quickly get a good read on how sensitive a client is likely to be about their weight, smoker status or other lifestyle issues.”
Chase de Vere chartered financial planner Paul Cameron agrees that the relationship between adviser and client is key. He has been advising most of his clients for more than five years so usually feels comfortable enough to talk to them about lifestyle issues.
But talking about quitting smoking or reducing alcohol intake is generally easier than suggesting weight loss. Cameron says: “I would usually make general comments rather than a specific point. Sometimes that leads to the client address the issue themselves, saying ‘Yes, I really should give up smoking’, for example.”
Regardless of whether the adviser actually comments on a client’s health or lifestyle, they should keep an eye on it. Cameron points out that noticing sudden weight loss or gain, for example, can be a sign of something more serious. An adviser who meets their client regularly may be well-placed to notice such changes.
He adds: “One lifestyle change I do often promote is to spend more money. Clients can tread very carefully despite having more than enough in the bank. Sometimes the financial reassurance to spend more is helpful, and I love hearing that a client has bought a car they had thought they couldn’t afford or gone on a trip they have always wanted to.”
See Good life guru Malcolm Kerr's views on this subject in this video we published recently.