Following a number of successful acquisitions in the last six years, Utmost Wealth Solutions has grown to become a market leader in the international life assurance market writing almost £5bn of new business in our key markets each year. Its assets under administration have also increased to £56bn.

Stephen Atkinson is Utmost Wealth Solutions' Global Head of Sales and Marketing. He has played a leading role in Utmost's acquisition programme and in shaping the enlarged business to play a leading role in the international life market over the long-term.

In this second segment of a two-part interview, Stephen speaks to II's Mark Battersby about what advisers should focus on when they're choosing an offshore bond provider. 

With the benefit of a 40-year career in life assurance sales and a steadfast belief in the client proposition, there are few in the industry that can provide such insightful commentary.    

MB: Knowing what you know about life companies from the inside, what should an adviser be focused on when choosing an offshore bond provider? 

SA:  Choosing an international life company provider for a client is one of the most important professional decisions an adviser has to make. In fact, making the right choice has become even more important in today's volatile and uncertain economic environment. Unlike most other planning vehicles, clients will be committed to that provider for the long-term as exiting may result in untimely and unplanned tax payments. 

Earlier in our discussion I stressed the importance of each life company's financial strength and strategic intent and pointed to the vast amount of information that is in the public domain that can help advisers make a decision. 

It's vital that an adviser's selection decision is evidence-based. This reminds me of that part of a James Bond movie when it's clear to all (apart from the villain) that something very bad is about to happen, but for some reason the villain has chosen to ignore all the evidence, and we all know how that ends!

There's never been so much information readily available to advisers to help them make an assessment, plus we have the benefit of so much real world experience based on what has happened to other companies. 

MB: So, you're saying that advisers should primarily focus on the size and strength of the provider? 

SA:  Let me pose a not so philosophical question in return - would you rather invest with the very strongest company based on evidence of its solvency, assets, profitability etc. and its plans to invest for the future, or would you rather invest with a lesser institution that doesn't have those longer-term plans and direction?

Another way of looking at this is to ask yourself what reasons could there be for taking such an unrewarded risk with a weaker provider? I would argue that it's an unrewarded risk as this would have no additional upside but it has significantly increased downside risk.  This type of risk is completely avoidable if you choose to use one of the strongest international life companies. Once you've considered all the available data and evidence, why would you choose to use a weaker company? At some stage in the future will clients, regulators and PI insurers have cause to question why?

MB:  I wouldn't think that advisers expect any of the life companies they use to fail, but is lack of investment in the business likely to cause issues in the future?

SA:  Clients who subscribe to an international life policy will have ongoing servicing and functionality requirements for many years ahead. I'm talking about ongoing customer service covering things like assignments, changes of custodians, changes of investment manager or DFM, change of country of residence requiring portability, tax reporting, lending or pledging, paying death benefits, income payments and policy conversion options for DGTs. I could go on!

Our experience shows, and we have probably more than most, having acquired more international life companies than any other company, that companies that do not invest, or are not a core business within a larger group, tend to either close or are sold to "closed book consolidators", leading to a substantial reduction or restrictions in this functionally.

MB: How do you respond to concerns from some advisers that an offshore bond can be a relatively expensive product to hold in a world where all charges and fees are under scrutiny?

SA:  The client benefits of an offshore bond are many - tax efficiency, succession planning, flexibility and ease of reporting to mention a few - but in order to offer these benefits, you need a thriving life company, and that requires ongoing investment.

Life companies are actually expensive to run. There seems to be a common fallacy that all that life companies provide is a simple piece of paper and a link to an investment platform! Without getting into a Pythonesque "what did the Romans ever do for us" type of list, I can give you some examples of activities that drive life company costs and need ongoing investment.

Firstly life companies must hold sufficient solvency margin over and above their liabilities to the extent that they are able to pay claims even in the event of a 1 in 200 year event - and we seem to be having a few of these lately.

Then they need to make sure that they can provide accurate and timely policy administration over the lifetime of each policy and, importantly, timely and correct tax reporting.

Companies need a strong compliance team as it's vital that clients' policies are compliant and remain so, as the cost of a mistake is exponential. To highlight this our Isle of Man office alone is currently tracking and analysing around 30 global proposed regulatory changes.

Having an experienced and highly qualified technical support team to help advisers correctly structure their clients' policies and provide ongoing support is a key part of our business.

Behind the scenes life companies need a strong Finance team to ensure that the company is run efficiently, compliantly and on a basis that ensures its long-term solvency and profitability. Companies also have significant outlays on information technology - developing new and improved services for advisers and clients, constant upgrades to existing systems, and today cyber protection is a non-negotiable commitment. All of this requires substantial ongoing investment.

MB: You didn't mention making profits. Life companies have different ownership structures but they all need to make a profit don't they?  

SA:  Yes, of course, the company must also make a profit for shareholders. In that respect we're the same as any commercial business, including adviser firms. The key is maintaining the right balance between shareholder expectations and the need to continually invest for the future.  

That brings me back to my point that this requires a financially strong life company that combines the ability and wherewithal to invest today, with the strategic intent to invest in the business for the long term. 

MB:   A final question. We all read a lot about ESG investments and sustainability these days. What's your approach to this important issue?

SA:  If the past few weeks of volatile weather patterns has taught us anything - it's clear we must all increase our focus on what we can do to reduce our impact on the environment.

But we need to be realistic to make an impact - we are part of a process that includes advisers, investment managers and custodian banks etc. We cannot dictate investment strategy - and nor should we, this is not our sphere of expertise.

What we can do is make sure that we as a business are doing our utmost - pun intended - to ensure that we have the lowest impact on the environment possible, through a combination of changing our own behaviours and strategic decisions, influencing others in our supply chain and various external initiatives. 

We see this as non-negotiable - effectively this is how all businesses must operate, it is business as usual as opposed to a marketing opportunity.