Creating Opportunities in a Challenging Economy: Protecting yourself in challenging times

Jacqueline Sharp, vice-president and general manager, Scotia Jamaica Life Insurance Company. – Contributed

Financial analysts have been advising consumers and businesses, indeed whole economies, to cut unnecessary expenses as a means of surviving the economic fallout.

Those in the know caution against frivolous spending and encourage instead a leaner budget and an attempt at remaining fairly liquid. Consumer trends show that for the most part people are heeding that advice, cutting spending on things like food, fuel, entertainment and even contributions to churches and other charitable organisations. Analysts say people have also begun to reduce how much they spend on insurance.

Bad idea

However, according to Jacqueline Sharp, Scotiabank vice-president and general manager of Scotia Jamaica Life Insurance Company, reducing insurance coverage at this time is a bad idea.

“If you’re not continuing to earn a steady income, if you’ve been laid off, if anything were to happen that you did not anticipate, and you’ve cut your insurance coverage, you would not have that cushion to take you through that difficult time. Protection is important, but even more so during these challenging times,” she explains.

Many families have faced financial ruin brought on by extended periods of illness, death or even an accident. Sharp argues that insurance can mean a world of difference and points to the newly launched Scotia CritiCare product as an excellent tool for just that kind of protection.

“CritiCare is a policy that will pay you a lump sum once you’ve been diagnosed with any one of nine critical illnesses we cover,” she says. In addition to the more common ones like cancer, stroke and heart attack, CritiCare covers paralysis and burns, among others.

“A lump-sum payment at a time when you’re going through emotional and physical distress means you won’t have to worry about paying for expensive medical treatment and high medical bills,” she argues. “These days, the incidence of these types of illnesses is increasing. Most people have a family member, a friend, a neighbour or a co-worker who has been afflicted with one major illness or another and even younger people are being affected. So it’s very important to have that assurance that if anything were to happen, you would have that added income to help with the bills.”

More important to plan for future

Sharp asserts that as the economy tightens, it becomes more important for people to manage their funds well and engage in more effective financial planning. She points to instruments at Scotia Jamaica Life Insurance that she and her team have designed to help customers plan for the future.

“ScotiaMint is a great vehicle for medium- to long-term savings goals like buying a house or sending the children to school abroad. It combines savings with a little bit of insurance and affords ScotiaMint customers some amount of tax advantages,” she says.

As it relates to planning for the retirement years, Scotia Jamaica Life Insurance this year launched ScotiaBridge – an individual retirement account or IRA. It is a popular savings instrument in the Unites States, which has only been recently introduced to the Jamaican market.

“ScotiaBridge is one product I would encourage anybody who is working and earning an income to acquire. You’ll be able to maximise your retirement contributions because you get tax-deductible contributions going into the plan and there is tax-free earnings growth throughout the accumulation years. So what all of that adds up to is greater value, a greater nest egg at retirement,” Sharp explains.

The Scotia executive contends that although IRAs are a relatively new concept in Jamaica, they are beginning to take off.

“An instrument like ScotiaBridge is going to allow self-employed persons, or someone who works with a company that doesn’t offer a pension plan, to have the benefit of an approved pension product,” she declares.

Sharp offers the following example of how ScotiaBridge could workfor Sean, a 40-year-old man who has begun to save towards retirement:

Sean’s age: 40

Retirement age: 65

Years of saving: 25

Regular monthly contributions: $3,000

Tax savings per month: $750

Growth rate: 14.0 per cent

Total at retirement: $2,021,870

This $750 is the 25 per cent tax-free portion of the $3,000 deduction that would now be going into a pension plan which allows for tax-deductible contributions (no taxes paid on pension plan contributions).

Stacy-Ann Smith, Gleaner Writer

Creating Opportunities in a Challenging Economy

Q.  If yo’ve been listening to the advice of financial experts since the global crisis began, you’ve probably heard “cut back on spending, stick to the budget”. right?

A.  People have been buying less food, less fuel and conserving on energy.  But analysts say consumers are also reducing the amount they spend on insurance.  “Bad idea,” says Jackie Sharp.

listen to the second feature here

Scotiabank throws lifeline to small-business persons

IF YOU have a small nest egg or some redundancy money and a good business plan, Scotiabank is ready to assist you. The bank has developed a range of services to help entrepreneurs who are just getting started and others who may need help in specific areas.

“The SME Unit was established two years ago to provide a value-added product to customers,” discloses Patsy Latchman-Attebury, vice-president in charge of the unit. “So not only are we providing financial services
, we are also providing a service that allows the small-business person to become a better manager of his/her business,” she adds.

Getting the details

According to Latchman-Atterbury, Scotiabank has trained its business banking officers to be able to question customers so they begin to think of their business not only in financial terms.

“We question our customers in such a way that they begin to think about their businesses in a detailed fashion that connects all the elements of the balance sheet,” the banking executive explains. “For example, if we have a business customer who has a problem with receivables, we ask how he/she is managing supplier credit, whether the business has a receivables policy and collectors who are assigned to ensure money owed is collected on time,” Latchman-Atterbury discloses.

She emphasises the need for businesses to improve processes like record-keeping. “You have to know what’s happening in your business. If you don’t know, then anything will happen. You need to know what’s happening with your cash, with your stock, especially at this time when you need to be managing every penny,” the Scotiabank executive advises.

Online features

Latchman-Atterbury cites as a useful tool Scotiabank’s Business Internet Banking feature, which allows business owners to keep tabs on their affairs, from inventory to cash flow. Another online feature, the Scotia Plan Writer, gives users a step-by-step guide to preparing a business plan.

The Scotiabank executive also points to another creative offering to small businesses that need capital.

Flexible options

She explains: “We have the regular term loans, but they can be repaid to match the cycle of the business. So customers are able to make payments every two months or every three months, depending on how the business cash flow comes in. We also developed the Customer Assistance Programme to provide our responsible customers with a flexible option for managing and maintaining their credit. If payments on an account become past due for 90 days, the loan is classified as delinquent and that greatly restricts what the bank can do.”

Latchman-Atterbury says customers who have a good track record of payment are invited in to discuss their situation. Two of the available options include restructuringthe loan, and receivinga moratorium on payments. These options, she notes, are designed to ensure businesses are able to maintain their cash flow through this period of uncertainty.

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On a personal note

“I didn’t get a start from my parents, I didn’t get a skill, I didn’t get nothing. Not a piece ah land, nutten at all. So I have to create my own ideas,” relates a hard-working St Catherine woman, who is a Scotiabank customer. “I have two children and they have to go to school. My daughter just graduated from UTech (University of Technology), but when she started, it was very hard. So I started with selling chickens and flowers. It was hard, but it is going good now. I just need some more help so I can hire two persons and spread my wings a little wider,” adds the ambitious Scotiabank customer.

She is banking on the Micro Enterprise Financing Limited (MEFL) to help expand her business. She is one of more than 2,500 Jamaicans who have been benefiting. Scotiabank executive Patsy Latchman-Attebury explains that the MEFL is a joint initiative involving Scotiabank, the Canadian International Development Agency and the Kingston Restoration Company. “The MEFL provides loans of up to $500,000 collateral-free, and borrowers may repay on a weekly or monthly basis,” states Latchman-Atterbury.

Stacy-Ann Smith, Gleaner Writer

Restructure expenses, says career banker

FOR THE last several months, Jamaica has been caught in the financial tsunami that has claimed whole industries, sent thousands on the unemployment line and forced people everywhere to pinch pennies. Households have cut the supermarket and utility bills. But while you have some amount of control over how much you spend on food and some other expenses, there is little you can do about loan payments. Right?

Wrong, says Scotiabank’s Executive Vice-president Wayne Powell. “We recognise that customers are having a tough time, so we decided that we needed to do something special, something different, something novel. We came up with what we call the Customer Assistance Programme (CAP),” Powell tells The Gleaner.

Scotiabank called thousands of their customers and sought first of all to ascertain what kind of situation they were facing. Then the bank decided what level of assistance they needed. Powell says good customers who were facing short-term problems received advice and a little reprieve.

“Do some restructuring of your expenses, we told them. Credit-card expenses can be very dangerous, so we advised them to use their credit cards for convenience rather than as a loan,” Powell relates. “There was also something for those persons who had immediate needs they couldn’t pay for. We waived one payment, sometimes payments for up to three months to allow customers to pay their children’s school fees. For credit-card payments, we may say skip a payment, which we do very frequently. And that helps out in the short term,” the banker adds.

Long-term fix

If customers are facing tougher challenges and need a long-term fix, Powell says CAP also provides options.

“We look at consolidating your debts – credit cards and other retail loans. For example, if you had a loan for five years, we may suggest you extend it to 15 years because the primary thing is to help you increase your cash flow. We have seen where, by restructuring a loan from five to 10 or 15 years, people cut their monthly payments by as much as $200,000,” he discloses.

But apart from relaxing some rules on loans, the Scotiabank’s vice-president points to other opportunities for customers, especially in the small-business sector.

A joint initiative

“The Micro Enterprise Finance Limited – a joint initiative involving Scotia, the Canadian International Development Agency and the Kingston Restoration Company – offers people at different levels who are not employed and who have good ideas, a chance to get small loans for distribution or whatever purpose they choose. That has been going very well,” states Powell.

He says many people who have lost their jobs have been coming in with ideas.

Powell also points to little-known options like using your credit cards to earn benefits.

“If you lodge your salary to your credit card every month and pay what you use, you pay no interest. But there’s also the Rewards Programme. While you are spending for breakfast, lunch and grocery, you could be earning miles on our American Airlines Card. There are actually Scotia customers who travel every year free of cost!”

Stacy-Ann Smith, Gleaner Writer

Creating Opportunities In A Challenging Economy

Q.  Struggling to maintain those loan payments?

Wouldn’t you welcome a chance to lower them?

What if we told you there was a bank that was inviting some loan customers to do just that?

A.  Watch for a three-part special “Creating Opportunities in a Challenging Economy” where Wayne Powell – Scotiabank’s Executive Vice-President will share some useful options, ideas and advice on how you can survive and thrive in this period of crisis.

listen to the first feature here

listen to the second feature here