Financial planners turn to life insurance as an asset protection strategy for a variety of reasons. Some of the more obvious reasons include shielding assets from potential creditors, excluding assets from a client’s estate, liquidity at death, and tax-free wealth transfer as well as providing for tax-free income. There is no question that, when it comes to asset protection, life insurance can play many roles and provide a variety of different benefits to meet your clients’ needs, but have you thought about what it can do for you as an advisor? The answer is that it can help you penetrate the generational layers within your of client list through wealth transfer strategies and vastly improve the often-temporary nature of your book of business.
Just as it is important to protect your clients’ assets, it is important to protect your greatest asset—your business. This can be easily accomplished by focusing on estate protection for your client, as protection of your clients’ assets lends protection to your business. However, this leads to the need to either become an expert in life insurance or accept the fact that you need to partner with one. A BGA point-of-sale person would be a good partner to help you nurture and leverage the services offered through this side of your business. Once you have found a reputable BGA in your area, and have received approval from your broker-dealer to work with them, you can begin to exchange leads and market your services. I suggest you start by promoting your services as well as asking about life insurance needs in all client meetings. If any opportunities are uncovered you can then introduce the insurance arm of your business, your BGA partner.
I experienced this recently with an advisor whose experience with life insurance had long passed, but was approached by a client for advice on what to do with a current life insurance policy. The advisor immediately turned to his BGA partner for assistance. The situation was that the client had purchased a life insurance policy and the carrier had since sold that block of business to another insurance company. When the new company took over the block of business they increased the cost of insurance, which in turn led the account to underperform. The advisor informed the client that, if he conducted a policy review, he could see what else was out there and advise on potential alternatives. He then contacted his BGA partner to proceed with the policy review to determine what could be done to improve the client’s situation. The review resulted in a $221,000 (premium) 1035 exchange into a new life insurance contract which led to another second-to-die life insurance policy for estate planning purposes, scheduled to be funded at $116,000 (premium) per year for the next eight years.
Through this process our advisor realized that not only did partnering with a life insurance expert provide him with an “in” to the estate protection side of his client’s account, it also provided him with the opportunity to strengthen his relationship with his client and create a more “sticky asset” in his book. As a result, he now makes it a practice, when appropriate, to address potential life insurance needs in every investment client appointment he runs. His approach is simple, “When I first got my start in this business I started as an insurance agent. If you have any insurance policies, and want to bring them in for review, I would be happy to take a look and make sure that everything is still working to meet your objectives and that you are still on track to accomplish your goals. If I see an issue, I can give you my advice on how to resolve it.”
Life insurance is the foundation of almost every estate plan. Being involved in this aspect of your client’s total financial picture allows you to not only develop meaningful relationships with your client’s beneficiaries, it also allows you the opportunity to deliver a substantial tax-free check to them at your client’s death and explain how and why you helped their loved one assure a tax-free continuation of their estate. The importance of having this opportunity is illustrated by the fact that over 70 percent of spousal beneficiaries and over 90 percent of non-spousal beneficiaries leave the current advisor once the original account owner passes. Additionally, less than 10 percent of broker-dealer clients buy their life insurance from their financial advisor. If you are not currently a member of the 10 percent club, you have a significant opportunity to build critical and impactful relationships with your clients and other advisors’ clients as well.
By assisting your clients with estate protection you are developing a deeper connection with them as well as producing an enduring relationship with their beneficiaries. The results of these actions will strengthen your own business. Customer continuation is a real issue in our profession—whether you are working with business owners looking to fund buy-sell agreements at death, individuals looking for tax-free wealth transfer or providing a strategy to meet tax-free income objectives—being the trusted advisor for all of your client’s asset protection needs opens the door to new clients and will significantly increase your odds of client continuation and continued success with your business. Remember, if you do not consider yourself an insurance expert or honestly just feel you do not have the time to devote to it, you can partner with a BGA in your area that will help guide you and your clients through the process.