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When It Comes Insurance Planning, It’s OK to Pass the Baton

Life InsuranceLife insurance isn’t sexy. It’s kind of like the orthopedic shoes you should wear when you’re doing something that requires walking all day long—not sexy but probably a good idea.

According to a 2013 survey by Saybrus Partners Inc., less than half of advisers surveyed said their efforts to provide life insurance and pertinent advice were successful. Mostly, Financial Advisor Magazine reports, because they feel it detracts from their “regular” business—like the business of investment management.

Clients of all ages may be reading about life insurance and misunderstanding the specifics so they either forego it or make costly mistakes. So brush up on your life insurance knowledge and figure out the best way to address the topic—even if it means passing the baton to a more knowledgeable professional.

Clients Need Help, Are Underinsured
Many articles out there are telling consumers what they should be getting from financial advisers, and one of the most consistent things on those lists is insurance planning.

Unfortunately, the insurance business is complicated and with potential mistakes lurking—like rate increases that come as a surprise, lapses in updating beneficiaries on the policies and missteps with estate taxes—clients need help.

And many clients are underinsured. According to data from the insurance industry association LIMRA, more than 50 percent of consumers ages 25 to 64 are without life insurance coverage. About 44 percent of those have a real need for it, says Kellan Finley, the managing director of the insurance consultancy firm Insurance Decisions.

“The gap between service models can be maddening for clients,” Finley says in an op-ed she wrote for Financial Advisor IQ. “It also elevates the risks that clients face when preparing for retirement or a serious life event.”

Life Insurance at Any Age
It’s time for the youngsters to start thinking ahead also.

Here’s a tip courtesy of Yaron Ben-Zvi, the co-founder and CEO of Haven Life, an online insurance provider: direct your young millennial clients to get life insurance. Sure he may be biased, but he brings up a good point: millennials have debt of all kinds from student loans, mortgages and car loans. If they co-signed for any of those with a partner or a parent, those folks will be saddled with a heavy burden should the millennial client die.The Journal’s September issue will be all about the next generation of planners and clients, and the issue (look out for the link on our Twitter page come September) is chock full of tips for working with millennial clients.

“Though death and debt aren’t typically dinner table conversations, it’s important to understand your financial obligations and how they impact your family,” Ben-Zvi said in a recent interview with Cheat Sheet.

Also, he says, millennials are probably healthy, which could lead to lower premiums. And he’s advocating for planners in the piece, noting that the process is complicated and the choices are many (think term life, whole life, permanent life, etc.)

“You can also go through an agent or a financial planner if you’d like someone to take you through the process,” he advises.

What Can Planners Do?
But if you’re not into the unsexy insurance—or you don’t have the resources for it—then you can partner with an insurance-consultancy firm or work with an objective insurance professional, Finley advises.

Finley notes that advisers should understand the ongoing service that term-life and long-term care policies need and be prepared to be updated with them. She advises to use a CRM system or an Excel spreadsheet to keep tabs of the policies.

“Whether it’s underwriting or explaining insurance jargon, those advisers who use unbiased resources can offload unprofitable work while helping secure the client’s future well-being,” she writes.

HeadshotAna Trujillo
Associate Editor
Journal of Financial Planning
Denver, Colo.

Editor’s Note: For an FPA webinar on how your high-net worth clients may be overpaying to be underinsured, click here. Conducted by Annmarie Camp, senior vice president of national sales and distribution leader of ACE Private Risk Services, and David Spencer, senior vice president of premier client services at ACE Private Risk Services, the webinar offers 1 CFP CE credit.

Also, the August issue of the Journal has more pertinent information on insurance, including life insurance and long-term care insurance. To download the digital edition, click here


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Anticipating Change in Your Business

Nothing is predictable—in life, the financial markets or our industry—except, of course, change itself. Let’s explore a few somewhat predictable events that tend to bring change, for better or for worse, to advisers’ practices.

“Man, Woman, Birth, Death, Infinity”
If you recognize that quote, you’re probably in your 60s and remember the popular TV show Ben Casey. The series opened with the elder professor teaching his physician protégés about the path of human existence. From the birth of a child through adulthood, procreation, health issues and ultimately death, the trajectory of life is fairly predictable.

Whether they happen to you or a family member, colleague, employee, client or friend, these life events can have an impact on your business. For example, the birth of a child may prompt a young employee to quit work or ask for paternity leave. The 60-year-old adviser may take time off when her first grandchild is born, while the 40-year-old might buckle down and focus more than ever in anticipation of college expenses ahead. When you think about it, the path of human existence is constantly affecting your practice in some way, shape or form.

Leases, Partnerships, Growth, Industry Evolution
You haven’t heard that list on any TV show, but these factors also lead to change at regular intervals throughout the life cycle of a financial advisory business.

  • The end of a lease. I’ve noticed that a lease coming up for renewal can be a crossroads for many advisers. For one, it may present an opportunity to buy the office building; another may see it as a chance to gain space for targeted growth over the long term. One adviser will simply renew the current lease, while another may take the opportunity to minimize office expenses.
  • A shift in a partnership. Partnerships evolve, too. As one partner experiences change due to personal factors such as those mentioned above, it can be like shifting tectonic plates in the partnership. Say one adviser has a health scare and the more reticent partner takes the helm of running the business. The emotional dynamic caused by the shift is palpable. At such junctures, lifelong relationships between colleagues can unravel or thrive.
  • Business growth. Whether an adviser’s success is due to skill, geography, luck, inheritance, passion, the market or other factors, at some point, it becomes clear which firms are consistently growing and which level off. In either case, inertia kicks in; the business in motion tends to stay in motion.
  • An evolving industry. Like individuals, industries are born, change and pass away. Time will tell how long the financial advisory and planning industry endures. Advisers who joined the profession 40 years ago, 20 years ago and today will face very different circumstances to which they must adapt.

What Changes Will Your Practice Confront?
Change is constant and often predictable. But it’s easier to see that when you’re looking in the rearview mirror—just ask any adviser in the second half of his or her career. For those still in the early stages, it’s worth keeping an eye out for all the predictable changes down the road. As the saying goes, we don’t get hit by the things we see coming!

Joni Youngwirth_2014 for webJoni Youngwirth
Managing Principal of Practice Management

Commonwealth Financial Network
Waltham