Advisors & Life Insurance

A Challenging Relationship

Used Car Pitch or Trusted Advice?

Financial guidance enjoys a rarified reputation, one occupied by matters such as health and career advice. Clients often do not trust aggressive sales tactics or pressure, especially when considering complex investment products.

For too long, life insurance sales have been pushed by commission structures and quotas that have no relevance to sound wealth management. More importantly, life insurance sales are in opposition to an Advisor’s fiduciary responsibilities.

Square Policy, Round Advisory

The onetime life insurance purchase is incongruous with how wealth managers work with their clients. Unlike most investments, on issuance a policy’s attributes are set for the term of the policy.

Traditional policies are static and do not take into consideration unforeseen life events such as changes in career, family composition, financial goals or even future health status.

Life insurance fails to meet the reporting, functionality, portability or forecasting standards of the Wealth Management industry.

Rebalance...But Only Once

Wealth managers rely on account rebalancing to minimize risk, ensure continued stability and adjust to unexpected circumstances such as market forces or account withdrawals. Rebalancing is so common that it is performed continually (daily, monthly, quarterly) on most portfolios.

The life insurance purchase process is, in effect, a single “policy balancing:” a one-time occurrence on application approval. This does not provide for functionality such as margin-based loans, account transfers, dynamic reporting, etc. Furthermore, a policy has no value until it’s approved and that cumbersome approval process can take weeks, if not months.

Continual valuation (rebalancing for the insured) makes life insurance accessible on demand instead of on approval.

Shortsighted Assumptions

Most policies are priced and purchased based on a solitary, static snapshot of the insured’s health status. Once a policy is issued, there’s an inherent lack of visibility of future performance. The individual’s future risk state, for better or worse, is not considered.

Legacy life insurance does not adequately address that the present and future are inextricably linked and are continually changing.

Not Net Worth, But Worth Something?

Life insurance is not traditionally viewed as a component of a client’s net worth. A policy is seen as only having supplemental or contingency value. In fact, most wealth managers place life insurance in the “other asset” pool.

This is an anomaly within the financial planning industry: for taxation, collateral and estate planning purposes, life insurance is considered an integral part of net worth. When a policy is effective, it has real value.

Hard to Activate

Life insurance presents unique challenges for Wealth Managers and their clients. Beyond the agency, licensure, staffing and workload demands on the Advisor, clients face a lengthy, complicated and often expensive application process.

Life Insurance Protects Future Plans. Plans change.
Shouldn’t the Policy?