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July 19, 2001 at 08:00 PM
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It happens every day in our line of work. Clients wonder if they purchased a product that best meets their needs. This is normal behavior.
Throughout the 1990s, the stock market experienced unprecedented gains, and with those gains, the market attracted more and more consumers. But now, with the recent stock market volatility, you may have customers concerned with the performance of their variable life product.
I even had one client call to ask, “What do the brackets mean on this quarterly statement?”
Obviously, the client had been following the upward bound performance of the products investment divisions through the good times, but never saw a negative return and so didnt understand the meaning of those brackets that earmark investment losses. He wanted me to explain them!
Some irate clients may even want to switch to another life product that they believe is a better choice.
Im the first to agree that not all clients belong in a variable life product. However, I also believe that switching from one product to another doesn’t make sense for everyone, either.
Here are some suggestions for dealing with your clients, especially in these more volatile times, based on my own experience.
Keep emotions in check. Emotions influence client behavior and decisions. Life insurance is an emotional purchase, but emotions alone should not drive all decisions.
With a variable product, there needs to be an intellectual and rational component. When emotions drive decisions, clients typically panic when the markets drop, instead of considering that the down period may be a good time to buy.
It’s really a simple supply and demand issue. When supply is low and demand high, the price goes up. Conversely, when supply is high and demand low, the price goes down.
Explain losses. Any losses within a variable product are only on paper and not realized unless a client decides to “get out of the product.”
If a client gets out now, he might have bought high and sold low–obviously this may not the right approach to profitable long-term investing. Plus, the professional asset managers within the variable product lose money when the divisions experience losses. Those asset managers want positive returns as much as the clients do, and will work hard to turn their divisions around into positive territory.
