The Question Is: How Can You NOT Offer Equity Products?

Do variable annuities and variable life products fit into the picture? “Yes, they do,” says Everson. “We often use them alongside the wrap,” especially in tax planning scenarios.

When clients turn age 50, she also approaches them about buying long-term care insuranceto help them address the risk of funding nursing home care later in life.

“Thats the beauty of financial planning today,” says Everson. “We can use different products to meet different needs and goals. And clients see how all the planning and the products work together.”

Meanwhile, in the Chicago office of Raymond James & Associates, reps have become keenly interested in selling VAs with living benefits guaranteesparticularly, a guaranteed retirement income benefit that assures the account value will grow by at least the minimum amount specified if the owner annuitizes the policy.

“All our reps are doing this now, using it to help clients plan for the future,” says Steven Schwartz, senior vice president-equity research.

The clients tend to be traditional mutual fund buyers, not day traders, he says. They are people who have perhaps come into some money and now want to use it to buy securities at todays lower values. But they are also people who have future long-term care and income needs in mind, he says. For this market, “some of the luster is off mutual funds,” due to the stock market slide this year, so they are taking greater interest in VAs with living benefit guarantees.

The appeal is, “they are in the market, and they guaranteed theyll have growth, if they annuitize,” Schwartz says. “They like that.”

Reps who have seen their clients mutual fund values fall, in some cases by 40% to 50%, like it too, he says. “For them, its a matter of, how can we not offer it to our clients?”

“Reps today have gone well beyond being stock jockeys,” explains Schwartz. “They look at the clients total wealth plan, including insurance, annuities, and long-term care.”

Some reps are even adding mortgages to their portfolios. Mortgages?

Thats right, says Kathy Gilliland, owner of Gilliland Financial Group, Dublin, Ohio. A mortgage is an ideal product for full financial planning, she says, because it helps clients build equity in their homes and/or borrow against that equity to meet other planning needs.

The products can play a “huge role” in the life of a client, she says, so planners should try working with them.

How did she come to this realization? Gilliland says she started bringing mortgages into her practice in 1990, when she noticed that the mortgages her clients took out from local banks where she had made referrals didnt always produce good results.

“Some clients paid too much for the mortgage. Others were allowed to take out too big a loan for their situation; werent offered enough product choice; encountered too many restrictions; etc.”

That propelled her to learn the mortgage ropes herself. To do it, she teamed up with a mortgage broker whom she trusted. Later, she became licensed as a mortgage broker in her own name.

The results, she says, have been amazing. “First, my clients are getting better mortgages. Second, I am obtaining, from the loan process, all the needs analysis and asset/liability information thats necessary for handling my clients other financial planning needs.”

In doing the mortgage, she explains, she inquires into client goals, objectives, risk tolerance, etc. She also sees the clients credit card debts, auto and home loans, employment history, savings, college plans, family structure, employment, and related financials.

The financial plan often “spirals up from the mortgage,” she says.

Sometimes, the process leads to setting up a Roth IRA. Sometimes, a VL or VA policy (if the 401(k) is maxed out). Sometimes, mutual fund purchases. Sometimes, combinations of those.

In some cases, she discourages a mortgage or suggests a smaller one, as when one young couple asked for a huge mortgage for which they qualified, but which she felt would have strapped them financially. Or shell refuse to do a mortgage altogether, as when one client wanted to put a second mortgage on his house so he could invest the proceeds in stocks. (“He has thanked me several times since then for talking him out of it,” she laughs.)

An unexpected result: “Theres a constant stream of people coming here for mortgages and financial planning,” Gilliland says. “Some days, I cant return all the calls.” Many are referrals from clients, and others are referrals from other planners and attorneys.

Are mortgage brokerage fees higher than mortgage fees charged by local banks?

“They can be, depending on the broker,” Gilliland allows. “But I keep my costs down, because I want to do lots of things with my clients for the rest of our natural lives. I want them to benefit so theyll stay with me.”

Some producers are frustrated by the broader roles financial professionals are being asked to assume today, Baldwin says, with a tinge of sadness. “They say, Im out of here.”

But then he brightens up. “That makes room for the younger people to come in. They have the education about the new products and systems, and dont know the way it used to be,” he says. “For them, this is opportunity.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, August 20, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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