Use Advanced Marketing As A Resource For Upscale Planning

Today’s financial services landscape is filled with companies targeting the high net worth. To reach this demographic effectively, organizations are operating as manufacturers of products and services, allowing them to partner with, as opposed to compete against, other wealth management retailers.

These firms place emphasis on the advisor as the client, and provide competitive products wrapped in various “value-added” services for both the advisor and the advisors clients. These services range from various “expected” services such as marketing materials, product education, and sales concepts, to “surprises” such as local market analyses, help in identifying and meeting new high-net-worth clients, and assistance in conducting various client programs.

Products and services from these companies are traditionally delivered through experienced wholesalers who behave like business consultants to their retail advisor partners. The wholesalers are in turn supported by teams of specialized attorneys, often grouped in advanced marketing teams.

This approach is consistently an excellent match-up of talent. The wholesaler comes to the table with technical expertise and a strong relationship with the advisor. The attorneys are experts in matters such as business and estate planning, and know the ins and outs of the tax and legal issues surrounding the use of life insurance, investments, trusts, and annuities.

The end result allows the manufacturer of high net worth products and services to equip advisors with the intellectual capital they need to serve the affluent in today’s extremely competitive environment.

Traditionally, advanced marketing, teaming up with wholesalers, has actively supported advisors in their delivery of life insurance products and investment tools. Today, annuities are playing an increasingly vital role in a client’s financial planning equation. The effective use of annuities in a client’s overall estate plan therefore mandates advisors who can call upon their wholesaler to deliver the support of knowledgeable specialists who understand the complexities and multiple uses of the product.

Calling on Advanced Marketing. Before we address how advanced marketing, through wholesalers, can help advisors make effective use of annuities, it is important to outline in general how advanced marketing supports advisors in meeting the wealth management goals of the affluent, including: their accumulation, preservation, and transfer goals.

When addressing the accumulation needs of a client, the advanced marketing team assists on strategies, services and products that enable the advisor to invest his client’s wealth soundly and prudently.

For affluent individuals, this can include offering a full range of mutual funds, managed accounts and other investment advisory services, as well as the professional experience to assist the client in making those choices.

For business owners, it may include business planning that maximizes the value of the business, and/or executive benefits planning that enables the client to structure a package from the business that fully achieves the clients financial goals.

If the financial advisor is focusing on the preservation needs of the affluent client, advanced marketing will assist in their focus on strategies, services and products that enable clients to preserve the wealth that they have accumulated. This includes protecting those assets from the burden of taxes on a decedents estate, or at least providing the liquidity needed to pay those taxes without being subjected to a forced sale of estate assets.

This also includes retirement distribution planning that protects a qualified plan or IRA from being needlessly eroded by taxes or penalties that result from failure to plan properly. The financial advisor should also address the long-term care needs of the client to determine whether those expenses, if necessary, should be covered by appropriate insurance.

Alternatively, if the financial advisor is focused on the transfer needs of the client, advanced marketing must concentrate their efforts on the estate planning issues, including effective disposal of assets at death, as well as lifetime giving strategies and charitable giving concepts like charitable remainder trusts and gift annuities.

The goal is to help the advisor create strategies that transfer wealth from generation to generation in ways that protect beneficiaries and achieve a clients financial and personal goals for those beneficiaries.

Using Advanced Marketing in Annuity Sales. The annuity is a flexible, complex tool that historically has long been regarded as an excellent vehicle to help the high net worth accumulate assets. Increasingly, however, annuities are being used effectively by financial services companies in the preservation and transfer phases of wealth management. This requires the advanced marketing team to draw on new resources of intellectual capital that allow the advisor to use annuities in a myriad of situations.

In the accumulation phase, advanced marketing provides counsel on the tax-deferral aspects of the annuity, which in turn give the client the ability to reinvest the earnings of the investments held in the annuity without subjecting those earnings to current taxation.

The preservation needs of the client can be met by using annuities that have a death benefit guarantee protecting the beneficiary from loss of principal if the annuitant (or contract owner, if different from annuitant) dies during the accumulation phase.

Advanced marketing can also illustrate how an annuity can play an important role in maximizing the amount of property passing to the client’s family. Many clients will attempt to minimize the amount of estate taxes owed at the death of the first spouse through the use of a Family Trust which holds the maximum amount that can pass free of estate taxes (currently $1 million) and a Marital Trust. The annuity could be used to provide a source of income to the surviving spouse that cannot be outlived, allowing the assets in the Family Trust to be invested in growth oriented securities, thus maximizing the amount of property passing to the remaining beneficiaries.

In addressing the transfer needs of the client, the advanced marketing team needs to be able to show how an annuity can be used as a source of funds to assist the client in creating a legacy for future generations. This technique, sometimes referred to as “annuity maximization” is used at a point in time when the client has decided to shift his or her planning focus from the accumulation phase. The strategy uses the income stream from an annuity to pay for life insurance, ultimately providing heirs with income and estate tax-free death benefits.

Conclusion. Ultimately, wealth management is a matter of focus and execution. It requires a full commitment to understanding and serving the needs of affluent individuals, business owners and corporate executives, as well as closely-held businesses. Financial advisors will be successful only if and to the extent that they can deliver on their promise to meet those needs.

In addition to developing competence in this sophisticated planning area, the advisor should be aligned with a financial services company that can provide immediate access to the financial and technical expertise needed to compete in today’s marketplace.

Richard C. Martin, JD, MBA, CLU, ChFC, CFP is vice president advanced marketing, The Phoenix Companies, Inc., Hartford, Conn. He may be reached via e-mail at richard.martin

@phoenixwm.com


Reproduced from National Underwriter Life & Health/Financial Services Edition, April 15, 2002. Copyright 2002 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.