Bank producers need to keep a number of points in mind if they want to sell more life and health insurance products to affluent clients, suggest executives of two leading bank insurance programs targeted at the need of the wealthy.
Point number one: Most affluent clients arent looking for a high rate of return from their banks.
“The only return theyre looking for is the return of their principal,” jokes John Falk, vice president of US Bancorp Insurance Services LLC, a unit of US Bancorp, Minneapolis.
Number two: Just because theyre wealthy doesnt mean theyre liquid. Many have their money tied up in their home, a vacation house or other illiquid assets, points out David Holton, president of Wachovia Insurance Services, a unit of Wachovia Bank in Winston-Salem, N.C.
Number three: Unless they are retired, the affluent are very busy people.
Those characteristics present a number of selling opportunities for the bank producer, the executives note.
First, wealthy clients who are leery of risk are great candidates for sales of annuities and of life policies.
They also are seeking financial products that help them protect their assets in the event of their death. “The issue of leaving money to my heirs when I die raises questions about what are the implications for taxes,” says USBs Falk.
That means life insurance in its various and sundry forms.
For some, single premium life insurance may be attractive, he says.
“Were not selling single premium so much for the highly affluent person who has an estate tax problem,” Falk explains, “because usually single premium life has some gift tax issues. Most of the people who do single premium life have less than $1 million, or less than $2 million as a couple.
“Those individuals love single premium, because they can get rate guarantees and a return of premium,” he adds. “So they are deferring the tax during their lifetime and eliminating the income tax at death. Its a very attractive combination of features at no risk. Our typical depositors dont want risk. Thats not why they deposit money in the bank.”
The fact that many wealthy individuals are illiquid offers other sales opportunities.
“With wealth transfer and wealth protection, you move into their estate planning needs, so our insurance people work with our trust and tax departments, looking at the tax liability of clients in the event of death,” Holton says. “So rather than their heirs having to sell off their estates to raise cash, many wealthy people use life insurance proceeds as a liquidity tool to meet obligations for estate taxes.”
The customers time-management problems are relevant to positioning the bank as a one-stop solution to the affluent clients financial needs, Falk suggests.