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Some Banks Target Affluent Clients

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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.

“Many people like the idea of the one-stop shop,” he says. “When you have a busy professional, he doesnt want to interview four or five entities to accomplish his financial goals.”

Retirement plans are a good revenue producer to hang on the one-stop peg, Holton adds, because the complexity of these plans forces many busy professional clients and small business owners to turn to a trusted advisor, their banker, for help.

“Retirement plans have a lot of complexity,” Holton says. “Theyre intertwined with federal tax law and state tax law. So the client thinks, I want to go somewhere where they could give me an idea of what I should be doing with the financial planning process to prepare for the future, as opposed to going to one financial company for one thing and another for something else.”

The banks approach the affluent market for insurance in different ways.

At Wachovia Bank, a traditional insurance advisor works as part of a team of people inside the banks wealth management division. Four financial disciplines are represented on a team: at least one banker, trust officer, investment advisor and insurance agent.

Each team may have several advisors in a given discipline, depending on the makeup and demographics of the teams wealthy clients, Holton explains.

“They have other players, such as financial planners, who also help out,” he says. “So the teams take a holistic view of a clients needs in wealth management. When insurance products are seen as a solution, then the insurance advisors will be brought in to execute them.”

Wachovia Insurance Services has 28 insurance advisors, assigned to a total of 53 wealth teams within the bank, he says.

Wachovias blending of the four disciplines helps the bank present itself as serving the entire needs of a persons financial life, Holton explains.

“Insurance is just one of the pillars, but its a critical one,” he says.

It is that approach that led to the banks increased sales of long term care insurance, he notes.

“Financial advisors will sometimes say the affluent market can basically be self- insured for long term care,” he says. “But still, many affluent clients feel more comfortable having a policy like that. That was the whole idea behind this concept of taking the four disciplines and putting them together.”

For its part, USB prefers to link insurance to its affluent clientele through its trust department. It offers a gamut of products for the affluent customer, including fixed and variable premium life, directly owned or in trust to get it out of the individuals taxable estate, and long term care.

Falk estimates by the end of 2003, USB will have sold $120 million in high-end life insurance products.

“We have a cadre of wealth-management consultants who are in the initial stage of identifying customers for trust services, including insurance. For us, this is somebody with $500,000 or more of investable assets.

“Some of the issues facing the affluent client are that they dont want to outlive their money and dont want to risk consuming their assets either during their life or at death,” he says. “Thats when our trust department will call in one of our insurance advisors.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, October 17, 2003. Copyright 2003 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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