Turbo-Charge Their Wealth
In the American classic “The Great Gatsby,” author F. Scott Fitzgerald wrote that the rich are different from the rest of us. In actuality, the affluent are similar to the rest of us in at least one respectwe all want to preserve our wealth. They just have more of it to preserve. Yet, despite their greater wealth, the financial priorities of high-net-worth individuals are not dissimilar to most peoplesinvestment return, tax efficiency and estate planning.
High-net-worth individuals typically are described as those whose net investable assets are $1 million or more and/or whose gross household income exceeds $250,000. Because they are a highly desirable market segment, affluent prospects are prominent on the radar of all financial services specialistsfinancial planners, investment advisors, stockbrokers and you, insurance professionals.
Unfortunately for those of us in the insurance industry, affluent customers are often not fully aware of the financial advantages that insurance products present. There is a lingering misperception that wealthy individuals can “self-insure” through a variety of financial instruments and therefore dont need life insurance. You know thats not true. The key lies in educating affluent customers and their other financial advisors that insurance products can “turbo-charge” wealth.
As is true with most clients, all high-net-worth individuals do not all have the same planning needs. For example, younger members of this group probably have life protection requirements as does any young family, but at a higher price point. High-net-worth individuals in the 55- to 65-year age bracket may be juggling multiple priorities. They may be planning for retirement at a time when they still have children in college or, perhaps, are embarking on a new business venture. As a result, despite their wealth, these boomers may be appropriate candidates for a life insurance policy with flexible premium features.
In short, the affluent market should not be viewed as a one-size-fits-all sales opportunity. If anything, the needs of high-net-worth individuals are likely to be more, not less, diverse than many other groups in the insurance marketplace.
As an insurance professional, you are aware of the benefits that insurance products can provide, and educating the affluent market about these advantages is your greatest business opportunity. This is your chance to grab the attention of high-net-worth clients by explaining how and why insurance products belong in a well-balanced portfolio, and how insurance products offer a range of choices that can meet their needs. For example, these potential clients might not realize the opportunities that a variable annuity can provide to create wealth while deferring all taxes until the money is withdrawn from their contract.
The example above is a more general indication of how life insurance can benefit high-net-worth clients, but really the solutions are endless, especially when customized products are introduced. People who are wealthy, whether through inheritance or entrepreneurship, will likely have special needs that can best be met with customized products and services. Therefore, it is invaluable to be aligned with a carrier that is committed to developing these customized products.
Customized insurance products will more easily capture the attention of this desirable market segment because these products can address their needs on an individual basis. This is not a new idea. However, although delivering customized products to this market segment has been tested in the past, there has been limited or minimal success. But if the right expertise and opportunities are brought together, the possibility for success can quickly become a reality. This brings us to 2 questions for you: How do I get to those high-net-worth clients, and which carriers can manufacture customized products that I can sell to them?
One of the most straightforward ways that distributors can gain a competitive advantage is by aligning with a carrier that has access to high-net-worth clients. In many instances, partnering with a bank-owned carrier can offer a worthwhile opportunity to distributors through its private banking channel. Private bankers, by definition, cater to high-net-worth clients and may provide opportunities to insurance professionals trying to break into this market segment. But as with any sales effort, as you know, it takes far more than getting in the door to make the sale.
If your carrier can manufacture and deliver customized products, working with a private banker and his client will enable you to identify those crucial circumstances that affect that client and provide insight into the kind of insurance products that would most readily help meet the clients financial objectives. A distributor/carrier partnership in which all entities contribute expertise and insight is the most likely to harness that information successfully to develop and produce innovative, customized solutions for these clients.
Keep in mind, however, that private bankers, like their wealthy clients, may have the same prejudice about the role of life insurance in a high-net-worth portfolio. Bankers, similar to their clients, need to be educated about the tremendous benefits and turbo-charging possibilities that insurance products can offer. Once they are fully aware of the customized benefits that could be available to a client, you can work together to determine which kinds of products will most help the client achieve his or her goal.
In most instances, I think you will find that the affluent client will be amazed at how life insurance products can enhance wealth or estate planning. A straightforward and classic example is the multiplier effect of permanent life insurance, which can help maximize other investments in a portfolio and, as such, proves to be an exceptional tool for wealthy individuals. Customizing these products to target a clients individual needs would only multiply the multiplier effect. Choosing a carrier that provides a wide range of investment and consultative services is worth considering since these carriers are the organizations, in the end, more likely to have a wealthier client base.
F. Scott Fitzgeralds observation may have worked as a literary device. But in the insurance business, affluent clients are like the rest of us. They are looking for products, advice and services that best serve their needs. The needs of the affluent happen to be less typical, and being in a position to offer them products that are differentproducts that are custom-made to fit their specific financial situationis the key to your success.
is senior marketing director, external distribution, at One Life Insurance, Elgin, Ill. He can be reached via e-mail at email@example.com.
Reproduced from National Underwriter Edition, April 23, 2004. Copyright 2004 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.