Help a prospect grasp certain connections and stimulate motivation to buy
By Thomas Borchert
Selling variable universal life doesnt need to be complex and confusing. Clients understand best when they see how the concepts apply most directly to their common experiences.
Helping a prospect grasp these connections will stimulate motivation to purchase the product. In most cases, this should be a single event. During the sales presentation, the advisor focuses on helping the client increase understanding by breaking down the discussion to cover the 5 common VUL elementscash flow, subaccount investing, expenses, death benefit and tax impact. Here are some suggestions.
Cash flow. Whenever contemplating a purchase, especially a large one with ongoing payments, most people have some worries about the transaction. They may wonder, “what if I cant make a payment or something else needs to be paid that Im not expecting?” Or, “what if I need money for an emergency?”
As relates to VUL, its not enough for the client just to know he or she has access to the policy cash values. The client needs to know the process for gaining that access and the ramifications of removing the money or skipping a payment. To respond to this need, the advisor should explain such things as the difference between withdrawals and policy loans, how the universal premium can be flexed, and how to set a billed premium level above the minimum scheduled premium.
Most importantly, be sure the client feels comfortable with the process and somewhat confident that he or she can accomplish the tasks required.
Subaccount investing. When investing, even when using subaccounts inside a VUL, I need to see a prospectus. Most clients are no different. They need to know what is in the subaccountsi.e., names of the companies whose stocks are in the subaccounts; the percentages of stocks, bonds, cash, etc. They also need to develop a feel for historic performance and risk and volatility levels. They need to understand the possible impact of asset allocation and dollar cost averaging programs, if elected.
Expenses. Tell the client how the insurance company gets paid and what other kinds of costs may be involved. It is important for clients to understand when these costs are deducted from their funds and how they may change over time. Show how they benefit by over-funding to possibly reduce the expenses relative to total accumulations. They also need to know the protections built in to the policy, capping these expenses.
Death benefit. Show how the death benefit takes care of the family upon the death of the insured. Explain how the client can afford to take other investment, business or planning risks because of the tax-free impact of this. Help the person see how the family wins financially. Talk about creating “generational wealth” that lives on and on.
Tax impact. Last, help the client see the difference between tax-deductible annual contributions and non-taxable death benefits and policy loans or withdrawals to basis. Talk about what it feels like in retirement to have an income that is not only non-taxable, but more than that, doesnt “gross up” my income so that I must pay “max tax” on my Social Security. Dont forget to cover the possible estate and charitable uses of the policy in later years.
Earlier, I said that “selling VUL doesnt need to be complex or confusing.” I may have been a bit optimistic, because the VUL policy really is a complex financial instrument.
However, the financial advisor can do several things to help simplify how the client learns about this type of policy, so it is more understandable than it otherwise might be. For instance, many people learn better with visual aids, so make a graphic representation of the 5 elements.
Also, though most people communicate best with words, when presenting financial concepts, the advisor can make them come to life with numbers. The words and numbers must be simple and have real impact, not just be lists or columns of numbers from an illustration.
Finally, as industry professionals know, the advisor must be able to show all of this on a single sheet of paper and walk the client through the entire story in 40 minutes or less.
After a dozen years as an educator and counselor, and 2 dozen years as an agent, I have found my own way to do all of the above using a flip chart of clear pre-printed overlays. In 60% of the cases, the client “wants” to purchase a policy. The only problem is, I cant get through the presentation in 40 minutes because the clients keep interrupting with questions. Not a bad problem to have.
Thomas M. Borchert, CLU, ChFC, AEP, CLTC, LUTCF, is an LTC specialist with Professional Insurance & Financial Alternatives, Sioux City, Iowa. His e-mail is email@example.com.
Reproduced from National Underwriter Edition, April 1, 2005. Copyright 2005 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.