Common sense dictates that clients are less inclined to object to a product that provides them with a quick, clear bottom-line return on investment. Usually the recommendations that draw the most resistance from clients are those involving products with an inherently defensive posture and purpose, whose benefits are less tangible, less immediate and thus less gratifying. Here’s a list of the products and maneuvers that, according to advisors, tend to meet with the most resistance:
- Permanent insurance. “Insurance in general is just not a beloved thing,” says Frances Twiddy, CFP and principal at Frances E. Twiddy Associates in St. Claire Shores, Mich. Permanent insurance in particular tends to raise client hackles because it costs more than term.
- Long term care insurance. Ongoing low-penetration rates tell the story. Still, LTCI is a shrewd investment for many senior clients. The challenge is convincing them of the product’s value. Here’s how Twiddy often approaches the issue with clients: “What is the one outstanding disregarded risk for a retired individual after a perfectly beautiful retirement plan has been put in motion? Something like a long-term care need could come along from the outside and blow your whole plan up. So how can we adequately insure against that possible risk at the smallest cost?”
- Tax planning maneuvers. According to Joel Javer, CFP, of Sharkey, Howes & Javer in Denver, the cloudy future of federal estate tax policy makes some clients reluctant to take tax-mitigation steps to protect their estates, contrary to the advice of their advisors.
- Alternative investments. Hedge funds, structured products and the like can be extremely sophisticated and difficult to explain, Twiddy says. “It’s kind of like asking a client to buy a black box.”
- Life settlement. Traces of the sharks-in-the-water days of viatical settlements still linger in the secondary market for life insurance.
- Variable annuities. From a public-perception standpoint, VAs are slowly recovering from the beating they took in the media earlier this decade.