Life Partners: Grow Your Practice With an Insurance Partner

Who Needs Life Insurance?

While many people could benefit from life insurance, there are certain categories of clients that provide clear opportunities. A good life insurance partner can help a financial advisor identify and assist these clients.

Wealthy families. The first is wealthy families with middle-aged or older members. With their income needs met, they are looking for wealth protection and transfer strategies. The opportunity for this group is to identify unused and underperforming assets and use them to purchase permanent life insurance, potentially with a long-term care rider. This helps protect their wealth and allows for tax-advantaged wealth transfer to heirs.

In one example, a husband and wife had a variable annuity with a guaranteed death benefit they’d purchased in the late 1990s. The annuity wasn’t performing well, and the clients’ needs had changed over the past decade. By transferring their assets to a life insurance policy, they were able to meet their primary goal of leaving an inheritance for their children. In that case, the original $460,000 asset was used to fund a policy with a $763,000 tax-free death benefit.

Business owners. The second group is business owners who use life insurance for succession planning. To ensure that the business continues, partners can take out life insurance policies on each other. If one dies, the other gets the proceeds and can use the money for the business. Alternatively, a business owner may have a life insurance policy that is payable to an heir, who may use the money to buy all or part of the business.  Business owners typically also need key person insurance.

High-income earners. The third category includes successful individuals who are 55 or younger and still in their prime earning years. They need life insurance to protect their families against the loss of their income in the case of a premature death. Additionally, they may have maxed out their Roth IRA, 401(k) or similar plans and are looking for additional ways to set aside funds for retirement. A permanent life insurance policy offers death benefit protection as well as tax-efficient cash accumulation so they can supplement their retirement savings and later withdraw cash tax free for planned or unforeseen events.

Life insurance holders. The fourth category is people who have a life insurance policy that was written some time ago, perhaps as long as 10–15 years ago. These policies may need to be reviewed and updated. There may be new riders that would be beneficial, for example, or the interest rate environment or tax laws may have changed. It’s important to make sure the policies are functioning as they were intended.

Life After Death

When life insurance is included in a client’s portfolio, it creates an opportunity for the financial advisor to stay connected to family members and other heirs. The advisor can assist in the death benefit withdrawal and help disburse or re-invest the money, potentially adding the next generation to his or her client roster and garnering more investment assets.

Financial advisors enjoy real and substantial advantages when they team up with a life insurance specialist. Putting that partnership in place doesn’t have to be difficult. It involves choosing a knowledgeable partner, setting up an agreement, working together to identify appropriate clients, counseling clients, ensuring that the policy is issued and setting up a regular schedule to assess new clients and follow up on existing ones.

Financial advisors who want to stand out in the marketplace, strengthen client loyalty and expand their practices and revenue should take a fresh look at offering life insurance. In most cases, it’s a winning idea for financial advisors and, most importantly, clients.

Six Steps to a Successful Partnership

Offering clients life insurance options has big benefits for advisors, including increased income, client retention, practice growth and market differentiation.

These six steps detail how financial advisors can launch and maintain a productive partnership with life insurance experts. Once advisors have their partnership up and running, they may wonder how they ever did business without the important planning and protection options offered by life insurance.

1. Find a partner you like and trust. This is key and creates the foundation for success. The insurance partner’s primary focus should be life and long-term care insurance to ensure that the relationship will be complementary, not competitive. Ideally, the partner will also have a working knowledge of the software and planning tools the financial advisor uses.

   If advisors don’t know any life insurance experts, they can ask for recommendations from colleagues and consult professional organizations. Look for professional certifications and check with state insurance departments and regulatory agencies for a history of complaints.

2. Define roles and responsibilities. Both parties should be clear on their responsibilities as well as parameters in the relationship. They should work out an agreement and commit it to paper. While it’s not a legal document, a written plan that includes goals, mutual expectations and commitments, and action steps is essential and can ensure the plan is successfully implemented.
3. Perform an assessment of your clients. Among the advisor’s client base, there are sure to be several people or families who have needs that can be addressed with life insurance. The financial advisor and the insurance expert should collaborate in this process since they bring different areas of expertise to the table. The financial advisor will have background knowledge of the clients, their goals and individual situations. The insurance expert will help to identify the clients who would most benefit from a life insurance discussion and how to approach them.
4. Set up introductory meetings with clients. At the meeting, which the advisor arranges, the life insurance expert should review all available options and make recommendations. Both professionals should understand that while the insurance expert is providing valuable information and products, the primary relationship is between the financial advisor and the client. The advisor knows the client and is in the best position to help the client define and achieve goals.
5. Facilitate the application and underwriting process. The insurance expert’s role includes assisting with completing the application, making sure all the documentation, including medical records, is submitted, and being the liaison between the carrier, the financial advisor and the client.
6. Establish a schedule for periodic assessments. The partners should set up a schedule—perhaps quarterly or semiannually—to assess new clients and determine if life insurance could be beneficial for them. They should also be aware of external conditions and events that affect the policy and policyholder, from changing family dynamics to fluctuating interest rates. Remember, the whole point of the partnership is to protect the client by developing and monitoring the best possible financial plan.