With fewer resources than the wealthy, those in the middle market are arguably in a much riskier situation, since they often lack any significant cushion of protection from a catastrophic financial event. Everyone’s financial resources are crucial, of course, but a middle-market family stands to become a less-than-middle-market family a lot quicker if their resources take a hit.
In part three of this month’s roundtable, we talk to three top producers about the products their middle-market clients are looking for right now. (For the rest of this roundtable, see part one, Why we chose the middle market, and part two, Reaching and teaching the middle-market masses.)
Q. In today’s financial environment, what kinds of products are resonating with your clients in the middle market, and why do you think these products are striking a chord?
Robert N. Garneau, CLU, ChFC, corporate registered investment advisor with MassMutual, based in Bedford, N.H.: The middle market finds annuity products very valuable in their retirement years, from the protection of their lifelong savings to guaranteed income for life. Fixed annuities with guaranteed interest rates are always of interest to them. Conventional long-term care is sometimes not affordable, and the new life products with long-term care access riders are becoming very appealing. Life insurance is also very important to them, but there is a need to fully explain all options, not just permanent protection. Getting an inventory of term protection is beneficial in their early years, and the conversion opportunity is important in the later years. Many times, the middle market will be the beneficiary of an insurance product of their parents, and they want to protect those assets for them and their children. They work hard to save what they can and do not want to lose it for any reason.
Shane Westhoelter, AEP, CLU, LUTCF, president of Gateway Financial Advisors Inc. in San Ramon, Calif.: The past few years, losing money in their investment accounts has been a real concern. Many cannot take the risk nor have time to make it up if they do lose large amounts over extended periods of time — not to mention the downturn in their homes and mortgage as well. The concern for how they will pay for care or who will provide it if they need it in future years is also growing more important. So products I have seen increase in my practice have been what I would call combination products — products where a client can get protection against potential needs or care, and minimize to the best of their ability against market risk with those dollars, and products where they might be able to have one premium pay for several potential needs in the future. Since there are many products and each client need is different, we like to discuss the needs and options with each client and allow them to make the decision that is best for them and their budget. The focus on how to make the premium dollar do more than one thing is becoming a higher focus than in the past. I hope we will see products continue to develop along this line of thinking, enabling clients to invest and grow money if they need it, but also providing needed protection if the unexpected arises.
Brian H. Ashe, CLU, president of Chicago-based Brian Ashe & Associates Ltd.: Term insurance always resonates because one can get a large amount of death benefit for a small initial premium. We urge those who buy term life that, if their needs will last longer than 15 to 20 years, they need to convert their term life to some form of permanent life insurance as soon as they are financially able. For those who are currently financially able and have permanent needs, we recommend both universal life and whole life policies. These products are attractive because the insured can levelize premiums, accumulate cash values on a tax-deferred basis, access the cash through loans and withdrawals, and supplement retirement, while maintaining death benefits in the later years. They have been particularly attractive in the past 10 years as the economic downturn in the United States has decimated investment portfolios and 401(k)s. Permanent life insurance provides assurance their “financial bucket” can be refilled, and their heirs will be protected even when the insured is in his or her 70s, 80s and 90s. We have sold very few variable life insurance policies.