Whether or not we truly plummet at terminal velocity over a fiscal cliff, a challenging new reality has set in for the financial services profession. Whatever your personal resolutions are for 2013, good luck with them, because we’ll have to work even harder to find success in our professional lives.
What does going over the fiscal cliff mean for clients? Even if some compromise is reached and the doomsday scenarios don’t pan out, clients will likely face higher taxes going forward for doing everything from getting married to growing their assets to dying.
For life insurance companies, no matter what happens on the policy front, these are already historically difficult times because of low interest rates. While low interest rates may be something to celebrate if you have a home to refinance, they are making things very challenging for our business.
Here’s, admittedly, an oversimplification of the issue: Insurance companies invest premiums and other revenue and, if successful, operate by earning more on those investments than what it’s committed to pay out in benefits. What’s happening now is that investments made years ago are maturing and must be reinvested at lower interest rates while policyholders and fixed annuitants are still entitled to the higher rates and benefits they were guaranteed initially. For new business, declining investment yields mean the return and benefits to the policyholder are greatly reduced from products sold only a few years ago.
What does this mean to you? A lot. Perhaps you’ve seen your commissions decline a bit. But the even greater impact is in the additional challenges you face as a financial professional in delivering value to your clients.
Are you finding it difficult to attract customers to annuities paying 1 percent? Do you have trouble explaining slower growth? If so, I’ll give you a minute to dab the tears off your face, but just one. Then it’s time to focus, perhaps refocus, on the job at hand. Even with these challenges we face in 2013 and beyond, it’s not time to feel sorry for ourselves. Our clients need us, and we need to start taking a more holistic look at exactly what they need. While we might not be able to show a client an eye-popping return on an annuity, what they want and need more than ever is our guidance.
The days of our business being driven by product and price are gone. Now, we must focus on protection and process. Spend some time these early weeks of 2013 taking a fresh look at products that offer maximum protection – like whole life insurance. This is a harder path to go down, but can be important for your clients.