Everyone in the life insurance business knows there are attractive opportunities in the foreign nationals market. Isn’t just the size of this market, which continues to grow. These prospects have what every life insurance advisor dreams about: need, urgency and means.
If that isn’t enough, this market offers the possibility of writing large cases with motivated high-net-worth individuals.
But the question remains: Given all the hype about the foreign nationals market, why are so few producers active in it?
Here are some reason why advisors may be “taking a pass” on the foreign nationals market:
They’re not sure what’s involved.
They are uncertain about being successful.
They think it’s too difficult to get up to speed.
They don’t know how or where to start.
While advisors may see the opportunity, even the lure of getting into a market with a burgeoning number of high-net-worth prospects with a need for substantial amounts of life insurance, that alone doesn’t seem to be enough to sway them.
The problem isn’t that this is a new market. Advisors are always jumping in when they see opportunity. They may be “taking a pass” on this market because they view it as different from what they’ve been doing.
If that’s the mindset, here is what an advisor needs to know to move forward in the foreign nationals market.
1. The prospects
The first step is to have a clear picture of the prospects. For example, target:
Non-Resident Aliens who own U.S. assets but reside permanently in another country. Also, Non-Resident Aliens who are working professionals and who spend considerable time in the U.S.
Resident Aliens or foreign nationals living in the U.S who own assets subject to U.S. estate tax and U.S. citizens married to non-U.S. citizens.
2. The problems
Each of these three groups has its own issues.
Usually, only those assets located in the U.S. are subject to federal estate and gift tax. But they are allowed a $13,000 tax credit, which only protects the first $60,000 of an estate from estate taxes.
Worldwide assets are subject to U.S. estate and gift tax. Also, they do not qualify for certain tax advantages afforded to U.S. citizens, creating a need for careful estate planning. And they may be subject to expatriation taxes when they are no longer U.S. residents.
3. How U.S. life insurance solves problems
Since purchasing life insurance in many foreign countries can be expensive and uncertain, U.S. life insurance has a strong appeal to foreign nationals. Here’s how it can help solve critical problems:
It can provide the necessary liquidity for paying for a U.S. estate, while enhancing an estate plan, if necessary.
Helps avoid the need to sell assets, perhaps at a discount, in order to meet estate tax obligations.
Serves as a way to transfer additional funds to a non-citizen spouse.
Non-Resident Aliens can own life insurance on their own without the complication of setting up a third-party trust or some other legal entity, and the death benefit will not be subject to U.S. estate taxes.
Life insurance-based estate plans can be modified to fit changing client requirements.
- There is tax-deferred cash value accumulation.
4. Identifying prospects
Where are they?
Their business and real estate investments tend to be in and around major metropolitan areas where there are colleges, universities and tech centers. Along with the east and west coasts, there are the inland metro areas such as Chicago, Denver, Dallas and Austin.
How do you find them?
As you might imagine, it takes research (or detective work), persistence, and most importantly, patience to find the right prospects. Start with your own network and existing contacts. Then, move outward to CPAs, attorneys, family offices, real estate organizations, chambers of commerce and organizations serving those from foreign countries, as well as business owners and executives.
5. Getting the job done
Position yourself as the go-to advisor.
The first step is learning the ins-and-outs of working with foreign national clients. Since you already know the life insurance business, you’re well on your way there because the needs of foreign national are basically the same as those of your current clients.
Have the proper technical support.
As a producer, your task should be prospecting, not backroom concerns. Find the right resource or one that can answer questions, gives you sound advice, helps with such issues as getting medical records translated, and have relationships with life insurance carriers with an appetite for writing large cases on foreign nationals. In most cases, that resource is going to be a BGA.
If an advisor is comfortable working with large cases, then the foreign national market is well worth investigating. But, as every life producer knows, nothing is easy. And that’s particularly true when the rewards are significant.
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