This month’s kickoff of the NFL preseason means millions of eyes will be focusing on multimillion-dollar star athletes, as well as on newer players who are accumulating their first millions. I’m sure many financial professionals would love to serve the long-term life insurance and health care planning needs of more millionaires, including top-tier sports figures, but these athletes often have easy access to financial advice, and other millionaires may not seem receptive to professional financial help. Others may welcome assistance — if engaged with in appropriate ways.
A recent research report, “Making Retirement Security a Reality,” from the Deloitte Center for Financial Services, shared that nearly one-third of millionaires have never consulted a financial professional. Similarly, a December 2015 LIMRA report, “Mass Affluent Market Use of Financial Advisors,” revealed that more than one-third of affluent investors believe they can manage their own financial affairs. Given these realities, how might financial professionals foster stronger connections with affluent clients and prospects, conducive to helping meet these audiences’ needs?
In order to address that question, it’s crucial to understand what’s meant by “affluent.” For purposes of this article, affluent consumers have $1 million to $5 million in investible assets, excluding their homes.
But millionaires differ in their financial mindsets and the characteristics they seek in planning and protection solutions. As LIMRA’s “MarketFacts Quarterly” recently reported, the organization’s research has unearthed three distinct segments of affluent investors based on their retirement income and product feature preferences:
• Guarantee seekers value “peace of mind” and strongly prefer lifetime guaranteed income, for which they are willing to trade off other features like investment growth or control of assets. They are more likely to be female and their trust in financial professionals is high.
• Estate Builders seek investment growth and self control over their investment management and allocations. Flexibility is important to them, but guarantees are not; their risk-tolerance level is high. They are more likely to be male and their trust in financial professionals is high, but cautious.
• Asset Protectors are primarily interested in preserving their investable assets. They seek guaranteed returns and would rather not dip into principal in their portfolios. They tend to favor CDs and other conservative investments. Their trust in financial professionals is generally high, but skeptical. How, then, might financial professionals forge even deeper bonds of trust with consumers in these market segments? The key, it seems, may be engaging more robustly with affluent clients and prospects. A major takeaway from LIMRA’s research, as explained in a related press release, was that “the more engaged affluent consumers are in retirement planning consultations, the more they trust their advisor and the advice.”
With that in mind, consider the following 10 strategies for fostering more meaningful engagement with affluent clients and prospects:
Take a holistic approach. The Pew Research Center has found that affluent adults are more likely than other adults to be in the sandwich generation, providing financial support for aging parents as well as for grown children. From a big-picture perspective, consider the prospect’s sons and daughters, parents, grandchildren, favorite church or charities, biggest concerns and priorities. Affluent consumers who believe their financial professional understands everything they’re trying to achieve may be less inclined to take a stab at planning on their own.
Communicate their way. The willingness to adapt to client communication preferences (while remaining within compliance parameters), conveys a level of respect many affluent consumers have come to expect. As tailoring approaches by client generation matters, utilize age-appropriate communication methods. Keep in mind, however, that affluent clients (busy, small-business owners, in particular) may have colossal time constraints and financial professionals may therefore need to show expertise quickly.
Ask questions. Fear of outliving retirement income or facing a financially devastating chronic illness doesn’t necessarily cease when someone attains affluence. And running out of money remains a possibility even for people with $1 million to $5 million in investible assets. How will the client or prospect cover large medical or long-term care costs, including for aging parents? How will he or she ensure sufficient income for other needs in retirement? Financial professionals can demonstrate value to affluent consumers by discussing all challenges that may arise — not to instill fear, but to educate.
Focus on the home front. Talk with affluent clients about financially challenging situations they have observed in their own families and beyond. Many millionaires weren’t born into affluence. They may have seen their parents struggle due to a lack of preparedness and, therefore, may be more comfortable discussing their own beneficiary or estate planning needs if approached initially about their parents’ experiences.
Show empathy. Share true stories of supporting other clients in times of need. For example, many people know someone who has suffered catastrophic financial consequences due to a protracted battle with cancer; if a client gained access to a living benefit to help pay for health care or other expenses, relay that experience.
Provide education. Selfmade millionaires (and other affluent clients) may be confident in their abilities to independently review and discern among various financial products. With interactive new tools and resources from carriers, financial professionals have the opportunity to help educate clients about numerous contingencies and the products that have been designed as solutions. Some online resources can be accessed without a login or password and, therefore, consumers have the option to revisit them after an initial review with a financial professional.
Offer options. An affluent consumer who fits LIMRA’s Estate Builders profile and wants more life insurance may appreciate a product that offers upside market potential, but may also want choices. Perhaps an index universal life insurance (IUL) solution designed for maximum accumulation would be a good choice, or a variable universal life (VUL) insurance product would fit the bill. A conservative client may prefer a guaranteed universal life (GUL) product with accelerated benefit riders for longevity and/or chronic illness or want a term insurance policy that offers a return-of-premium (ROP) feature.
Suggest appropriate funding. In years past, some consumers, even with high investible assets, may have been reluctant to purchase large life insurance policies for fear of not having easy access to cash value in the contracts. Now, clients may want to consider funding a policy more aggressively, because features and riders of some new products offer more options for accessing cash value in the contracts (when the terms of the policies have been met).
Explain “utility.” Affluent consumers may be among the most value-conscious of all clients. It should be easy to relay the value proposition of a single financial product that has been designed to serve multiple purposes and meet evolving needs. Who doesn’t want their dollars to do double or triple duty?
Address tax-planning needs. The need to diversify assets, in order to leverage taxadvantaged financial products, may be of particular importance to affluent clients. Review modern solutions designed to address client needs for tax diversification and accumulation, as well as supplemental income in retirement. Professionals who leverage the foregoing strategies may not necessarily find themselves helping multimillion-dollar athletes make their next financial moves. However, they will have the potential to attain success through service to other affluent clients. How might “success” be defined?
Consider this quote I just happened to come across recently. Tim Tebow, the former NFL quarterback and Heisman Trophy winner, told a reporter for The Washington Times: “Success comes in a lot of ways, but it doesn’t come with money and it doesn’t come with fame. It comes from having a meaning in your life, doing what you love and being passionate about what you do. That’s having a life of success. When you have the ability to do what you love, love what you do, and have the ability to impact people …That’s having a life of success. That’s what having a life of meaning is.”