The previous bear market ended in March of 2009. The current bull market has lasted more than eight years. That makes this advance in equities the second oldest on record without at least a 20% drop in the S&P 500 Index.
To the casual observer, this would seem like a purely positive development for the financial services industry, since a booming market usually leads to stronger portfolios, and in turn, to happier clients.
This is generally true; however, bull markets also bring their own set of unique challenges for financial professionals, especially those who are focused on helping meet their clients’ holistic planning needs.
As a general rule, growth is good, but when clients see constant growth they can become fixated on accumulation and forget the other parts of their financial strategy that also need attention — namely protection.
Building a level of protection into your client’s overall financial strategy can certainly come through diversification of their investments, ensuring they have a broad mix of assets so their portfolio is not too concentrated in one area. Usually this amounts to utilizing different types of mutual funds, but can also extend to other financial vehicles outside of equities such as fixed income options like fixed index annuities (FIAs) that provide guaranteed income and principal protection against market loss (any product guarantees are backed by the financial strength and claims-paying ability of the issuing company). Yet, to ensure your client’s financial strategy is complete and includes protection, they need to incorporate life insurance into their overall strategy, which provides needed death benefit protection for their beneficiaries.
Life insurance has long been one of the foundations of the financial planning pyramid, but it’s an easy area to overlook when the stock market is enjoying daily gains and everyone is focused on growing their savings. And when life insurance is part of the conversation, it often starts and stops with term coverage, which provides the necessary death benefit to protect against the financial consequences of an unexpected loss of life, but offers no additional advantages that could complement a client’s financial strategy.
Innovations Bring Opportunity
This is unfortunate as innovations within permanent life insurance have made the category much more dynamic in recent years and worth considering for clients in need of more flexible options for their finances.
So why do permanent life insurance products not get the attention they deserve? Simply put, too many people are unaware of the additional living and tax advantages that may be available through permanent life insurance.
According to the 2018 Life Insurance Needs Survey from Allianz Life Insurance Company of North America (Allianz Life), nearly nine in 10 people (88%) understand the death benefit component of permanent life insurance, yet more than half (51%) are unsure or don’t believe cash value from permanent life insurance can be used to help fund college education, supplement retirement income or assist with other financial needs. Furthermore, a full two-thirds (66%) are unsure or don’t believe benefits paid from life insurance are not taxable.
These misconceptions exist despite the fact that consumers place high value in financial products that can provide these very benefits. When asked what they find most valuable in financial products, 85% of respondents said one that “provides a source of tax-free income in retirement,” followed by 78% who value one that “provides tax-free money for family/loved ones” and 68% who want a product that “provides the ability to use the funds to pay for college.”