Close Close
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards

Life Health > Life Insurance

Selling Financial Safety Masks

Your article was successfully shared with the contacts you provided.

We have all seen or heard the controversy that has arisen over whether to wear a protective face mask in this pandemic era. To me the reactions we see each day regarding the choice to wear or not wear a mask compare directly to how households waiver about having financial protections in place for their loved ones. Many times financial professionals face the same level of controversy as they try to help consumers put basic insurance protections in place.

How many of you who sell life and annuity products have needed to educate your prospects on the basic financial risks they face? How often does it happen that once you have that basic education conversation the tone of the sales call changes?

You are having the “Why You Need a Financial Safety Mask?” conversation and may not have known it. You need to educate prospects as part of the sales process, so they understand why they need a mask and what risks the mask protects them against. In most cases they will not have fully thought about and considered the impact of these risks on their lives.

(Related: NAFA vows to continue DOL rule fight)

In my opinion there are six key things that you need to stress when having the financial safety mask educational conversation. These are all important but go beyond just trying to reasonably address the prospect’s financial protection needs.

1. Building Basic Money Knowledge

Consumers can’t fully embrace the protection issues in their lives without basic knowledge about money, how it works and how to effectively use it. I tell consumers that they should spend at least 2 hours per week or 17 minutes per day improving their money knowledge. I call it Spend2.

2. Developing a Mindset/Money Awareness

Consumers can’t be successful in their financial journey without having a money mindset. Money actions need to become second nature. They need to act reasonably and responsibly without thinking about it. To have such a money mindset they need to want to do it.

3. Adopting Reflective Practices

I know the moment I mention that a household needs to have a cash budget, about 50% completely turn off their attention to what I am saying. So, I explain a budget differently. I say that it is a practice that makes them reflect on what they are and will be earning and spending. I emphasize to households that they need to take time to make sure they have more cash inflow than outflow and that they are putting away funds for future needs and emergencies.

4. Putting Insurance Coverages in Place to Mitigate Risks

Paying for the cost of the unexpected and delivering cash in the future when it is needed is what insurance does. Be it vehicle, health, life, annuity, disability, or accident related these coverages provide cash for future delivery. Using this analogy, I try to reframe what insurance is and ask that consumers think of these products as governmentally regulated GoFundMe campaigns where they make ongoing regular donations (premiums) that will result in a guaranteed payout if the uncertain events spelled out in the policy take place. Overall, insurance coverages allow them to eliminate or minimize financial risks in their lives for a reasonable amount of money.

5. Creating an Emergency Fund

As part of having a financial safety mask, they need to create an emergency fund to provide a cushion in case life gives them uninsured twists and turns such as an illness, a non-warranty related car repair, an accident, severe weather events or as in recent times — a pandemic. Having such a fund enables them to have the resources needed to pay the costs of the unexpected that typically can’t be insured.

I6. Maintaining Their Ability to Earn a Self-Supporting Income

The most important component of the financial safety mask is the consumer’s lifelong ability to earn a sustaining income. The decisions they make on what type of college or trade education to get, ongoing skills training and work experience build to create the employable person they are. What income they can generate is based on the skills and experience they have and stays with them for a lifetime and mostly dictates their cash inflow. Without the ability to earn a sufficient income, the likelihood of having financial success is greatly diminished.

Consumers need to have a financial safety mask. They need one to enable them to be as financially successful and secure as possible. It takes a little time, study and investment. It has at least six key dimensions. At the end of the day it can tremendously change their lives and those of the people they love. Being relaxed about money matters in daily life enables them to live life to the fullest and to be there in a mindful way. It is just so important to enjoy their life’s journey. The financial safety mask, although not mandatory, really helps.

— Connect with ThinkAdvisor Life/Health on FacebookLinkedIn and Twitter.

Harry N. Stout (credit: Stout)Harry N. Stout has been the president of Fidelity & Guaranty Life, deputy chief executive of Old Mutual Financial Network, and managing director of Insurance Insight Group. He is also the author of The FinancialVerse personal finance books.


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.