In volatile times, like the ones we have seen recently, investors tend to look for stability. Yet only 49% of those with a financial advisor and a financial plan have discussed life insurance with their advisor, according to a survey released on Monday by Saybrus Partners, an interesting finding given that life insurance is not subject to market or interest rate volatility for the death benefit withdrawal and so is considered a safer place to park assets.
Meanwhile, among those who have discussed life insurance with their advisors, 15% said the conversation took place over a decade ago, while 40% have discussed it within the past year. In addition, 83% of respondents said they would be interested in life insurance policies that had additional features not present in their current policy.
The message here is that financial advisors are missing an opportunity to speak to their clients about life insurance products.
“We believe life insurance is foundational for a well-designed financial plan, not only for the protection it provides but also its tax efficiency, and potential for cash accumulation and wealth transfer,” said Kevin Kimbrough, national sales manager for Saybrus Partners, in a press release. “The survey affirmed statistically what we have heard anecdotally for years -- financial advisors often do not discuss life insurance during the financial planning process. They are missing an opportunity to fill a critical gap in some existing financial plans while at the same time differentiating themselves and expanding their practices. Additionally, there are benefits to including assets such as life insurance that are not tied to the financial markets and therefore not subject to the same volatility we are currently seeing.”
According to the study, 47% of U.S. adults who have a financial advisor and have life insurance said their advisors have never reviewed their existing life insurance policy with them. In addition, 34% of U.S. adults who have a financial advisor and a financial plan said that over the last two years, their advisor has recommended that they add some form of insurance to their financial plan. But only 24% were advised to include life insurance specifically, while just 10% said their advisor had recommended long-term care insurance.
“Life insurance can be complex, and many advisors are reluctant to introduce it into the financial planning conversation. However, some of these financial professionals are finding that they can use outside specialists to help them advise their clients on the most effective and efficient life insurance uses for each unique portfolio,” Kimbrough said.
An important discussion for financial advisors to have with clients is the purpose of life insurance. Eighty-one percent of U.S. adults who have a financial advisor and have life insurance said a primary reason they carried a policy was to protect their family or heirs. Yet wealth transfer and cash accumulation are also key features of many permanent life insurance policies.
“These statistics demonstrate that typical life insurance policyholders may not be aware of the many other uses for life insurance beyond family and heir protection,” Kimbrough said. “They may be relying on IRAs or annuities for wealth transfer, which are designed for asset accumulation and retirement income but not for wealth transfer, especially from a tax perspective. Life insurance offers potential for tax-efficient cash accumulation, which can be accessed for a variety of reasons including supplemental retirement income or health care costs, as well as a tax-efficient vehicle to provide for heirs.”
The survey was conducted online in the United States by Harris Interactive between July 22-26, 2011 among 2,410 adults aged 18 and older, of which 786 said they currently have a financial advisor.
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