BISA Portfolio
Connecting Life Insurance to Sound Financial Planning
from the 4/12/2018 issue of BISA Portfolio Weekly

By Katie Condon

Financial institutions have a lot of responsibility weighing on their shoulders right now. With the industry rapidly evolving to adapt to the new DOL and digital landscape, financial advisors are striving to be more holistic resources for their clients. What can institutions do to keep clients year over year? In the Planning 101 session at the 2018 BISA Annual Convention, BISA members and thought leaders discussed how driving life insurance production is a solid solution for long-term client retention.

In the panel session, Dale Niemi, BancWest Investment Services; Kevin Hughes, MoneyGuidePro; Tim Kehrer, Kehrer Bielan Research & Consulting; and Robert Mittel, Prudential Life Insurance Company covered trends and opportunities in life insurance advisory and shared how it can improve client relationships and retention. Below is a recap of the session including important information on this growing trend and how to implement it at your organization.  

Why focus on life insurance?

Selling life insurance often takes a back seat to other services at financial institutions. It’s something that can be sold, but it hasn’t traditionally been a priority for the industry. Kehrer noted that the share of revenue drive slipped from 6.5 percent to 5.5 percent at banks and with brokers/dealers. However, total life insurance production per advisor has surged. In fact, research from Kehrer Bielan’s DoL Readiness Roundtable —The New Importance of Financial Planning and Life Insurance report suggests that the typical advisor generates 4.5 times as much life insurance business as advisors in firms that are affiliated with third-party broker/dealers. As a result, firms who embrace financial planning that includes life insurance are getting ahead in a post-DOL world. On the flipside, firms minimizing their range of products to remain compliant are inevitably becoming less relevant.

Kehrer pointed out that driving life insurance production ultimately comes down to increasing advisor production. “Those averaging more than one plan per month produce 54 percent more life insurance plans than firms with fewer plans per advisor,” he said. Where the typical advisor produces less than $4,000 a year in life insurance sales, those producing more plans bring in over $13,000. The correlation between financial planning activity and life insurance production is very strong.

By incorporating life insurance plans into the rest of the advice package, firms can establish deep and lasting relationships between clients and advisors. Once a financial advisor has achieved the status of the primary advice giver, the loyalty to their bank or credit union and its people increases and so does share-of-wallet. Kehrer Bielan’s research also found that households with a plan from a bank or credit union keep slightly more assets in those institutions. “No matter how we slice it,” Bielan said, “banks and credit unions need to be in financial planning business and driving life insurance.”

Avoiding Hazards

“The amount of life insurance shortfalls in the plans we present is tremendous,” Hughes noted. There are a lot of questions financial management firms need to be asking each other about the ways that they present and talk about life insurance. Hughes suggested that many advisors may not be comfortable asking protection questions. Instead of simply offering a number based on how much a client says they need, financial advisors must be able to assess need over the course of a lifetime and advise different types of solutions on a case-by-case basis.

In order to get advisors more comfortable with insurance plan production, Hughes advises coaching and training sessions. The panel recommended bringing in long-time insurance specialists to teach financial advisors more about insurance, covering the gap in knowledge that currently exists. The more advisors become comfortable with life insurance advisory, the more revenue they yield and more well-rounded their advice becomes.   

And there seems to be a lot of opportunity on the table. Only 10 percent of MoneyGuidePro plans are assessing life insurance modules currently. “Get this business,” Hughes said, “there is so much opportunity waiting.”

Rethinking Financial Planning

Many firms are concerned about putting too much weight on their advisors. “We are stacking a big laborious process of financial planning on top of insurance, which is a big laborious process,” Niemi said. He suggested that firms rethink how they approach financial planning by increasing their focus on having conversations and uncovering goals and expectations and weaving in protection as part of a larger discussion on wealth management over time. Advisors should be asking questions like, “What are you doing to protect your kids in case you aren’t there?” as a way to approach a more holistic viewpoint of a client’s wealth and assets.

Because insurance changes every decade of a person’s life, it’s important for a client’s primary financial counsel to be there every step of the way and be able to respond when new insurance is needed. He also suggested that it could be valuable for financial services firms to look at all the segments of insurance types and determine what they should be selling for different phases of a client’s life.

These aren’t exactly easy conversations, but they are necessary for the long-term financial health of a client. By having intentional and directive-oriented conversations, advisors not only show the client that they have their best interests in mind, but they also get at the heart of a client’s needs to offer a financial plan than encompasses all aspects of their financial journey.

Becoming a Go-To Financial Resource

Selling life insurance as part of an overall financial plan can lead to an increased sense of trust from the client and, ultimately, grow a financial advisor’s share-of-wallet for their individual clients. Advisors and financial institution will undoubtedly benefit from becoming the primary financial counsel for a household in all aspects, and talking to clients about life insurance is a great way to start that conversation.

Learn more about transitioning to a holistic advice model here.