The No. 1 question insurance producers hear is usually along the lines of: How much insurance do I need? Even if clients aren’t asking producers this question, there’s no doubt they’re asking it of themselves.
Of course, that probing can quickly move beyond things like insurance. Clients begin to wonder what kind of retirement planning they should be undertaking, whether estate planning is something they need to think about sooner rather than later, the odds that they’ll need long term care somewhere down the line.
Data shows the trend among Americans is a greater focus on financial planning, and more importantly, receiving financial advice.
According to a recent LIMRA report on US Consumers Today, 34% of Americans say they are interested in receiving financial advice. This is significant and represents one reason why financial professionals may want to renew their focus on providing clients with a basic needs analysis.
The benefits of basic needs
Financial professionals aren’t salespeople – they’re individuals who provide a vital service to their clients, helping them to understand their needs and taking the necessary steps to meet them. This is why something as simple as a basic needs analysis can be so beneficial for both planners and their clients.
A basic needs analysis is all about identifying the financial commitments and requirements a person has and putting solutions in place. Each person’s needs will be different, but there are certainly common issues that a majority of people will contend with.
By providing clients with a basic needs analysis, financial professionals can help give them a clearer picture of their financial standing, as well as what strategies they may want to put in place.
For instance, one key aspect of such analysis often concerns retirement. LIMRA found that over 60% of those surveyed believed “saving for a comfortable retirement” is a high financial priority.
With a basic needs analysis, financial professionals can show clients how much money they would need to secure the kind of retirement they want. Next, planners can recommend specific strategies to meet this goal, such as increased savings, investment options and income generation alternatives, such as a fixed annuity.
Just as every person’s needs will be different, how much planning or strategy is required will fluctuate as well. Using life insurance as an example, the first step would generally be figuring out how much money it would take for an individual to cover all final expenses. These include medical bills, funeral costs, estate-settling expenses, debt obligations, mortgage balances and more.
While most individuals will be aware of these liabilities, it’s up to financial professionals to help them see the forest for the trees. In addition to final expenses, a person’s lifestyle will significantly impact how much insurance coverage makes sense. For example, if a client has children in college or heading toward higher education, they’ll need to consider how much money they need to leave behind to cover tuition and other costs.
Additionally, clients will need to know how much money their family will need to maintain their lifestyle following the loss of a breadwinner. One recent study from the Life Insurance Management Research Association found that the majority of middle-market consumer said they would not be financially prepared for the loss of a family member. The majority of those surveyed said such a loss would force them to make drastic or significant financial changes.
With a basic needs analysis, financial professionals can help clients fully recognize what their planning needs may be, and even more importantly, take the proper actions to cover all their bases.