Financial Professionals Can Use Insurance to Assuage Client Fears

No one wants to worry about losing retirement savings, but a huge portion of Americans remain concerned that market volatility will cut into the money they’ve set aside for retirement.

According to a new survey from Wells Fargo, the majority of affluent consumers remain worried about the effect of stock market fluctuations on their savings. Financial professionals need to be a trusted partner for these consumers, and should present savings options that provide a less risky way to meet retirement goals.

Careful retirement planning that incorporates life insurance investments alongside riskier options can give high net worth consumers improved peace of mind while deepening the relationship between client and producer.

Heavily invested

According to Wells Fargo, affluent consumers have the majority of their wealth invested in the stock market, and that can lead to uncertainty and apprehension. More than half of survey participants noted they fear losing their invested money because of stock market changes, and that fear may be a lackluster awareness.

Despite having so much money invested into stocks, 20 percent of high net worth consumers don’t know the exact amount of their wealth that’s currently at risk on the stock market. A lack of knowledge can exacerbate the feeling of helplessness and increase fears about losing money unexpectedly.

How financial professionals can help

Financial professionals are uniquely positioned to eliminate consumers’ fears, but too few high net worth investors currently work with a financial professional. According to Wells Fargo, just over 60 percent of high net worth consumers seek a professional’s advice. The remaining portion of the market is a prime target for financial professionals, and may contain a large portion of consumers who are concerned about their financial stability.

In a survey conducted by market research firm Spectrem, just 48 percent of high net worth individuals said most financial professionals were professional and knowledgeable. This sense contributes to limited engagement between high net worth individuals and financial professionals, and producers can overcome this perception by being completely transparent. In the same study, transparency was listed as one of the most important factors in switching to a new advisor for 94 percent of respondents.

A lack of transparency makes it difficult for high net worth clients to know how much of their money is invested into certain asset classes, which may contribute to a sense of uncertainty. Additionally, lack of transparency lessens a client’s confidence about retirement and encourages them to switch to a new financial professional or eschew financial guidance altogether.

Options to improve relations

Financial professionals who want to build their client base by engendering an atmosphere of trust with existing clients and boosting referrals for other high net worth individuals should prize transparency. They should also offer alternatives to traditional stock market investing that can be a risker proposition for clients who want to ensure they can preserve capital into retirement.

Simultaneously, many of these clients will be wary of removing their funds from the stock market. While stocks introduce a fair amount of risk, they also provide the potential for significant yields that more conservative investment opportunities can’t match. This leads to a catch-22 for many high net worth consumers who are unwilling to risk lessened returns, but remain concerned about the potential shortfalls pure stock market investing can create.

For clients who are currently unwilling to liquidate some of their current assets, premium financing may provide investors a way to obtain the life insurance they need without significantly cutting into their principal investments until a later point in time.

With premium financing, a consumer is able to purchase an insurance policy using money gained through a loan. That money pays off the policy’s annual premiums, and the client simply pays the annual interest on the loan. While this isn’t a way to get an insurance policy for free, it does allow high net worth individuals to purchase insurance while maintaining other investments that can accrue money more quickly. Premium financing can help to assuage some consumers’ fears about preserving capital, and lead to retirement success.

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Highland Capital Brokerage

Highland Capital Brokerage

Highland Capital Brokerage is committed to developing client-focused relationships with financial advisors using our core competencies of life insurance, annuities, and long-term care. We distinguish ourselves by providing point-of-sale support, advanced marketing, and creative estate and business planning techniques.
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