(Photo: Shutterstock)
Over the last few years, I've absolutely loved watching Tony Romo as an analyst for NFL games. He has an uncanny ability to predict which play the offense will run — earning him the nickname "Romostradamus."
Probably even more impressive than his ability to quickly break down a defense and predict the play the offense will shift into is his ability to clearly explain what he sees that causes the offense to run the play. He sees a level of detail that even a veteran viewer simply doesn't, and by explaining things that others wouldn't think of, the 14-year NFL veteran quickly became the highest paid broadcaster in TV history.
Advisors have the opportunity to be Romostradamus for their clients by clearly explaining two concepts in permanent life insurance policy design — funding level and growth potential. These two basic levers are easy for clients to understand and can readily help advisors explain why one policy type or structure would be a better fit for a client's goals than another structure.
Legacy Goals
Let's take a look at an example. A client has recently retired and is setting goals for their wealth over the rest of their life. For this client, a key goal is leaving a specific amount to their children, and they're willing to have fluctuations in their own lifestyle in order to make sure that becomes a reality. Life insurance can be an ideal vehicle for this common situation.
Since the goal is the targeted legacy, the advisor can explain that the goal is to fund the policy with as little premium necessary to ensure that the client reaches their goal. This policy structure will provide the precise amount of premium needed to fund it in order to ensure that the death benefit will be there. The client doesn't need the ability to take loans or make withdrawals later in life. The client can readily understand that they don't want excess cash value because ultimately, the death benefit is the need, and the death benefit will remain the same regardless of the cash value.
When considering the growth potential in a guaranteed death benefit universal life policy, advisors don't need to worry about the ability to have above-market returns by having an aggressive asset allocation. If the client has separate growth goals (and of course, most will), they can use other investments, because the advisor will have committed as little capital as possible to achieving this particular targeted legacy goal. The client doesn't need or want the risk that comes with highly fluctuating rates of return, even if they could produce higher growth potential.
So, for a targeted legacy situation, we can explain that we are looking for a policy that will accommodate a relatively low funding level with predictable growth potential. A guaranteed UL might be a good choice. The client can easily tie back the funding level and growth potential concepts to the policy design.
Joe Elsasser developed his Social Security Timing software in 2010 because, as a practicing financial advisor, he couldn't find a Social Security tool that would help his clients make the best decision about when to elect their benefits. Joe later founded Covisum, a financial tech company focused on creating a shared vision throughout the financial planning process.
