Some commentators have suggested that family offices should mimic institutions and adopt a disciplined and process-oriented institutional approach when managing their investment portfolios. It would allow them to be more effective and produce more efficient long-term results.

But family offices, including advisors to ultra-high-net-worth families, should also consider this approach when managing family assets such as life insurance. That means that selecting a life insurance specialist, someone who can align the family’s specific needs with the proper insurance, is of the utmost importance. Such advisors can objectively assess existing life insurance portfolios and recommend targeted, efficient solutions to accomplish family objectives.

The process involves a number of steps:

1. The first is information gathering and analysis. A family’s advisors (including its attorneys and CPAs) should collaborate and thoroughly assess its situation and needs. This includes quantifying the family’s financial needs in order to determine which strategies or financial products they need. The life insurance advisor should have the proper consent to work collaboratively with other key advisors to the family to develop these strategies. It is imperative that family advisors and insurance advisors work together to analyze the financial consequences of each alternative, always keeping in mind the family’s overall planning goals and objectives.

2. The next step is product selection. The family’s advisors and the insurance advisor should evaluate various alternatives to determine the most competitive products and planning strategies.

To choose and design the right products, advisors must review the confidential client data used during the underwriting process. Both medical and financial information can have a direct impact on the final recommendation. An advisor must consider the clients’ risk tolerance (how sensitive they are to market and interest rate risks and carrier financial ratings and how much they want a guarantee instead of flexibility). The advisor must also weigh the use of sophisticated estate and corporate setups (grantor retained annuity trusts, for instance, or family limited partnerships, charitable lead trusts, etc.). The insurance advisor should provide an executive summary with a complete analysis of suitable products along with a summary of overarching planning and financial implications.

Ultra-high-net-worth families should also explore institutional products. Because affluent individuals typically have better access to health care (and live longer), keep their life insurance policies in force longer and buy policies significantly larger than average, they can access products with lower premiums and policy expenses than the general public can with available retail products. An insurance advisor who can properly analyze and use these products can be an effective advocate for the family.

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